GE Aerospace (NYSE: $GE) is a leading aircraft engine supplier based in Evendale, Ohio, formed after General Electric split into three companies.
It reported impressive first-quarter 2024 earnings that surpassed analysts’ estimates. This marks the company’s inaugural earnings release as a stand-alone public entity, following its historic spin-off from the industrial conglomerate General Electric in early April 2024.
With a legacy spanning over a century, GE Aerospace records an extensive installed base of approximately 44,000 commercial and 26,000 military aircraft engines. The company employs a global workforce of 52,000 individuals dedicated to inventing the future of flight and ensuring safe air travel.
Strong Q1 Performance
For the quarter ended March 31, 2024, GE Aerospace reported adjusted earnings of $0.82 per share, soaring 203.7% year-over-year and surpassing the Zacks Consensus Estimate of $0.67 per share. The company’s total segment revenues climbed 11% to $15.2 billion, driven by strong demand across its commercial and defence sectors, although narrowly missing the consensus estimate of $15.7 billion.
Segment Highlights
The Aerospace segment, GE Aerospace’s core business, witnessed a 16% year-over-year revenue increase, reaching $8.1 billion. This impressive growth was backed up by strong demand for commercial engines and services as well as defense and propulsion technologies. On an organic basis, the segment’s revenues rose 15% compared to the prior year.
The Renewable Energy segment, formerly part of GE Vernova before the spin-off, recorded revenues of $3 billion, up 6% year-over-year. Organic revenues grew 4%, benefiting from strong momentum in the Grid and Offshore Wind businesses.
The Power segment, previously under GE Vernova, saw revenues climb 8% to $4.1 billion. Organic revenues increased by 7%, driven by increased gas power, heavy-duty gas turbines, and aeroderivative orders.
Margin Expansion and Cash Flow
GE Aerospace demonstrated operational excellence, with its adjusted profit surging 76% year-over-year to $1.5 billion. The company’s margin expanded by an impressive 380 basis points to 10.2%, reflecting its focus on cost discipline and operational efficiency.
The company’s cash position remained strong, with cash, cash equivalents and restricted cash totaling $18.4 billion at the end of the first quarter, up from $17 billion at the end of 2023. Adjusted free cash flow soared to $850 million, a significant improvement from $102 million a year ago.
Shareholder Returns
During the first quarter, GE Aerospace rewarded its shareholders with a dividend payment of $86 million and repurchased 1.1 million shares for $0.1 billion, demonstrating its commitment to returning value to investors.
FY 2024 Optimistic Outlook and Guidance
GE Aerospace expects adjusted revenues to grow in the low-double-digit range compared to the previous year, with operating profit projected to be between $6.2 billion and $6.6 billion. Adjusted EPS is expected to be within the range of $3.80 to $4.05, while free cash flow is expected to exceed $5 billion.
Starting from the second quarter of 2024, GE Aerospace will report its operating results under two segments: Commercial Engines & Services and Defense & Propulsion Technologies. The Commercial Engines & Services Segment is expected to witness revenue growth in the mid-to-high teens range, with operating profit forecasted to be between $6.1 billion and $6.4 billion.
Revenues for the Defense & Propulsion Technologies segment are projected to increase in the mid-single-digit to the high-single-digit range while operating profit is anticipated to be between $1 billion and $1.3 billion.
Dividend Announcement
In a separate announcement, GE Aerospace’s Board of Directors authorized a regular quarterly dividend of $0.28, payable on April 25, 2024.
CEO Larry Culp, who oversaw the historic separation of General Electric into three independent companies, expressed confidence in GE Aerospace’s future as a focused global aerospace leader. “We will continue to prioritize safety, quality, delivery and cost — always in that order — while also investing in our future and driving long-term profitable growth,” Culp stated.
With a strong order book, strong cash flow and a commitment to shareholder returns, GE Aerospace appears well-positioned to capitalize on the resurgence in global air travel and maintain its leadership position in the aerospace industry.
GE Aerospace Stock Performance
GE’s stock has been on a remarkable run, fueled by optimism surrounding its strategic transformation and the spin-off of its aerospace business. On April 9, TD Cowen upgraded GE stock to a “buy” rating, citing GE Aerospace’s promising commercial aftermarket prospects amid Boeing’s production challenges.
This positive analyst action added momentum to GE’s shares, which rallied 8.28% to close at $162.62 on Tuesday, April 23. Year-to-date, GE stock has surged an impressive 37%, while the newly formed GE Aerospace has soared nearly 54%, trading at its highest level since July 2016.
Should You Buy GE Aerospace in 2024?
GE Aerospace’s strong first-quarter performance and ambitious growth projections for 2024 and beyond make a compelling case for investors to consider adding the stock to their portfolios. With a dominant position in the rapidly recovering aviation industry, a strong order backlog, and a management team committed to operational excellence and shareholder returns, GE Aerospace presents an attractive investment opportunity.
However, potential barriers, such as supply chain disruptions or geopolitical tensions, should be monitored closely. Ultimately, for investors with a long-term horizon and confidence in the company’s strategic direction, GE Aerospace could be a great addition to a diversified portfolio.
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