GE Aerospace experienced a significant drop in its stock price on Tuesday after the company reported third-quarter earnings that fell short of revenue expectations.
The manufacturer of airplanes and defense technology posted adjusted earnings of $1.15 per share, reflecting a 25% increase compared to the previous year, alongside a 6% revenue growth to $8.9 billion. However, analysts had anticipated earnings of $1.13 per share and revenue exceeding $9 billion.
Despite a 28% increase in total orders to $12.6 billion, driven largely by a 29% rise in commercial engines and services orders, the company’s revenue from these segments grew only 8% to $7 billion, missing projections of $7.13 billion. Similarly, defense and propulsion technology revenue increased by 2% to $2.24 billion but fell short of the expected $2.33 billion.
During the earnings call, CEO H. Lawrence “Larry” Culp emphasized GE Aerospace’s commitment to collaborating with Boeing as the latter navigates challenges related to strikes and quality control issues. Culp noted that GE Aerospace is actively working with suppliers to boost production and is addressing durability concerns with its LEAP jet engines. The company anticipates a 10% decrease in LEAP engine deliveries for 2024 compared to the previous year.
Looking ahead, GE Aerospace maintained its adjusted revenue forecast for 2024, projecting high single-digit growth. The company raised its operating profit guidance to between $6.7 billion and $6.9 billion, up from an earlier estimate of $6.5 billion to $6.8 billion. Additionally, GE Aerospace expects adjusted earnings per share to range from $4.20 to $4.35, an increase from the prior guidance of $3.95 to $4.20. The company also projects free cash flow between $5.6 billion and $5.8 billion, exceeding its previous forecast of $5.3 billion to $5.6 billion.
Despite the quarterly setbacks, GE Aerospace remains optimistic about its commercial engines and services revenue, expecting growth in the low double digits to mid-teens, while defense and propulsion technology revenue is projected to increase in the mid- to high-single digits.
Following the earnings report, GE Aerospace’s stock fell by 9%. However, the company’s shares have still seen a notable year-to-date increase of nearly 74%, with a remarkable 106% gain since a breakout in November 2023. This decline has raised questions about GE Aerospace’s reliance on Boeing and the impact of the latter’s ongoing operational challenges on GE’s business outlook.
With input from Investor’s Business Daily and GE Aerospace.
