GE Aerospace earnings: No good deed goes unpunished
We’ve raised our fair value estimate of GE Aerospace stock.
Mentioned: GE Aerospace (GE)
Key Morningstar metrics for GE Aerospace
- Fair Value Estimate: $293.00
- Morningstar Rating: ★★★
- Morningstar Economic Moat Rating: Wide
- Morningstar Uncertainty Rating: Medium
What we thought of GE Aerospace’s earnings
GE Aerospace’s GE fourth-quarter commercial revenue grew 24% to $9.5 billion at a 24% operating margin, while defense revenue grew 13% to $2.8 billion compared with 2024. Management promised mid-teens commercial engine revenue growth in 2026, and investors traded the shares down over 7% on Jan. 22.
Why it matters: Our outlook for commercial aircraft entails a near doubling of the global fleet by 2042, driven by secular growth and replacement of older, less efficient aircraft. GE Aerospace stands to participate heavily in this upswing, given its high market penetration across both narrow- and wide-body categories.
- As newer planes like the 737 MAX and 777X are delayed in entering service, airlines using their older aircraft and engines longer than planned benefit the aftermarket business, where GE provides replacement parts at very high incremental margins.
- In GE’s vast commercial aftermarket business, we see 6% compound revenue growth over 10 years, but with improving margins over time, driving company operating margins to more than 27% in the next decade.
Bears say: Despite the company beating its own fiscal expectations in 2025, investors seemed disappointed in management’s slightly more modest growth projections for 2026, sending the stock price downward by over 7% by the afternoon of Jan. 22.
The bottom line: We have raised our fair value estimate for wide-moat GE Aerospace shares to $293 per share from $279, reflecting both near-term lucrative shop visits and ongoing efficiency improvements that drive our forecast for continued service margin expansion.
- The shares trade very close to our revised fair value estimate. We anticipate the firm’s continued dividend growth and share repurchases will drive attractive shareholder returns, while the franchise’s opportunity to compound its value should, all else equal, raise our fair value estimate up at our cost of equity of 9% per year.
