Earnings
GE Aerospace raises 2026 profit outlook as orders jump 49%, but weaker cash flow sends shares lower
The engine maker beat third-quarter forecasts and lifted its EPS range to $8.00-$8.10, yet free cash flow fell 14% and the stock dropped more than 4% before the open.
HedgeWeekly News Desk ·
GE Aerospace lifted its 2026 adjusted earnings forecast to $8.00 to $8.10 a share on Tuesday, up from $7.65 to $7.85 and above the analyst average of roughly $7.9. The company now expects adjusted revenue to grow 19% to 20% this year, compared with its earlier call for growth in the high teens.
Third-quarter revenue rose 16% to $14.12 billion, well ahead of forecasts near $12.9 billion, and adjusted EPS climbed 36% to $2.25 against expectations of about $2.00. Orders surged 49% to $19 billion. Adjusted operating profit grew 30% to $2.99 billion, taking the adjusted margin up 220 basis points to 22.5%.
The engine business led the gains. Commercial Engines & Services revenue rose 21% to $10.34 billion, with spare-parts sales up more than 20% and LEAP shop visits up more than 40%, though the unit's margin slipped 10 basis points to 27.9%. Defense & Propulsion Technologies revenue rose about 7% to $3.47 billion. Free cash flow fell 14% to $2.04 billion, sales discounts and allowances increased by $1.56 billion, and the insurance arm swung to a $210 million pretax loss from a $363 million profit a year earlier. GE bought back $2 billion of stock in the quarter.
Why it matters: the shares fell more than 4% to about $298.50 in premarket trade despite the guidance raise, a sign that investors are weighing cash conversion and aftermarket risk more heavily than headline beats. With Brent near its highest since May, the concern is that airlines trim flying to cope with fuel costs, which would eventually slow the high-margin repair and spare-parts work that drives GE's earnings. The company said the Middle East conflict had not materially hit operations through September and pointed to a backlog of engines waiting for repair. Investors will also track the GE9X engine, whose upgraded midseal GE is targeting for FAA certification by the end of 2026, subject to regulators.