GE Aerospace (NYSE:GE) stock traded lower on Thursday after the company reported second-quarter results that topped Wall Street estimates and raised its full-year 2026 guidance.
Earnings Beat, Margins Narrow
Adjusted EPS came in at $2.02, topping the $1.86 estimate. GAAP earnings from continuing operations rose 23% to $2.30 per diluted share. Revenue increased 21% to $13.35 billion, beating the $11.85 billion estimate.
GAAP profit increased 17% to $2.80 billion, while adjusted operating profit rose 18% to $2.75 billion.
Adjusted operating margin declined 130 basis points to 21.7%, reflecting higher installation-engine volumes, investments, and inflation.
Total orders climbed 17% to $16.53 billion, while backlog exceeded $210 billion.
Commercial Services Drive Growth
Commercial Engines & Services revenue rose 27% to $9.73 billion, with services up 26% and equipment up 30%.
Operating profit increased 20% to $2.66 billion, while margin contracted 160 basis points to 27.3%.
First-half commercial services revenue grew 32%, while engine deliveries rose 31%, including 41% growth in LEAP deliveries.
Defense Business Expands
Defense & Propulsion Technologies revenue increased 16% to $3.44 billion, while operating profit rose 18% to $475 million.
Margin expanded 30 basis points to 13.8%. Defense & Systems revenue rose 12%, while Propulsion & Additive Technologies revenue increased 23%.
Cash Flow And Guidance Rise
Operating cash flow increased 39% to $3.26 billion, while free cash flow rose 43% to $3.03 billion. Free-cash-flow conversion reached 143%.
GE Aerospace ended June with $9.3 billion in cash and $10.3 billion including short-term liquidity investments. Total borrowings were $19.2 billion, and the company repurchased $2 billion of shares.
The company raised full-year adjusted EPS guidance to $7.65 to $7.85 from $7.10 to $7.40, above the $7.58 estimate.
Operating profit guidance increased to $10.55 billion to $10.75 billion from $9.85 billion to $10.25 billion. Free cash flow is now expected at $8.9 billion to $9.2 billion, up from $8 billion to $8.4 billion.
Aftermarket Demand Remains Resilient
During the earnings call, management said aftermarket demand remains more resilient than expected, with customer behavior unchanged and parked CFM56 aircraft declining since March.
GE Aerospace described the business as supply-constrained rather than demand-constrained. Spare parts delinquencies rose 20% sequentially, while MRO capacity remains oversubscribed.
Executives said supply chain capacity and production constraints—not weakening demand—are the primary factors limiting how quickly the company can grow.
More than 95% of third-quarter spare-parts revenue is already in backlog, and planned engine removals exceed the full-year shop-visit outlook by more than 40%, supporting visibility into 2027.
Management expects LEAP shop visits to grow at roughly a 25% annual rate through 2030, while the external service channel expands to about 30% of the portfolio.
CEO H. Lawrence Culp Jr. also said GE Aerospace has several months of GEnx engines at Boeing’s Charleston facility.
Management expects free cash flow to grow with earnings, although cash conversion should normalize over time. It also warned that persistent supply-chain constraints and a sharp further rise in fuel prices could weaken air-travel demand.
GE Stock Price Activity: GE Aerospace shares were down 3.59% at $347.41 at the time of publication on Monday, according to Benzinga Pro data.
Photo by Jonathan Weiss via Shutterstock
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