GE (GE) Q3 2026 Earnings Call Transcript

GE Aerospace reported third-quarter orders of $19.0 billion, up 49%, revenue up 18% to $13.3 billion, and operating profit up 30% to $3.0 billion, with margins expanding 220 bps to 22.5%; adjusted EPS rose 36% to $2.25. It raised 2026 revenue growth guidance to 19%-20%, operating profit to $10.9-$11.0 billion, adjusted EPS to $8.00-$8.10, and free cash flow to $9.1-$9.4 billion; management expects low-double-digit commercial services growth in 2027. Risks include a GE9X mid-seal certification delay affecting 2026 shipments and an expected approximately $300 million GE9X ramp-related profit headwind in 2027.

Analysis

GE’s strongest signal is not the headline growth rate but the durability of aftermarket pricing and utilization: low retirements, expanding widebody work scopes, and a maturing LEAP fleet support service revenue even if new-aircraft production wobbles. The offset is conversion risk. Rising spare-parts delinquency means demand is outrunning available supply; backlog is valuable only if GE and suppliers can ship it without worsening turnaround times or customer AOGs. CPP may relieve a casting bottleneck over time, but capacity benefits will take investment and execution, not arrive immediately.

Near term, upgraded guidance should support GE, though EPS growth overstates the underlying operating acceleration somewhat: share-count reduction and a lower tax assumption contribute, while cash conversion benefited from working-capital timing. The 2027 setup is more mixed. Service visibility is strong, but the GE9X ramp is expected to dilute profit before cost reductions catch up; FAA timing remains a swing factor. Boeing’s engine inventory rising faster than aircraft deliveries also cautions against equating GE shipments with final aircraft demand. Sustained 777X delays would defer GE9X economics and weigh on Boeing’s delivery recovery.

Contrarian risk: low CFM56 retirements are not unambiguously bullish. They sustain current service demand and constrain used-parts supply, but could defer replacement demand and eventually normalize shop-visit growth. High oil prices could pressure airline capacity and spending with a lag, though already-flown cycles and booked work buffer GE into 2027. Defense awards and the Kratos-linked funded propulsion program add optionality, but disclosed contract economics are insufficient to underwrite a material earnings revision.

Key Decisions for Investors

• GE: Favor holding or adding incrementally on weakness rather than chasing the results. Reassess after the next update on service conversion, parts delinquency, and 2027 margins; the thesis weakens if delinquency rises while turnaround times or AOGs deteriorate.
• GE / Boeing: Track GE9X mid-seal FAA certification and Boeing aircraft deliveries separately from engine shipments. Delayed certification or continued engine inventory accumulation would challenge the near-term ramp thesis; avoid treating GE’s shipment growth alone as proof of Boeing demand recovery.
• Airlines, including Delta Air Lines: Treat high fuel prices as a 1–3 month downside watch for utilization, capacity, and discretionary maintenance behavior, not yet as evidence that GE’s booked 2027 work will disappear. A material schedule reduction or lower airline maintenance spend would falsify that relative resilience.
• Monitor GE’s cash flow quality and guidance composition: operational profit delivery should validate the bullish case more than EPS alone. Failure to convert earnings into cash after working-capital timing normalizes would argue against adding.