Date: October 22, 2024

Sources:

* GE Aerospace 3Q 2024 Form 10-Q

* GE Aerospace 3Q 2024 Webcast Presentation

* GE Aerospace 3Q 2024 Press Release

Overview: GE Aerospace delivered strong third-quarter results, exceeding earnings and free cash flow expectations. Robust demand, particularly in services, fueled growth and profitability. The company also made notable progress in addressing supply chain constraints, expanding aftermarket capacity, and securing significant customer wins.

Key Highlights:

* Financial Performance: Orders: $12.6 billion, up 28% year-over-year, reflecting robust demand across both commercial and defense segments.

* Adjusted Revenue: $8.9 billion, up 6% year-over-year.

* Operating Profit: $1.8 billion, up 14% year-over-year, driven by strong services performance.

* Adjusted EPS: $1.15, up 25% year-over-year.

* Free Cash Flow: $1.8 billion, up 5% year-over-year.

* Operational Progress: Implemented FLIGHT DECK, a lean operating model, to address supply chain constraints at priority supplier sites, resulting in material output increases.

* Increased LEAP internal shop visits by over 20% year-over-year and expanded aftermarket capacity by adding a dedicated LEAP MRO shop in Poland.

* Achieved over 20% sequential growth in engine deliveries across both commercial and defense segments, demonstrating improved operational execution.

* Customer Wins: Secured narrowbody wins with Avolon (150 LEAP-1A engines for 75 A320 aircraft) and widebody commitments from EVA Air (GEnx engines for four 787s) and Qatar Airways (40 GE9X engines for 20 777s).

* Finalized a commitment with the Polish Ministry of National Defense for over 200 T700 engines to power 96 Boeing Apache Guardian helicopters.

* Capital Allocation: Returned $4.4 billion to shareholders year-to-date, including $1.3 billion in share repurchases and $1.5 billion in proceeds from the sale of GE HealthCare shares.

Segment Performance:

* Commercial Engines & Services (CES): Orders: $9.8 billion, up 29% year-over-year, with both services and equipment segments showing strong growth.

* Revenue: $7.0 billion, up 8% year-over-year, with services growing 10% driven by spare parts sales, work scope, and price, offsetting a slight decline in internal shop visits.

* Operating profit: $1.8 billion, up 16% year-over-year, with margin expansion driven by service volume and price, partially offset by inflation and investments.

* Defense & Propulsion Technologies (DPT): Orders: $3.0 billion, up 19% year-over-year, primarily driven by Defense & Systems.

* Revenue: $2.2 billion, up 2% year-over-year, with growth in Propulsion & Additive Technologies (primarily Avio Aero) offsetting a slight decline in Defense & Systems due to lower engine units and mix.

* Operating profit: $220 million, down 18% year-over-year, with margin contraction driven by inflation, engine mix, and investments, partially offset by price improvement.

Outlook:

* GE Aerospace raised its full-year 2024 guidance for adjusted revenue, operating profit, adjusted EPS, and free cash flow, reflecting strong year-to-date performance and positive fourth-quarter expectations.

* Adjusted Revenue: Increased to ~$32 billion (high single-digit growth).

* Operating Profit: Increased to $6.7-$6.9 billion.

* Adjusted EPS: Increased to $4.20-$4.35.

* Free Cash Flow: Increased to $5.6-$5.8 billion.

Key Quotes:

* H. Lawrence Culp, Jr., GE Aerospace Chairman and CEO: “The GE Aerospace team delivered strong results, with demand driving orders up 28%. We grew earnings 25% and produced substantial free cash flow, both largely driven by services. Given the strength of our results and 4Q expectations, we're raising our earnings and cash guidance for the year.”

* Culp continued: "Leveraging FLIGHT DECK we're focused on servicing and delivering our engines faster without compromising safety and quality. While there's more work to do, we made meaningful progress with engine deliveries improving more than 20% sequentially while also expanding aftermarket capacity. Our path forward is clear, and I am confident GE Aerospace is positioned to deliver a solid year in our first year as a standalone company."

Key Themes:

* Strong demand for commercial and defense aerospace products and services.

* Effective execution of FLIGHT DECK to address supply chain challenges and improve delivery performance.

* Focus on aftermarket services as a key driver of growth and profitability.

* Commitment to shareholder value through dividends and share repurchases.

* Confidence in GE Aerospace's future as a standalone company.

Important Considerations:

* Supply Chain: While GE Aerospace has made progress in addressing supply chain constraints, continued vigilance is needed to ensure smooth operations and meet growing demand.

* Inflation: Continued inflationary pressures may impact margins and require ongoing cost management efforts.

* Geopolitical and macroeconomic uncertainties could affect future performance.

Overall, GE Aerospace demonstrated strong financial and operational performance in the third quarter of 2024. The company is well-positioned for continued growth and profitability, driven by robust demand, aftermarket service expansion, and efficient execution of its operating model.

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