GE Aerospace: A Year Ahead

GE Aerospace, the standalone company formed from General Electric's aerospace division, has had a remarkable first year, with strong earnings growth and a promising outlook for 2025. As we look ahead, several factors suggest that GE Aerospace could be an attractive investment opportunity.



Strong Earnings Growth and Valuation

GE Aerospace is expected to deliver mid-teens earnings growth in 2025, building on its impressive 56% EPS growth in 2024. The company's current valuation, with earnings trading at 37 times and FCF at slightly less than 34 times, may seem expensive. However, investors should consider that this snapshot also shows a company set for mid-teens growth in 2026 and beyond.



Shift in Installed Base and LEAP Engine Profitability

The shift in the installed base from CFM56 to LEAP engines is expected to have a positive impact on GE Aerospace's services revenue and profitability. The delay in new airplane deliveries at Boeing and Airbus means older planes are being run more, pushing out the period when services revenue on the CFM56 engine timeline has been pushed out. Additionally, LEAP services became profitable in 2024, and the overall LEAP program is expected to turn profitable in 2025. This transition presents opportunities for GE Aerospace to grow its services revenue and enhance its profitability.



Increasing LEAP Deliveries and Dividend Hike

GE Aerospace expects 15% to 20% more LEAP deliveries in 2025, with engine volume growth in the high teens. This increase in deliveries will drive additional services revenue and further enhance the company's market position. Additionally, GE Aerospace plans to hike its dividend by 30% and initiate a $7 billion share buyback program. These shareholder-friendly moves can boost investor confidence and make the stock more attractive.



Risks and Challenges

While GE Aerospace's outlook appears promising, investors should be aware of potential risks and challenges. Market-led weakness, supply chain constraints, geopolitical risks, intense competition, and economic downturns could pose threats to the company's stock price. Investors should monitor these factors and evaluate how GE Aerospace manages these challenges.

In conclusion, GE Aerospace's expected mid-teens earnings growth, improving LEAP profitability, increasing LEAP deliveries, and dividend hike make it an attractive investment opportunity for the coming year. However, investors should also be mindful of potential risks and challenges that could impact the company's stock price. By staying informed and closely monitoring GE Aerospace's progress, investors can make well-informed decisions about their investments.