GE Aerospace ends Q3 with strong orders

UPDATE - GE Aerospace benefitted from strong demand for new commercial engines and services, reporting a 25-percent growth of revenues to $8.4 billion in Q3. For the year-to-date, revenues are up by even 26 percent to $23.3 billion, General Electric said in its Q3 earnings release today. GE’s consolidated revenues were up by 18 percent to $46.1 billion. However, the engine maker has reduced its guidance for CFM LEAP deliveries for 2024. The aero-engine division saw particularly strong revenue growth in services, which were up 29 percent to $6.1 billion in Q3 or by 26 percent to $16.4 billion in the first nine months. Revenues from engine sales grew by 17 percent in Q3 to $2.3 billion or by 26 percent to $6.8 billion year to date. The net profit for the engine unit was up 33 percent to $1.7 billion, resulting in an operational margin of 20.4 percent. During the quarter, GE Aerospace and CFM delivered 520 commercial engines compared to 489 in the same period of 2022. Of these, 389 were CFM LEAPs, up from 347. For the first nine months, total commercial engine deliveries reached 1.544, up from 1.187, including 1.174 LEAPS, up from 812. This includes spare engines to replace LEAPs that need shop visits. Lower guidance While the supply chain still is not where it should be, parts supplies have improved during the quarter. GE is guiding a 15 percent increase in LEAP deliveries from Q3 to Q4 but has reduced its guidance for 2024. "We are now planning for a 40 to 45 percent increase in fleet deliveries this year, down from our 50 percent target at the beginning of the year. We now expect OE revenue to grow low to mid-20s and services revenue to be up mid- to high 20s for the year," Chief Financial Officer Rahul Ghai said in the earnings call. He added: "It's primarily a function of our own supply chain challenges that we are having internally. As we look at our supply chain environment, while we are working extremely hard, we are seeing an improvement in total material inflow, the supplier delinquencies still remain high, actually were up sequentially about 25 percent from 2Q to 3Q. So that is impacting our output on the other end. And for next year, we're still expecting a 20 to 25 percent improvement in LEAP deliveries from where we end this year." "LEAP deliveries are a little bit lighter than we had initially expected. Still, a pretty substantial ramp in the fourth quarter we're expecting. Based on the revised guidance that we just provided, we expect about a 15 percent growth from 3Q to 4Q and a pretty big ramp year-over-year," Ghai said. 900 new orders GE Aerospace booked 900 new engine orders in Q3 valued at $9.8 percent, up 34 percent year on year. They included 713 CFM LEAPs, thanks to the huge orders from Air India, Avolon, Ryanair, and numerous other customers for the Boeing MAX and Airbus A320neo family. The remainder of new orders (187) are for large commercial engines, notably the GEnx that has been selected by various customers of the Boeing 787. In Q3 2022, GE Aerospace received orders for 101 LEAPs and 80 large engines for a total of 181. In the first nine months, GE Aerospace has received orders for 2.333 commercial engines, of which 1.455 LEAPs and 878 large engines. These orders are valued at $27.5 billion. This compares to 1.303 in the same period of last year, when 936 LEAPs and 367 large engines were listed. These numbers exclude military engines, which GE Aerospace lists separately. Full-year guidance GE Aerospace is guiding full-year organic revenue growth in the low 20 percent range and an operating profit of around $6.0 billion. Free cash flow is expected to outperform last year. Consolidated revenues are expected to be up by the low teens. Earnings per share are guided at $2.55 to $2.65, up from $2.10 to $2.30 in the previous guidance. Free cash flow should be between $4.7 and $5.1 billion versus $4.1 and $4.6 billion. GE is on track to launch GE Aerospace as the new main business unit in Q2 of 2024 when GE Vernova will be spun off as a separate unit. This is subject to Board approval and other customary conditions. GE received some $2.7 billion in proceeds in Q3 related to the sale of its shares in lessor AerCap, which acquired GECAS in 2021.

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