General Electric announced its 3Q22 earnings at $0.35 and missed consensus by $0.14. The company is a complex conglomerate with revenues spread among healthcare, renewal, power, and aviation. The split comes with three segments, GE Healthcare, GE Vernova (energy business), and GE Aerospace.
GE Aerospace (previously: GE Aviation) was the star performer. JPMorgan noted: “An Aviation-dominated quarter on almost all fronts, with other businesses missing, and generally guided lower. Aero was the star of the show beating once again with strong mix as services grew materially above capacity, and guidance was raised here.” Whereas overall sales were up 4%, Aviation saw a 25% rise to $6.7 billion. Revenues of Services improved by 33%, with that of commercial engines up by even 47%. LEAP unit deliveries were up 8%, but at 101, orders were down from 287 in Q1 2021. Year to date sees 936 LEAP orders, up from 866 last year. Another 367 commercial engines were GEnx (747 and 787) but likely hardly any GE9X as the Boeing 777X is delayed.
MAX deliveries improved performance
The restart of Boeing MAX deliveries helped improve the aviation segment’s performance. Our delivery tracker for this year shows Boeing delivered 341 aircraft through October 25. Of these, 63% are MAX 8, 10% are MAX 8-200s, and 13% are MAX 9s. Nearly 90% of Boeing’s new deliveries this year have been a MAX variant. Added to this, of course, would be the deliveries of engines on the Airbus A320 family. Whereas GE powers most Boeing widebodies, Rolls-Royce does this at Airbus. The restart of Boeing 787 deliveries in August has also been a boon to GE, 12 in the year to date through October 25.
The following table utilizes fleet data from ch-Aviation and lists active aircraft. The light blue section highlights GE’s significant market share among single-aisles. GE Aviation and Safran with the CFM International LEAP are the sole suppliers of the 737 program and have over 57% of the Airbus equivalent.
The supply chain issue is potentially a more significant hurdle for GE than its competitors. P&W is Airbus-dependent (and to a lesser extent Embraer), and Rolls-Royce is Airbus-focused. GE Aerospace is a crucial supplier to Airbus and Boeing. Rising deliveries from Airbus and Boeing put more pressure on GE. Indeed there are reports of Boeing moving GE LEAP engines among its MAX inventory. This is a clear sign GE and CFM are struggling to meet demand.
Moreover, there is an issue with the MAX 7 and MAX 10 – both require FAA certification before deliveries can start. Boeing has done an excellent job of selling the MAX 10 of late. The demand for LEAP engines will grow. This may be why, despite the earnings miss, GE’s stock is strong. GE Aviation and Boeing are co-dependents, and any more disruptions to Boeing’s MAX program exacerbate GE Aviation’s risk.
Co-Founder AirInsight. My previous life includes stints at Shell South Africa, CIC Research, and PA Consulting. Got bitten by the aviation bug and ended up an Avgeek. Then the data bug got me, making me a curious Avgeek seeking data-driven logic. Also, I appreciate conversations with smart people from whom I learn so much. Summary: I am very fortunate to work with and converse with great people.