GE Aerospace (GE 6.78%) beat analyst expectations in the fourth quarter and announced plans to boost returns to shareholders. Investors cheered, sending GE shares up 10% as of 10 a.m. ET.
Strong commercial demand
GE Aerospace was long considered one of the crown jewels inside of the General Electric conglomerate. Now independent, the company is demonstrating to investors what it is capable of. GE earned $1.32 per share in the fourth quarter on revenue of $10.8 billion, easily surpassing Wall Street’s consensus $1.04 per share on $9.5 billion estimates.
For the year, GE reported profit up 27% to $7.6 billion on revenue up 9% to $38.7 billion.
The driver of the beat is strong demand for spare parts and services. Production issues at both Boeing and Airbus are forcing commercial airlines to lean heavily on their existing fleet, creating the need for additional maintenance. GE and other aerospace suppliers typically generate lower margins on sales to aircraft manufacturers and make up for it with spare parts and service sales.
“GE Aerospace delivered a strong finish to 2024 given robust demand for our services and products,” CEO Larry Culp said in a statement. “Our performance capped off a monumental first year as a stand-alone company with $1.7 billion of profit growth and $1.3 billion of free cash flow growth.”
Is GE Aerospace stock a buy?
The company is optimistic the strong performance can continue, announcing post-earnings it would boost its dividend by 30% and launch a new $7 billion share repurchase plan. Culp forecasted double-digit revenue and earnings growth in the new year and expects to convert all its operating profits in the year to free cash flow.
GE is in the right place at the right time, and this sort of earnings performance is likely not to continue indefinitely. But the company plays an important role in the aerospace supply chain and cannot easily be replaced, making it a good fit for investors looking for long-term growth and income opportunities.
