Among all companies in the Aerospace & Defense segment of the industrials sector, General Electric Aerospace (NYSE: GE) has likely delivered the most exceptional performance. The North American engine manufacturer has continued to raise its long-term earnings bar, impressing analysts with its conviction in durable aftermarket cash flow generation capabilities. The company’s management team elected to reset its EBIT target to $11.5B, demonstrating an increase over previous estimates. Upward EPS revisions have followed throughout the year, jumping significantly in the latest set of 2026 forecasts.
The manufacturer’s strengths have emerged in both its existing product lines (namely, increased throughput of LEAP-1A engines) and CFM56/GE90 engines, which are being serviced profitably. Both of these factors have helped the company offset headwinds and are continuing to underpin the company’s free-cash-flow visibility going forward. Investors have continued to reward this with multiple expansions, with the manufacturer now trading on exceptionally high 30s price-to-earnings multiples. We analyze the factors contributing to GE Aerospace’s continued success in the market.
The Company Has Seen Stronger Earnings Growth
A few factors have motivated GE’s stock to continue to re-rate. For starters, investors have anticipated that the company’s earnings will grow at a faster rate than they had previously expected. Management’s long-term profit goal has been increased, signifying renewed confidence in the company’s long-term prospects. Quarterly results in recent months have continued to come in strong, and analysts have, as a result, continued to increase their future earnings forecasts.
If the company continues to deliver on its objectives and its relatively more ambitious investment targets, the company’s pathway to long-term success could be very clearly defined. General Electric still warns that the company’s margins could be set to dip in the second half of the year as the manufacturer begins to ship more GE9X engines (which are less profitable due to current unit economics) and sell fewer spare engine parts. The company continues to invest heavily in research and development while maintaining a future and growth-oriented mindset, with steady execution now the clear goal for the company.
Aftermarket Execution And LEAP Production
Another clear driver of the company’s continued strong performance is its engine-service business. GE has continued to generate attractive cash flows when its engines come into the shop for maintenance. Shop visits for older-generation CFM56 and GE90 engines remain high, and, as a result, service revenues remain very strong. At the same time, General Electric continues to deliver more new LEAP engines, which are used on several narrowbody Airbus and Boeing jets. This allows the manufacturer to steadily expand its installed base, which will return for service later down the line.
Last quarter, GE Aerospace saw LEAP engine deliveries accelerate, with parts availability continuing to improve. Even as this mix continues to shift away from higher-priced spare engines (a relatively short-term industry headwind), GE continues to grow its margins across its commercial engine and services units.
There does remain some uncertainty for the manufacturer surrounding the Boeing 777X program, which is the principal customer for its GE9X engine. The continued certification delays for the model will harm the airline’s delivery timeline.
A Company Existing In Its Own Right
Back in 2023-2024, General Electric elected to break up into three different focused companies. GE HealthCare was first spun off on January 4, 2023, before GE Vernova was spun off on April 2, 2024. The remainder of the company was amalgamated into GE Aerospace.
Post-separation, investors have continued to reward the high-margin aerospace division with strong trading multiples. GE Aerospace has continued to outperform, setting an all-time high earlier this month of $295, according to Barron’s. Strong engine aftermarket cash flows and LEAP engine scale-ups, as well as the continued mitigation of macroeconomic risks, have been key catalysts.
The company’s shares are trading up more than 77% year-to-date, far ahead of major market and industry indices. This rating reflects effective execution by the airline, including the upgrading of long-term profit targets and growing confidence that the company will be able to sustain free cash flow.