GE Aerospace GE
What does GE Aerospace do?
GE Aerospace develops, manufactures and services engines for commercial and military aircraft. It also provides engine components as well as avionics and propulsion systems. The company is divided into two segments: Commercial Engines & Services and Defense & Propulsion Technologies. Customers are airlines, aircraft manufacturers, leasing companies, business aviation operators, and governments and armed forces.
The business model is based on the sale of new engines and a long-lived service business. Maintenance, repair, overhaul and the sale of spare parts accompany an engine for decades and are usually considerably more profitable than the initial sale. In terms of competitive position, the company is one of the few suppliers of large commercial aircraft engines and has a very large installed base. It competes with Pratt & Whitney and Rolls-Royce, among others, and partly works in joint ventures, for example with Safran. High certification and development costs as well as long product cycles create substantial barriers to entry.
Score profile
Rank vs. Aerospace & Defense (36 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, GE Aerospace ranks among the best in the group Aerospace & Defense (8.7/10). On growth, the company ranks in the middle in the group Aerospace & Defense (5.4/10). On valuation (higher = cheaper), the stock ranks in the bottom fifth in the group Aerospace & Defense (1.5/10). On financial strength, GE Aerospace ranks below average in the group Aerospace & Defense (2.3/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 36.3x | 24.3x | better than 16 % |
| Trailing P/E | 38.7x | 29.0x | better than 17 % |
| PEG ratio | 3.8x | 1.5x | better than 10 % |
| EV/EBITDA | 30.8x | 18.4x | better than 15 % |
| Price/sales | 6.7x | 3.2x | better than 19 % |
| Price/book | 20.0x | 3.6x | better than 5 % |
| Revenue growth | 15.9% | 11.0% | better than 63 % |
| Earnings growth | 8.9% | 10.0% | better than 46 % |
| Gross margin | 30.1% | 22.8% | better than 74 % |
| Operating margin | 18.5% | 10.7% | better than 87 % |
| Net margin | 17.3% | 7.7% | better than 90 % |
| Return on equity | 50.2% | 11.9% | better than 96 % |
| Debt/equity | 116.0% | 51.8% | better than 13 % |
| Current ratio | 1.0x | 2.2x | better than 1 % |
| Free cash flow yield | 1.8% | 1.5% | better than 54 % |
| Dividend yield | 0.6% | 0.9% | – |
| Payout ratio | 20.2% | 26.0% | – |
| Beta | 1.41 | 0.96 | – |
Valuation: what is GE Aerospace worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give GE Aerospace a model range of 140.28 USD to 226.19 USD per share.
21 analysts, average rating “Buy”, average price target 378.43 USD (+11.9%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- The number of flight hours and flight cycles largely determines demand for maintenance, repair and spare parts.
- Deliveries of new commercial aircraft by aircraft manufacturers expand the installed engine base and secure future service revenue.
- Defense budgets and military procurement programs drive demand in the Defense & Propulsion Technologies segment.
Risks
- Dependence on aircraft manufacturers' production rates and on supply chains can weigh on deliveries and margins.
- Weakness in air travel, for example due to crises, pandemics or economic downturns, noticeably reduces the service business.
- Technical problems or durability defects in engines can cause high warranty and retrofit costs as well as reputational damage.
What to look for with GE Aerospace
The ratio of service revenue to new engine revenue and the development of the segment margin are revealing, because the recurring service business shapes earnings power.