GE Aerospace (GE) 26Q2 Update

26Q2 revenue was $13.3 billion, up 21.1% over 25Q2.  Commercial Engine & Services (CES) revenue rose 21.8%, while Defense & Propulsion Technologies (DPT) revenues were up 34.3%.  CES segment profit jumped 19.0%, with a 60 bp decline in margin to 27.3%.  DPT segment profit surged 31.5%, with margin down 30 bp to 13.8%.  Other income rose 5.0% from $298 million to $313 million, mostly on higher investment and equity method income.  Thus, 26Q2 net income was $2.37 billion, up 16.9% from $2.03 billion.  GAAP EPS was up $2.26 or 19.6%, from $1.89, on a lower share count.  Adjusted EPS was $2.02, up from $1.66, exceeding the consensus estimate of $1.86.

Once again, services gains drove profitability.  GE is benefiting from pent-up demand for engine maintenance, repairs and overhauls.  Growth in external shop visits is driving sales of parts.  Work scopes remain favorable for the LEAP and widebody engines, and stable for CFM56.  Sales of LEAP and other commercial engines rose 24% in the quarter, as continuing improvements in parts availability allow GE to catch up on its order backlog.  26Q2 profit margins declined, though, due to growth in early cycle GE9X engine sales, investments and inflation.

Management has raised its 2026 guidance and now anticipates high teens revenue growth, up from low double-digits previously; operating profit of $10.55-$10.75 billion, up from $9.85-$10.25 billion; adjusted EPS of $7.65-$7.85, up from $7.10-$7.40; and FCF of $8.9-$9.2 billion, up from $8.0-$8.4 billion.  Although certainly impressive, GE’s current valuation anticipates similar revenue and growth rates for at least the next few years.

My 2026 projections now show adjusted revenue growth of 17.1%, operating profit of $10.9 billion; GAAP EPS of $8.37; adjusted (non-GAAP) EPS of $7.75 and FCF of $9.0 billion, all within guidance.  For 2027, I anticipate that revenue growth will slow to 5.2%; and GAAP EPS of $8.95; non-GAAP EPS of $8.00; and FCF of $9.3 billion.

Year-to-date, GE’s stock has delivered a total return of 11.1%, better than the S&P 500’s 9.4% gain.  The stock is now valued at 38 times my 2027 GAAP EPS estimate and 43 times my 2027 non-GAAP EPS estimate.  My price target is now $320.00, which values the stock at 35.8 times projected 2027 GAAP EPS and 40 times projected 2027 non-GAAP EPS.  The price target equates to a potential total return of -5.7% at yesterday’s closing price of $341.30.  Thus, I am maintaining my performance rating of “5” (Sell). I have been behind the curve on this stock, as it has handily outperformed for the past two years.  Yet, its valuation is quite high and except for a late spring surge, the stock has lost momentum this year.  While it has delivered on earnings, the valuation now implicitly assumes multi-year double-digit earnings growth, which does not seem possible given slowing air passenger traffic growth, the satisfaction of pent-up demand, the potential fallout from geopolitical risks, including the conflicts in Ukraine and Iran, and the implications of the Federal budget deficit.

This is a summary of my recent update report on GE Aerospace (GE). To obtain a copy of the report, please reach out to me using the contact information provided below.

July 21, 2026 (Report published on July 21, 2026).

Stephen P. Percoco
Lark Research
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© 2015-2026 by Stephen P. Percoco, Lark Research.   All rights reserved.

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