GE Aerospace (GE) 25Q2 Update

25Q2 revenue was $11.0 billion, up 21% over 25Q1.  Commercial Engine & Services (CES) revenue rose 30%, while Defense & Propulsion Technologies (DPT) was up 7%.  CES segment profit jumped 33%, with a 50 bp rise in margin to 27.9%.  DPT segment profit rose 5%, as margin slipped 20 bp to 14.1%.  25Q2 net income was $2.03 billion, up from 24Q2’s $1.26 billion.  GAAP EPS was $1.87, up from $1.20, and exceeded my estimate of $1.45.  Adjusted EPS was $1.66, up from $1.20 and ahead of my estimate of $1.29 and the consensus estimate of $1.43.

Management highlighted the company’s strong performance for the quarter, with growth rates in excess of 20% for orders, revenue, profits, EPS and free cash flow.  This strong performance was the result of improved materials availability (which enabled the company to deliver out a higher proportion of its backlog), increased shop visits (as a result of the continuing post-pandemic rebound in air traffic) and continuing productivity and operating efficiency gains from FLIGHT DECK, its proprietary lean operating model.  With these gains, management raised its guidance for 2025 revenues, earnings and free cash flow and also its longer-term outlook for these measures through 2028.

GE’s 2025 guidance now anticipates low double-digit adjusted revenue growth (i.e. excluding run-off insurance operations) in the mid-teens, up from low double-digits previously; operating profit of $8.2-$8.5 billion, up from $7.8-$8.2 billion; adjusted EPS of $5.60-$5.80, up from $5.10-$5.45 and FCF of $6.5-$6.9 billion, up from $6.3-$6.8 billion.  My projections now show adjusted revenue growth of 15.8% (up from 12.6%), operating profit of $8.4 billion (up from $7.9 billion), GAAP EPS of $6.75 (up from $6.19), adjusted (non-GAAP) EPS of $5.80 (up from $5.40) and free cash flow of $6.8 billion, up from $6.7 billion.  For 2026, I anticipate adjusted revenue growth of 7.7% (from 6.9%); GAAP EPS of $7.48, up 11% from 2025; non-GAAP EPS of $6.45, up 11.2%; and free cash flow of $7.0 billion, up 2.9%

Since my last report on April 22, GE’s stock has advanced 39.2% on a total return basis, better than the S&P 500’s 19.6%.  The stock is now valued at 35 times my 2026 GAAP EPS estimate and 41 times 2026 non-GAAP EPS.  It is also valued at 31.4 times management’s 2028 adjusted EPS guidance of $8.40.  Based upon management’s guidance and my 2026 projections, I am raising my price target from $200.00 to $205.00.  That equates to a potential total return of –21.7%.  Thus, I am reducing my performance rating from “4” (Underperform) to “5” (Sell). While the company’s 25Q2 performance was impressive, management’s guidance essentially leaves its original expectations for 25H2 unchanged.  Perhaps then there is a reasonable chance that the company will exceed its own guidance over the final two quarters.  Even so, the stock’s valuation at nearly 40 times 2025 GAAP EPS and 31.4 times anticipated 2028 EPS is high, especially given GE’s exposure to the business cycle and potential geopolitical events, both of which could reduce air travel demand, and with it demand for new engines and maintenance services.

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 22, 2025 (Report published on July 22, 2025.)

Stephen P. Percoco
Lark Research
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Linden, New Jersey 07036
(908) 975-0250
admin@larkresearch.com

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

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