01—Abstract
Summary
Summary of the 8-K filed October 22, 2024. Cited figures are marked; the original filing is the authoritative source.
GE Aerospace (formerly General Electric, now operating as a standalone aerospace company) reported strong third-quarter 2024 results on October 22, 2024, led by a 28% jump in total orders to $12.6 billiona and 25% growth in adjusted EPS to $1.15.
GAAP revenue rose 6% to $9.8 billionb, and GAAP continuing EPS was $1.56, inflated by gains on retained equity interests (notably GE HealthCare) and a Dolby licensing sale. Adjusted revenue grew 6% to $8.9 billion, operating profit increased 14% to $1.8 billion, and operating margin expanded 150 basis points to 20.3%. Free cash flow reached $1.8 billion, up 5%, and year-to-date FCF of $4.6 billion was up 31%.
Growth was driven primarily by the Commercial Engines & Services segment, where orders rose 29% and segment margin expanded 180 basis points to 25.7%. Management raised full-year 2024 guidance for operating profit to $6.7c–$6.9 billion (from $6.5–$6.8 billion), adjusted EPS to $4.20–$4.35 (from $3.95–$4.20), and FCF to $5.6–$5.8 billion (from $5.3–$5.6 billion). The Defense & Propulsion Technologies segment was a weaker spot: segment profit fell 18% to $220 million and margin contracted 240 basis points, and management now expects that segment's operating profit to land at the low end of its $1.0–$1.3 billion range.
Investors should also note several one-time items: a $251 milliond non-cash goodwill impairment at Colibrium Additive, a $328 million pre-tax charge to settle a legacy shareholder lawsuit in principle, and $378 million in restructuring charges. Supply chain constraints remain the key operational risk, as engine deliveries improved over 20% sequentially but the company still has work to do on supplier output and aftermarket capacity.
02—Key points
Key Highlights
- Total orders rose 28% to $12.6 billion, with Commercial Engines & Services orders up 29% to $9.8 billion, signaling strong forward demand.
- Adjusted EPS grew 25% to $1.15, and operating profit rose 14% to $1.8 billion, with operating margin expanding 150 bps to 20.3%.
- Full-year 2024 guidance raised: operating profit to $6.7–$6.9B, adjusted EPS to $4.20–$4.35, and FCF to $5.6–$5.8B.
- Free cash flow of $1.8 billion in Q3 (+5%) and $4.6 billion year-to-date (+31%), with 2024 FCF conversion expected above 100%.
- Defense & Propulsion Technologies profit fell 18% to $220 million, margin down 240 bps, and full-year operating profit now expected at the low end of the $1.0–$1.3B range.
- One-time items include a $251M non-cash goodwill impairment at Colibrium Additive, a $328M pre-tax legal settlement charge, and $378M in restructuring charges, which depressed GAAP results.
- GAAP continuing EPS of $1.56 was boosted by a $341M pre-tax gain on the Dolby licensing sale and $357M in gains on retained ownership interests, so GAAP and adjusted figures diverge materially.
03—Questions
Frequently Asked Questions
Why is GAAP EPS ($1.56) so much higher than adjusted EPS ($1.15)?
GAAP results include non-operating items that management excludes from adjusted EPS. In Q3 2024, these included $357 million in gains on retained and sold ownership interests (largely the mark-to-market of GE HealthCare shares), $356 million in gains on business interest transactions (including the Dolby licensing sale), and $172 million in pre-tax insurance earnings. These gains were partly offset by restructuring charges, the Colibrium goodwill impairment, and the legal settlement charge. Adjusted EPS strips out these items to better reflect ongoing operating performance.
What is driving the strong order growth, and is it sustainable?
Orders were driven by commercial aerospace demand, including narrowbody wins such as Avolon's order for 150 LEAP-1A engines and widebody commitments from EVA Air and Qatar Airways. Services and equipment orders in Commercial Engines & Services each grew more than 20%. Sustainability depends on airframer production rates and supply chain recovery, since the company still faces constraints at its top 15 supplier sites. Orders are a leading indicator, but they do not guarantee revenue timing, which depends on delivery execution.
Why did the Defense & Propulsion Technologies segment underperform?
Segment profit fell 18% to $220 million, and margin declined 240 bps to 9.8%. Management cited inflation, unfavorable engine mix, and investments, which more than offset price improvements. Defense & Systems revenue declined 2% due to fewer engine units and unfavorable mix, though Propulsion & Additive Technologies grew 9%, driven by Avio Aero. Orders strengthened 19%, which may support future revenue, but management now expects full-year segment operating profit at the low end of its $1.0–$1.3 billion range.
What do the one-time charges mean for investors going forward?
The Colibrium Additive goodwill impairment ($251 million) reflects slower adoption of additive manufacturing and is non-cash, though it signals weaker expected returns on that business. The $328 million pre-tax charge relates to an agreement in principle to settle a legacy shareholder lawsuit, which is subject to finalization and may result in a cash outflow. Restructuring charges of $378 million in Q3 were also significant. These items are excluded from adjusted metrics, so investors should evaluate whether recurring 'one-time' charges are becoming a pattern.
How much capital has been returned to shareholders, and what does it signal?
Year-to-date through Q3 2024, the company returned $4.4 billion to shareholders. This included repurchasing 7.9 million common shares for $1.3 billion in Q3 under its $15 billion program announced in March 2024, plus proceeds of $1.5 billion from selling 17.3 million GE HealthCare shares. The buyback pace signals management confidence and capital discipline, though funding partly relied on monetizing non-core stakes rather than solely on operating cash flow.
04—Continue