GE Aerospace is a US aircraft engine maker with one of the largest installed bases of commercial engines in the world, including those produced through CFM International, its joint venture with Safran.
Present situation
Despite solid third quarter results, the stock remains penalized by investor questions about the growth of its aftermarket activities, the core of its profitability, as highlighted by RBC. RBC, BNP, Morgan Stanley and Susquehanna lowered their price targets.
Opportunity analysis
The installed base guarantees decades of maintenance and spare parts revenue, but the market is debating the pace of aftermarket growth after a very strong period. The forward case depends on shop visit volumes, spare parts pricing and new engine output. Points to watch: aftermarket growth, delivery rates, margin trends and free cash flow.
Investor outlook: Neutral
A high quality franchise where expectations are being reset rather than broken. Clear evidence that aftermarket growth is holding would restore confidence.
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