Q4 2024 Earnings Summary
- GE Aerospace projects significant profit growth, expecting to add about $2.5 billion in profit between 2023 and 2025, which is about one-third better than previous expectations. This demonstrates strong financial performance and upward revisions to profit estimates.
- The company plans to increase shareholder returns, with $7 billion in share repurchases and a planned 30% increase in dividends, reflecting confidence in future cash flows and financial strength.
- Services revenue is expected to grow low double digits to mid-teens in 2025, driven by higher spare parts sales and increased shop visit revenue, underpinned by strong demand and improved pricing.
- Ongoing supply chain constraints may continue to hinder GE Aerospace's ability to capitalize on strong demand, with improvements expected to be gradual and no significant "step function improvement" anticipated in 2025. The company acknowledges that challenges with approximately 15 critical suppliers persist, potentially affecting revenue growth and operational execution.
- Profit growth guidance for 2025 has been revised downward, with the company now projecting $750 million of profit growth at the midpoint, down from the initial expectation of $1 billion. This suggests slowing profit growth momentum and potential challenges in meeting prior expectations.
- Dependence on key programs like the GE9X engine, with limited opportunities beyond the Boeing 777X, may impact future growth prospects. The company is "fully focused" on helping launch the 777X, with no mention of other applications for the GE9X, which could be concerning given delays in the 777X program.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | -44% | The drop reflects the impact of the prior-year contribution from spun-off and divested businesses, notably in healthcare, which is no longer included in GE’s consolidated results. Ongoing supply chain constraints and a more selective project pipeline in renewables also contributed to lower revenues. |
Cost of Goods Sold | -53% | The decline primarily stems from the exit of cost-intensive operations (e.g., healthcare spin-off), resulting in a smaller cost base. Additionally, cost-reduction initiatives in the remaining businesses helped lower overall production costs compared to the prior year. |
Operating Income | +93% | Despite lower revenue, GE’s favorable business mix (driven by Aerospace services) and reduced corporate costs boosted margins. Lower segment costs, restructuring benefits, and improvements in pricing also supported operating profit growth. |
Net Income | +1% | While operating performance improved, one-time charges and higher restructuring costs moderated overall profit expansion. Gains in the Aerospace segment and lower interest expenses were largely offset by lower revenue from discontinued businesses, leading to modest net income growth. |
EPS, Basic | +21% | The combination of a smaller share count (due to share buybacks and spin-offs) and improved margin performance in continuing operations elevated EPS. This was partially tempered by the limited net income growth. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
CES revenue growth | FY 2024 | no prior guidance | Low double digits to mid-teens | no prior guidance |
Total operating profit | FY 2024 | no prior guidance | $6.7B to $6.9B | no prior guidance |
CES operating profit | FY 2024 | no prior guidance | $6.6B to $6.8B | no prior guidance |
DPT operating profit | FY 2024 | no prior guidance | Lower end of $1B to $1.3B | no prior guidance |
Margins | FY 2024 | no prior guidance | Over 200 bps year-over-year expansion | no prior guidance |
Corporate costs | FY 2024 | no prior guidance | $850M | no prior guidance |
Tax rate | FY 2024 | no prior guidance | ~20% | no prior guidance |
Adjusted EPS | FY 2024 | no prior guidance | $4.20 to $4.35 | no prior guidance |
Free cash flow | FY 2024 | no prior guidance | $5.6B to $5.8B | no prior guidance |
Shop visit growth | FY 2024 | no prior guidance | Lower than prior estimates | no prior guidance |
Total profit | FY 2025 | no prior guidance | $7.8B to $8.2B | no prior guidance |
EPS | FY 2025 | no prior guidance | $5.10 to $5.45 | no prior guidance |
Free cash flow | FY 2025 | no prior guidance | $6.3B to $6.8B | no prior guidance |
Revenue growth | FY 2025 | no prior guidance | Low double-digit | no prior guidance |
CES segment revenue growth | FY 2025 | no prior guidance | Mid-teens | no prior guidance |
CES services | FY 2025 | no prior guidance | Up low double digits to mid-teens | no prior guidance |
CES equipment | FY 2025 | no prior guidance | Up high teens | no prior guidance |
LEAP deliveries | FY 2025 | no prior guidance | Up 15% to 20% | no prior guidance |
CES segment profit | FY 2025 | no prior guidance | $7.6B to $7.9B | no prior guidance |
DPT segment revenue growth | FY 2025 | no prior guidance | Mid- to high single-digit | no prior guidance |
DPT segment profit | FY 2025 | no prior guidance | $1.1B to $1.3B | no prior guidance |
Corporate costs | FY 2025 | no prior guidance | Less than $1B | no prior guidance |
Share repurchases | FY 2025 | no prior guidance | $7B | no prior guidance |
Dividend | FY 2025 | no prior guidance | Planned 30% increase, subject to approval | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Operating Profit | FY 2024 | "$6.7B to $6.9B" | $7.62B (sum of Q1 2024 at $1.588B, Q2 2024 at $1.846B, Q3 2024 at $1.893B, Q4 2024 at $2.293B) | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Supply chain constraints | A recurring theme since Q1 2024; constraints impacted deliveries, shop visits, and inventory levels; mitigation efforts and gradual but uneven progress discussed each quarter. | Ongoing challenges with ~15 critical suppliers, gradual improvement expected into 2025; no step-function fix; material inputs +26% across priority sites. | Still a key focus, showing incremental progress but remains a headwind. |
Services revenue growth and shop visits | Q1–Q3 2024 consistently saw 10–14% services revenue gains, with shop visits constrained by material availability but improving over time. | 12% CES Services revenue increase, lighter than expected due to lower internal shop volume; expects mid-teens growth in 2025 driven by expanded work scopes and spare parts. | Consistent growth continues, constrained by supply chain but supported by strong demand. |
Profit growth guidance revisions | Q1–Q3 2024 included multiple upward revisions (e.g., $6.2B–$6.6B in Q1 to $6.7B–$6.9B in Q3), reflecting higher services mix and stronger margins. | Updated 2025 profit guidance to a $2.5B increase from 2023, aiming for $7.8B–$8.2B; about ⅓ better than earlier targets. | Stronger revision, signaling improved confidence in profitability. |
Engine deliveries | Prior quarters noted year-over-year declines due to supply constraints but sequential improvements; Q3 featured a 22% q/q uptick but still below prior year. | LEAP deliveries down 10% year-over-year (offset by pricing and mix); Defense engine deliveries up 20%. | Gradual recovery but still impacted by constraints. |
LEAP engine performance | Q1–Q3 featured ongoing durability improvements, shop visit optimization, and a path to break-even in 2024–2025; supply chain remained a limiting factor. | Certified LEAP-1A HPT durability kit doubling time on wing, service profitability exceeded expectations; program on track for OE profitability by 2026. | Improving durability and economics, moving closer to full profitability. |
GE9X engine program | Mentioned in Q3 regarding cost reduction and deliveries to Boeing; no mention in Q2; in Q1, introduced as part of wide-body portfolio with margin headwinds. | Backlog near 1,000 engines; additional dust testing; second iteration HPT blades; recent China Airlines order for 777-9. | Program continues development, maintaining strong backlog and working on cost improvement. |
R&D spending in DPT | Q3 noted margin pressure from R&D investments; Q2 had no direct mention; Q1 highlighted $2B overall R&D and specific DPT tech initiatives. | Increased self-funded R&D in 2025 for next-gen engines, partially offsetting profit growth. | Continued investment to drive innovation, weighing on near-term margins. |
High inventory levels | Q1–Q3 all reported rising inventory, though pace slowed in Q3; linked to unpredictable supplier deliveries and strategic stocking. | Still elevated due to material constraints; added ~$1.5B inventory this year; expecting partial liquidation in 2025. | Gradual improvement expected, though remains an operational focus. |
Shareholder returns and dividend increases | Q1–Q3 discussed significant capital returns ($4B returned YTD by Q3), with a large buyback program; Q1 included a 250% dividend increase. | Returned >100% of free cash flow in 2024 (incl. $5B in buybacks) and plans a 30% dividend raise for 2025. | Robust shareholder returns continue, with another substantial dividend hike planned. |
-
Updated 2025 Profit Guidance
Q: What's changed in the 2025 profit outlook vs. prior expectations?
A: GE now expects to add about $2.5 billion of profit over two years, which is about one-third better than anticipated nine months ago. The 2025 profit growth is driven by a $700 million increase in CES profit at the midpoint, mainly from services revenue rising by $3 billion year-over-year. Services margins are expected to remain flat despite LEAP's growing share, offset by productivity and pricing. The 9X program will be a headwind of a couple of hundred million dollars as engine shipments ramp up. DPT revenue is projected to grow mid- to high single digits, with margins expanding about 70 basis points. -
LEAP OE Profitability Outlook
Q: Will LEAP OE become a profit center after breakeven?
A: LEAP services became profitable in 2024, and the program reaches breakeven in 2025, with OE becoming profitable in 2026. Profitability is improving due to higher external spare parts volume, better pricing, lower warranty expenses, and more shop visits than expected. The program is on track to deliver the same profit as CFM56 by 2028, powering future growth for the company. -
CES Margins and Services Growth
Q: How will CES margins and services evolve in 2025?
A: CES had a strong quarter with 28% margins, exceeding expectations due to favorable services mix and higher spare parts sales. In 2025, spare parts are expected to remain strong, with projected departures up mid-single digits and spare parts revenue up low double digits due to pricing changes. Shop visit revenue is anticipated to increase mid-teens from high single-digit volume growth and more extensive work scopes. Profit will be driven by these factors, and the company enters the year with about 90% of spare parts revenue in backlog. -
Supply Chain Constraints on Services Growth
Q: Could services growth be higher if supply issues resolved?
A: Demand is strengthening broadly, and there's pent-up demand with a backlog, some of which is delinquent. If supply chain improvements continue and internal progress is made, there's potential to exceed current growth expectations. However, operational execution remains the focus to deliver on outlined plans. -
GE9X Engine Prospects Beyond 777X
Q: Are there opportunities for the 9X beyond the 777X?
A: Currently, GE is fully focused on supporting Boeing to launch the 777X. They have nearly 1,000 engines in backlog and have started shipping engines to Boeing. The delays have allowed for extensive testing, making it the most tested engine in GE's history, approaching 2,500 cycles. While excited about the backlog and entry into service, no other opportunities beyond the 777X are being pursued at this time.