GE Aerospace lifts 2024 profit forecast on strong demand for engine parts, services

FILE PHOTO: View of the GE Aerospace chalet at the 54th International Paris Air Show at Le Bourget Airport near Paris, France, June 22, 2023. REUTERS/Benoit Tessier/File Photo

(Reuters) -GE Aerospace raised its full-year profit forecast, citing a “solid start to the year” on strong demand for jet engine parts and services as airlines keep their older planes in the air to tide over a shortage of new commercial aircraft.

The company now expects 2024 operating profit of $6.2 billion to $6.6 billion, compared with its earlier forecast of $6 billion to $6.5 billion. Adjusted earnings for the year are estimated at $3.80-$4.05 per share, compared with $2.95 per share in 2023.

Shares of the aerospace giant were up 4% in trading before the bell.

Earlier this month, GE completed its breakup into three companies focused on aviation, energy and healthcare.

Wall Street analysts have been bullish on the prospects of the aerospace business, with some calling it the “most appealing” of mega-cap U.S. aerospace companies.

Analysts say planemaker Boeing’s production challenges are also expected to be a near-term benefit for GE Aerospace as it increases demand for older engines and allows the company to supply more of its LEAP engines in the aftermarket.

The company has a dominant share in the engine market for narrowbody jets and enjoys a strong position in widebodies. More than 70% of its commercial engine revenue comes from parts and services.

The business has been benefiting from a surge in demand for after-market services as a strong rebound in travel and a shortage of aircraft due to production and engine issues has forced carriers to keep older jets in the air for longer.

CFM International, GE’s joint venture with Safran, is the sole supplier to Boeing’s 737 MAX family of jets, which are currently being produced at a lower rate due to an ongoing safety crisis.

Engine makers typically sell engines to airlines at a discount and recoup the money by selling parts and services over the life of the engine.

“We have yet to see a pick up in older GE powered aircraft being retired, as the supply/demand imbalance in new aircraft deliveries is being exacerbated by the 737 ramp halt and the GTF (geared turbofan) engine recall,” Vertical Research Partners analyst Robert Stallard wrote in a note earlier this month.

Last month, GE Aerospace forecast an operating profit of about $10 billion in 2028.

On Tuesday, GE Aerospace said GE’s first-quarter adjusted profit, which included results for both aerospace and energy businesses, rose 76% to $1.5 billion, or 82 cents per share. The energy business GE Vernova completed its spin-off on April 2.

(Reporting by Rajesh Kumar Singh in Chicago and Abhijith Ganapavaram in Bengaluru; Editing by Anil D’Silva and Emelia Sithole-Matarise)