GE Aerospace (GE) stock analysis: Hold

Bro's Verdict
Deep Dive

Rating

HOLD

Confidence

62%

Target Price

$365.00

Upside

+18.6%

Horizon

medium

GE Aerospace is a high quality franchise with a decades-long CFM56/LEAP aftermarket annuity and a defence portfolio, but at ~35x NTM EPS and 6.4x NTM sales the stock already embeds the LEAP durability inflection and mid-teens services growth. A DCF on ~$8b of FCF growing low to mid teens supports only $240-$330, so further gains require estimate revisions rather than multiple expansion. The analyst's base case target of $365 implies ~19% upside, but with no margin of safety in the multiple and insider selling into strength, the recommendation is Hold — upgrade below $285 or on hard evidence of LEAP equipment margin inflection, trim above $400.

Executive Summary

•GE Aerospace is one of three Western commercial engine primes alongside RTX (Pratt & Whitney) and Safran, and its CFM56 and LEAP installed base generates recurring, high margin spares and repair revenue across a 20 to 30 year engine life.

•FY26 guidance was raised to $10.55b to $10.75b operating profit and $7.65 to $7.85 adjusted EPS, and Q2 2026 adjusted EPS of $2.02 beat the $1.86 consensus by 9% on revenue growth of 24%, a fifth consecutive quarter of double digit top line growth.

•At $307.74 the stock trades on ~35x NTM consensus EPS of $8.80 and ~6.4x NTM sales, a premium to RTX (~32x TTM) and Safran (~34x TTM) that already embeds the LEAP durability cost curve inflection and mid teens services growth.

•Risk/reward is balanced: the $409.60 consensus price target implies 33% upside, but a DCF on roughly $8b of FCF growing low to mid teens supports $240 to $330, so further gains require estimate revisions rather than multiple expansion.

Financial Snapshot

•Revenue (TTM): $50.64b

•Revenue growth: +24% YoY in Q2 2026, fifth straight quarter of double digit growth

•Gross margin (TTM): 31.1%

•Operating margin (TTM): 20.6%

•Net margin (TTM): 17.7%

•ROE: 48.2%

•TTM net income: $8.97b

•TTM EPS: ~$8.34 (derived on ~1.07b shares)

•Q2 2026 adjusted EPS: $2.02 vs $1.86 consensus

•Q4 revenue: $12.63b, net income $2.37b

•Q3 revenue: $11.61b, net income $1.90b

•Q2 revenue: $11.87b, net income $2.54b

•Q1 revenue: $11.30b, net income $2.16b

•Debt/equity: 113.2% gross; net debt modest, cash balance not disclosed

•Market cap: $330.75b at $307.74

Forward Outlook

•FY26 adjusted EPS guidance: $7.65 to $7.85, raised from $7.10 to $7.40

•FY26 operating profit guidance: $10.55b to $10.75b, raised from $9.85b to $10.25b

•NTM consensus EPS: $8.80 as of 2 October 2026, well above the stale FMP forward estimate of $7.93

•FY+2 EPS estimate: $9.12 across 13 analysts, which looks understated given the FY26 upgrade

•NTM revenue: $50.31b (+11% YoY consensus); FY+2 revenue $55.85b

•Q3 2026 consensus EPS: $1.921, report due 20 October 2026

•Q4 2026 consensus EPS: $1.926

•Margin trajectory: operating margin to the low to mid 20s by 2027 to 2028 as services mix rises and LEAP durability costs roll off

•Management expects supply chain constraints and inflation to persist through 2026

Valuation Analysis

•NTM P/E: 35.0x on $8.80 consensus; 38.8x on the FMP $7.93 estimate

•TTM P/E: ~37x

•NTM P/S: ~6.4x

•NTM EV/EBIT: ~32x on FY26 operating profit of $10.65b

•PEG: ~2.3x on 15% forward EPS growth, rich versus aerospace peers

•EV/EBITDA: 22.7x versus a 30.8x two year average

•Historical P/E: 34.7x versus an 18.2x two year average, +1.6 SD

•P/BV: 18.1x versus a 3.6x two year average, distorted by the 2024 GE Vernova and GE HealthCare spin offs

•Historical multiple comparisons are unreliable for GE given the spin off restated book value and earnings base

•DCF (WACC 9% to 10%, terminal growth 2% to 3%, FCF ~$8b growing low to mid teens): fair value $240 to $330

•Consensus price target: $409.60, median $415.50, range $350 to $450

•Base case price target: $365

•Bull case: $430

•Bear case: $255

•RTX: ~32x TTM P/E, $245.6b market cap, Pratt & Whitney GTF and defence exposure

•SAF.PA (Safran): ~34x TTM P/E, $129.6b market cap, 50% CFM JV partner with direct LEAP leverage

•RR.L (Rolls-Royce): ~37x TTM P/E, $110.7b market cap, widebody and defence weighted

•TDG (TransDigm): ~34x TTM P/E, $61.8b market cap, aftermarket components pure play

Key Risks & Catalysts

Risks

•LEAP durability costs persist longer than planned, delaying the equipment margin inflection

•Flight hour growth stalls on airline capacity discipline or a macro slowdown, hitting high margin spares

•Supply chain constraints and inflation continue into 2027

•Multiple compression: 35x NTM P/E against an 18.2x two year average leaves no cushion for a miss

•Insider selling: 8 open market sells and zero buys over 90 days, net -$7.2m

•Widebody (GE9X) and defence program timing slippage

•Institutional 13F data is partial and shows 3,286 positions closed quarter over quarter, though the $0.4b captured value is too small to be conclusive

•Consensus FY+2 EPS of $9.12 implies only 3.6% growth off NTM, a sharp deceleration if it proves accurate

Catalysts

•Q3 2026 results on 20 October 2026, consensus EPS $1.921

•Further FY26 guidance upgrades if services growth beats

•LEAP durability cost curve inflection turning equipment margins positive

•XA100 adaptive cycle engine selection for NGAD/F-47

•T901 rotorcraft engine ramp for FLRAA and ITEP

•Hypersonics and defence propulsion backlog conversion

•Continued buybacks and dividend growth

•Residual GE Vernova stake monetisation, size not disclosed

Investment Thesis

GE Aerospace is a genuinely high quality franchise. The CFM56 and LEAP installed base creates an annuity of spares and shop visits that runs for decades, and services is where the margin lives. That annuity, plus a defence portfolio spanning rotorcraft, hypersonics and adaptive cycle propulsion, is why the market pays 35x NTM earnings for a business growing EPS in the low to mid teens. On a like for like basis GE sits between Safran and Rolls-Royce on TTM multiples, which is defensible given the durability of its aftermarket.

The debate is entirely about price. The bull case rests on the LEAP durability cost curve rolling off into 2027 and 2028, services compounding mid teens on flight hours plus pricing, and defence backlog converting. The bear case is that 35x NTM P/E and 6.4x NTM sales already price all of that, a DCF supports $240 to $330, insiders have sold into strength with no buys, and the stock is 21% below its $388.84 high. The $8.80 NTM EPS versus the stale $9.12 FY+2 estimate suggests the out year consensus has not caught up to the FY26 upgrade, which is a modest positive for revisions.

Recommendation: Hold, 12 month price target $365, implying ~19% upside and ~41x NTM EPS. The franchise quality justifies a premium, but the multiple leaves no margin of safety. Upgrade to Buy below $285 or on hard evidence of LEAP equipment margin inflection; trim above $400.

Written by Buy Side Bro's AI analyst from financials, consensus, filings and recent news. General information only, not financial advice.

GE Aerospace GE

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Executive Summary

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Executive Summary

Financial Snapshot

Forward Outlook

Valuation Analysis

Key Risks & Catalysts

Investment Thesis

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