Boeing’s factories stall, yet this aviation supplier’s orders jumped 49%

Boeing faces factory halts and quality audits, but airlines are utilizing older planes for more extended periods. This shift impacts companies servicing these aircraft, with revenue from maintenance and spares growing steadily. GE Aerospace, a key player in this sector, experienced a 49% surge in orders to $19.0 billion last quarter, prompting a fourth consecutive quarter of higher-than-expected outlook.

The gap between delayed aircraft production and rising maintenance demand highlights the lucrative aspect of aviation services.

Commercial segment revenue at GE Aerospace grew by 21% in the third quarter, marking the sixth consecutive quarter of growth at 20% or better. Services revenue climbed 17%, while segment orders increased by 58%, outpacing the company's overall growth of 49%. Adjusted operating profit rose by 30% to $3.0 billion, with a 22.5% margin that widened by 220 basis points, and adjusted EPS of $2.25 surged by 36%, surpassing consensus estimates of $2.00.

Management has revised its 2026 adjusted EPS guidance to $8.00 to $8.10 from the previous range of $7.65 to $7.85.

The aviation industry boasts an extensive installed base of over 80,000 units, supported by a services backlog exceeding $170 billion. Services orders have risen by 30% so far in 2026. Airlines are extending the lifespan of their older aircraft, with CFM56 retirement rates down to around 1.5% to 2.0%, well below the initially forecasted 3% to 4%. This prolongs the demand for parts and repairs, which are primarily generated from existing aircraft, bypassing the production delays at Boeing.

LEAP deliveries have increased by 26% year to date, and Indian carrier IndiGo's order for more than 1,000 LEAP-1A units represents the largest LEAP deal ever. The LEAP and GEnx installed bases are projected to roughly double by 2030, potentially boosting high-margin shop visits. These shop visits are expected to grow by 25% to 26% in 2027, following a 40%+ growth this year.

Management anticipates flat commercial segment margins in 2027, with services growth compensating for losses on the GE9X ramp, and a resurgence expected from 2028 onwards.

The GE9X still awaits FAA certification, which management aims to achieve by year-end. Free cash flow conversion stands at 105% year to date, with guidance calling for $9.1 billion to $9.4 billion of free cash flow in 2026. Despite a slight 4% drop in premarket trading following the October 20 results, GE Aerospace maintains a strong valuation multiple, with a forward multiple of 36.6 times.

The shares have faced skepticism regarding future growth, but all but one Wall Street rating are currently Buy. Consensus analyst projections, compiled on InvestingPro, forecast EPS growth from $8.24 this year to $10.39 in 2028, which would push the multiple to about 29 times. The dividend yield of 0.62% has been a consistent feature for 56 consecutive years, a testament to GE Aerospace's reliability.

The GE Aerospace Pro Research Report delves deeper into service margins, shop-visit trends, and the dividend legacy. The next critical test for the company will be its fourth-quarter results and full 2027 guidance presentation on January 21. ProPicks AI's strategies refresh monthly, and the updated Beat the S&P 500 lineup now includes travel, biopharma, and health insurance, available for $9 a month. The author has disclosed no position in the mentioned stocks.