Industrials

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General Electric Company

General Electric Company (GE): Guidance and Outlook Overview

1. Full-Year Guidance for 2024

• Revenue:
  • GE Aerospace: Low double-digit growth.
    • Commercial Engines & Services (CES): Mid- to high-teens growth.
      • Commercial Engines: High-teens growth.
      • Services: Mid-teens growth.
    • Defense & Propulsion Technologies (DPT): Mid- to high single-digit growth.
• Operating Profit:
  • GE Aerospace: $6.6 billion to $7.1 billion.
    • CES: $6.1 billion to $6.5 billion.
    • DPT: $0.5 billion to $0.8 billion.
• EPS:
  • GE Aerospace: $3.80 to $4.05.
• Free Cash Flow:
  • GE Aerospace: Over $5 billion, well above 100% conversion.

2. Q4 2024 Outlook

• Revenue:
  • GE Aerospace: Expected to be flat to slightly up.
• Operating Profit:
  • GE Aerospace: $1.8 billion to $2.0 billion.
• EPS:
  • GE Aerospace: $1.15 to $1.25.
• Free Cash Flow:
  • GE Aerospace: $1.8 billion to $2.0 billion.

3. Key Drivers and Challenges

Commercial Engines & Services (CES)

• Strengths:
  • Robust demand for services and equipment.
  • Strong services growth, driven by higher spare part sales, increasing shop visit work scopes, and improved pricing.
  • Continued improvement in LEAP shop visit turnaround times.
• Challenges:
  • Supply chain constraints impacting new engine deliveries.
  • Lower-than-expected LEAP deliveries due to supply chain issues.
  • Transition to the new HPT blade for LEAP engines.

Defense & Propulsion Technologies (DPT)

• Strengths:
  • Strong order book and backlog.
  • Favorable pricing and product mix.
  • Continued investment in next-gen programs.
• Challenges:
  • Supply chain challenges affecting engine deliveries.
  • Increased investment in R&D for next-gen programs.

Supply Chain and Production

• Progress:
  • Material input increased sequentially, supporting spare part delivery.
  • Improvement in material inflow, but supplier delinquencies remain high.
• Challenges:
  • Supplier constraints, particularly in critical components like HPT blades.
  • Need for continued collaboration with suppliers to unlock capacity.

4. Long-Term Outlook

• 2025 Expectations:
  • Revenue Growth: Continued low double-digit growth.
  • Operating Profit: $7.5 billion to $8 billion.
  • EPS: $4.20 to $4.35.
  • Free Cash Flow: $5.6 billion to $5.8 billion.
  • Margin Expansion: Continued focus on margin expansion through productivity gains and price realization.
• 2028 Target:
  • Operating Profit: Approximately $10 billion.
  • Free Cash Flow: Exceeding net income, with conversion well above 100%.

5. Strategic Initiatives

• FLIGHT DECK:
  • Proprietary lean operating model to improve safety, quality, delivery, and cost.
  • Focus on eliminating waste, increasing capacity, and reducing turnaround times.
• RISE Program:
  • Development of next-generation technologies, including open fan, compact core, and hybrid electric systems.
  • Targeting a 20% improvement in fuel efficiency and emissions reduction.

6. Capital Allocation

• Dividends:
  • Initiated a quarterly dividend of $0.28, a 250% increase.
• Share Buybacks:
  • Announced a $15 billion share buyback program.
• M&A:
  • Commitment to value-accretive acquisitions in strategic areas.

7. Sector-Specific Trends

• Air Travel:
  • Expectation of high single-digit departure growth.
  • Continued strong demand for both narrowbody and widebody engines.
• Defense Spending:
  • U.S. defense spending expected to grow low single digits.
  • International defense spending expected to grow mid-single digits.
• Aftermarket Services:
  • Strong demand for shop visits and spare parts.
  • Expectation of mid-teens growth in shop visits.
  • Increased focus on third-party networks to enhance capacity.

8. Financial Metrics

• Free Cash Flow:
  • Strong performance, driven by earnings growth and working capital improvements.
  • Inventory levels remain high due to supply chain challenges but expected to normalize.
• Margin Expansion:
  • Continued focus on improving margins through productivity and price realization.
  • LEAP OE ramp and 9X introduction will create short-term margin pressure.

9. Key Risks

• Supply Chain Delays:
  • Potential delays in material availability could impact delivery schedules.
• New Engine Deliveries:
  • Uncertainty around delivery schedules for new engines, particularly LEAP and 9X.
• Market Dynamics:
  • Variability in air travel demand and defense spending could affect revenue and profit growth.

Conclusion

GE Aerospace is well-positioned for continued growth in 2024 and beyond, driven by strong demand in both commercial and defense sectors. The company's focus on operational excellence through initiatives like FLIGHT DECK and strategic investments in R&D will be crucial in meeting customer demands and achieving long-term financial targets. Despite supply chain challenges, GE Aerospace remains confident in its ability to deliver on its commitments and create value for shareholders.

Last updated on 01/14/2025 05:14 AM