(Bloomberg) -- General Electric Co. reported a jump in second-quarter profit and raised its guidance for the year as the newly independent jet-engine manufacturer capitalized on strong demand for maintenance services during the busy summer travel season.
Adjusted earnings at GE Aerospace were $1.20 a share in the quarter, the company said in a statement on Tuesday. That’s better than the 98-cent average of analyst estimates compiled by Bloomberg. The company raised its forecast for cash flow and profit for the full year as shop visits surged and pricing power improved.
“In terms of demand signals, things are strong,” Chief Executive Officer Larry Culp said in a Bloomberg Television interview. He said utilization of jets equipped with GE engines “could not be higher,” lifting critical maintenance revenue.
The results highlight how the world’s largest maker of jet engines is navigating persistent turmoil in the aerospace supply chain while responding to strong demand for maintenance and spare parts needed to keep existing jetliners flying. This week at the Farnborough Airshow, GE notched wins for its widebody turbines with British Airways and Japan Airlines, among others.
Orders, operating profit and free cash flow all increased in the double-digits in percentage terms, Culp said in a statement, citing “momentum across the business” as he raised full-year targets.
“Right now, we would argue that GE – not Boeing or Airbus – is the most powerful company in the commercial aerospace industry,” Melius Research analyst Robert Spingarn wrote in a note.
GE Aerospace shares rose 5.4% as of 9:58 a.m. in New York. They had increased about 60% this year through Monday’s close, by far the biggest gain in an S&P 500 index of aerospace and defense companies.
The company now expects adjusted earnings of as much as $4.20 a share for all of 2024, up from top-end of $4.05 previously. Free cash flow, previously forecast at no more than $5 billion for the year, will reach as high as $5.6 billion, GE Aerospace said.
Still, Culp acknowledged that output of the company’s Leap engines, used on both Boeing Co. and Airbus SE narrowbody jets, hadn’t kept pace with the planemakers’ expectations. Airbus had to scale back its plan to ramp up output last month, citing engine shortages as the latest pinch point.
GE now expects output of its Leap jet engine to increase by 5% at most this year. That’s the second time the company has cut its 2024 outlook for the narrowbody engine. At its investor day presentation in March, GE forecast as much as 25% growth.
“Our challenge is not one of demand, it’s one of supply,” Culp said in a separate interview.
GE Aerospace became an independent company in early April after the spinoff of GE’s former energy-related businesses, which are now known as GE Vernova. The transaction concluded Culp’s lengthy turnaround-turned-breakup that transformed GE from struggling conglomerate into pure-play maker of jet engines for commercial and military aircraft.
The company’s board extended Culp’s contract through at least 2027 earlier this month, quelling speculation that he could be a candidate for the CEO role at Boeing Co.
--With assistance from Guy Johnson.
(Updates with CEO comments, share movement from third paragraph.)
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