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GE Aerospace raised its 2026 profit forecast for the second time this year on Tuesday, supported by strong demand for aircraft engine repairs and spare parts.
The company now expects adjusted earnings of $8 to $8.10 per share for the year, up from its previous forecast of $7.65 to $7.85. Analysts had expected earnings of $7.94 per share.
GE Aerospace also raised its adjusted revenue-growth outlook to between 19% and 20%, compared with its earlier forecast of growth in the high teens.
However, GE shares fell more than 4% in premarket trading as rising oil prices pressured markets and investors assessed cost inflation and weaker cash flow.
Third-quarter earnings beat expectations
GE Aerospace reported third-quarter profit from continuing operations of $2.41 billion, or $2.32 per share, compared with $2.17 billion, or $2.04 per share, a year earlier.
Excluding one-time items, earnings came in at $2.25 per share, beating analysts’ expectations of $2.01, according to FactSet.
Revenue increased 16% to $14.12 billion, above Wall Street estimates of $12.88 billion.
The commercial engines and services segment recorded a 21% increase in revenue, while sales at the defence and propulsion technologies business rose 6.7%.
Chief Executive Larry Culp said strong demand had driven orders up 49%, prompting the company to raise its annual outlook.
“We are raising our 2026 guidance across the board, and we now expect 2027 commercial services to grow low-double-digits supported by our over $170 billion commercial services backlog,” he added.
Higher costs and weaker cash flow weigh on sentiment
Despite the strong results, several cost pressures may have tempered the market’s reaction.
Sales discounts and allowances increased by $1.56 billion, primarily reflecting higher allowances for new engine installations and spare parts, as well as product durability reserves in the commercial engines and services business, Stockwits said.
Margins in the segment fell 10 basis points because of product mix and inflation, while free cash flow declined 14% to $2 billion.
GE Aerospace’s insurance operations also reported a pretax loss of $210 million, compared with a profit of $363 million a year earlier.
The company expects supply chain constraints to continue affecting production and customer deliveries, while inflationary pressures are likely to persist.
Oil prices raise concerns over airline demand
Oil prices also climbed sharply on Tuesday, adding to concerns about the outlook for airlines and their suppliers.
US West Texas Intermediate crude futures rose 6.58% to around $110.48 per barrel by 7:38 a.m. ET. The contracts expire on Tuesday.
Brent crude futures for December delivery gained 1.94% to $111.67 per barrel, their highest level since May.
The company warned that prolonged high fuel prices could force airlines to reduce flying, weakening demand for engine repairs, spare parts and spare engines.
The company said the Middle East conflict had not materially affected its operations through September.
Airlines worldwide have been cutting costs and capacity to protect profitability after the war in Iran disrupted oil shipping routes, driving up jet fuel prices.
Such reductions pose a risk to engine manufacturers because fewer flights could eventually reduce demand for maintenance and replacement parts.
However, airlines continue to hold on to their aircraft, while a backlog of engines awaiting repairs is helping sustain demand for maintenance services.
For GE Aerospace, the strong commercial services backlog provides support for near-term growth.
But sustained fuel inflation, capacity reductions by airlines and continuing supply chain constraints remain risks to its longer-term outlook.
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