After-sales market strongly drives GE Aviation (GE.US) performance and guidance both exceed expectations.

On Thursday, the world's largest jet engine manufacturer GE Aviation (GE.US) announced better-than-expected fourth quarter performance and annual profit outlook, indicating that strong demand for air travel and high-profit aftermarket parts and services are continuing to drive company performance. GE Aviation stated in its financial report that it expects adjusted earnings per share for the full year of 2026 to be between $7.10 and $7.40, with the midpoint higher than analyst average estimate of $7.10. The company also expects adjusted revenue to achieve low double-digit percentage growth. For the fourth quarter performance, the company reported adjusted earnings per share of $1.57, higher than analysts' estimate of $1.43; adjusted revenue was $11.9 billion, surpassing market expectations of $11.2 billion, with orders increasing by 74% during the quarter. Boosted by this news, the company's stock price rose nearly 6% in pre-market trading. Over the past 12 months, its stock price has surged by nearly 70%, outperforming the S&P 500 index during the same period. Aftermarket market and aviation recovery provide core momentum CEO Larry Culp stated in a release that the company is prepared for "another year of significant earnings and cash flow growth." He emphasized that the company is entering the new fiscal year with a strong momentum and is poised to create greater value for customers. The performance outlook highlights the company's continued profitability from strong global demand for air travel. Despite aircraft manufacturers accelerating delivery rates over the past year, the demand for new aircraft continues to outstrip supply, prompting airlines to put more existing fleets into operation, thereby raising maintenance expenses. This presents significant opportunities for engine manufacturers, as most of their profits come from long-term parts and maintenance contracts, which usually have high profit margins and stable demand. GE Aviation holds a leading position in the narrow-body aircraft engine market and also has a solid share in the wide-body aircraft market. Culp has implemented a continuous improvement management principle called "Flight Deck" at the company level, which has successfully shortened repair turnaround times and improved overall operational efficiency. Currently, over 70% of GE Aviation's commercial engine revenue comes from parts and service business. The company stated that its commercial engine revenue in Q4 increased by 24%, and it is expected that revenue from this segment will achieve mid-double-digit percentage growth by 2026. In addition, GE Aviation is also actively expanding its defense business, with sales in this sector growing by 13% compared to the previous quarter. Industry challenges However, engine shortages and reliability issues are also increasing the operating costs of airlines, leading to heightened friction between suppliers and airlines, with many airlines resisting price increases. As a key industry player, CFM International, a joint venture between GE Aviation and France's Safran Group, has recently renewed agreements with global airlines to ensure competitiveness in the engine maintenance market. Political and trade policies remain potential influencing factors for GE Aviation. Culp has publicly called for reducing trade barriers in the aviation industry, emphasizing that free trade helps create a trade surplus for the U.S. aerospace industry. However, with the controversy over Trump's attempts to control Greenland, tariff issues may once again come under scrutiny.