After Earnings, Is GE Aerospace Stock a Buy, a Sell, or Fairly Valued?

GE Aerospace released its second-quarter earnings report on July 16. Here’s Morningstar’s take on GE Aerospace’s earnings and stock.

Key Morningstar Metrics for GE Aerospace

• Fair Value Estimate
  : $347.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : Medium

What We Thought of GE Aerospace’s Q2 Earnings

GE Aerospace’s commercial engines segment revenue grew 27% year over year with a 27.3% operating margin in the second quarter. Defense revenue grew 16% with a 13.8% margin. Management raised its full-year revenue and profit expectations after weathering recent macroeconomic turbulence and uncertainty.

Why it matters: We maintain our admiration for the global franchise GE Aerospace has cultivated, and for the discipline with which it executes productivity-enhancing projects across the business. Despite uncertain times, GE’s moat is proving its worth.

• The company shipped 134 more commercial engines in the second quarter than last year, including 100 more in the Leap family. New engine deliveries generally provide lower margins than aftermarket sales, but commercial margins remained healthy at above 27%.
• Notwithstanding a spike in jet fuel prices and geopolitical jitters related to war in and around Iran, high global aircraft utilization and fewer recent retirements of older jets in recent months led the commercial aftermarket business to grow 32% in the first half.

The bottom line: We have raised our fair value estimate for wide-moat GE Aerospace to $347 per share from $307, due to the time value of money and a slightly steeper medium-term aftermarket margin growth trajectory.

The shares trade within 10% of our fair value estimate, though we anticipate the firm will continue to enhance its dividend and share-repurchase programs.

Overall, GE Aerospace is one of the best businesses on my coverage list and is performing very well even in an uncertain macro environment. The stock is fairly valued today, but it has lots of compounding potential.

The following are excerpts from Morningstar’s company report on GE Aerospace.

Fair Value Estimate for GE Aerospace

With its 3-star rating, we believe GE Aerospace’s stock is fairly valued compared with our long-term fair value estimate of $347, representing an enterprise value/2026 estimated EBITDA ratio of 27 times and 44 times our 2026 earnings estimate. We forecast 14% compound revenue growth from manufacturing over the next decade. In the larger commercial aftermarket business, we see 9.6% compound revenue growth over 10 years, with improving margins over time.

Overall, including the defense and propulsion segments, we forecast a 10% compound annual revenue growth for GE Aerospace through 2035. But that is just the top line. Our aggregate forecast shows commercial aerospace margins approaching 29% in our decade-long forecast period, and defense margins just over 22%. Taken together, our forecasts offer a picture of GE Aerospace generating up to $160 billion of free cash flow over the next decade, most of which the company has pledged to return to investors. Driven by reduced share count over time, we forecast mid-teens earnings per share growth after 2030.

Read more about GE Aerospace’s fair value estimate.

Economic Moat Rating

GE Aerospace meets our highest standard of a wide-moat business; it was the crown jewel of the GE conglomerate. We assign GE Aerospace a wide moat based on switching costs and intangible assets stemming from its massive installed base of aircraft engines and the complex technical know-how it takes to design, produce, and maintain them. We believe it will outearn its cost of capital by a comfortable margin for at least the coming 20 years.

We think GE Aerospace’s status as the premier aircraft engine manufacturer has become self-reinforcing due to the scale the company achieves through market penetration and its ability to reinvest in R&D. Especially now that it operates independently of the other erstwhile GE conglomerate business units, GE Aerospace can further the performance of its products through ongoing R&D investments. We ascribe a narrow moat to the defense and propulsion technologies unit, which accounts for 25% of GE Aerospace’s business revenue and one-seventh of profits.

Read more about GE Aerospace’s economic moat.

Financial Strength

As of year-end 2025, GE Aerospace’s net debt amounted to just $8 billion on a $130 billion balance sheet. GE’s gross debt of $20 billion comes in under 2 times EBITDA coverage and is lower than that of many aerospace peers. We expect GE Aerospace’s EBITDA to grow handsomely over time and think the company’s credit ratings are likely to improve. Its $40 billion securities portfolio balances the similarly valued liabilities of GE’s legacy long-term-care insurance portfolio. We expect GE Aerospace to opportunistically wind down or dispose of its real estate and long-term-care insurance portfolios if market conditions are suitable. Until then, a remote financial risk remains, should payouts from long-term-care policies outstrip the reserves GE has put aside to cover them.

Our analysis of the scenarios potentially impacting the insurance book nets to plus or minus $1 billion in liabilities, which is well within GE’s funding cushion, barring doomsday scenarios that could affect the securities assets. Thus, only in a vanishingly improbable scenario would we foresee the insurance book depleting GE Aerospace’s resources.

Read more about GE Aerospace’s financial strength.

Risk and Uncertainty

We assign GE Aerospace a Medium Uncertainty Rating, as the company bears some remote financial and ongoing operational risks in its manufacturing and service business. Complex manufacturing is subject to supply chain risk, which, along with workplace disruption, could mar the company’s revenue and profitability in one or more product lines at almost any time. A more pernicious risk to long-term profitability would be posed by a flaw in one of the company’s engine designs or manufacturing quality. We see minimal risk to GE’s businesses from import or export tariffs due to many offsetting customs provisions in the global aerospace supply chain and the already restricted list of sources defense contractors can use for inputs.

From an environmental, social, and governance standpoint, the most prominent risk is carbon emissions from aerospace engines, though we note that GE is developing a next-generation sustainable engine in its CFM Rise program. If other governance risks were to materialize, they would be financially quantifiable and finite and would not, in our view, undermine the company’s intangible assets or switching-cost moat sources.

Read more about GE Aerospace’s risk and uncertainty.

GE Bulls Say

• Bears vastly underestimate the incremental profits GE will make from operating leverage as commercial aerospace fully recovers and its Leap engine aftermarket program enters its profitable phase.
• The Leap engine is installed on a growing majority of the popular Airbus A320neo family, compounding GE’s prospects for decades of profitable aftermarket revenue from its large installed fleet of engines.
• Even the fleet of older engines like the GE90, which went into service in 1995 and powers most Boeing 777s, has yet to see most of its shop visits to GE.

GE Bears Say

• GE is all in on its experimental open-fan Rise design for the next generation of commercial engines, which aircraft makers might, or might not, adopt to propel new jets in the 2040s.
• Burgeoning demand for its engines could place GE Aerospace’s manufacturing and supply chain under further disruptive strain, frustrating customers and hampering efficiency.
• Engines sold with long-term service contracts effectively transfer risk to the manufacturer for its performance over time, which can result in higher-than-anticipated maintenance costs and dent the profitability of the program.

This article was compiled by Irza Waraich.