GENERAL ELECTRIC CO Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Performance Overview: Orders up 28%, revenue up 6%, operating profit up 14%, adjusted EPS up 25%, free cash flow $1.8 billion.
• Service and Product Demand: Robust demand with LEAP share of global narrowbody departures increasing over 20%. Engine output up 22% quarter-over-quarter, spare parts sales grew sequentially.
• Supplier Partnerships: Working with suppliers to increase inputs; key supplier sites saw a 18% increase in output in Q3.
• New Wins and Contracts: Avalon, Eva Air, Qatar Airways, Polish Ministry of National Defense, and U.S. Air Force contracts secured.
• RISE Initiative: Advancing new technologies like open fan design, turboprop catalyst engine, T901 engine progress, XA100 engine testing, and NGAD program design.

Segment Performance

• Commercial Engines & Services (CES): Orders up 29%, services revenue grew 10%, equipment revenue grew 5%. Revenue in Q3 was up 8%, with services up 10% due to higher spare part sales and improved pricing, while equipment revenue grew 5% offsetting lower units. Over 90% of the $149 billion backlog is in services.
• Defense & Propulsion Technologies (DPT): Orders increased 19%, but profit declined. Revenue grew 2% in Q3, with Defense & System systems revenue down 2% and Propulsion and Additive Technologies growing 9%. Total backlog is $18 billion, up $1 billion year-over-year.

Guidance

• Raised full-year guidance. CES expected low-double digits to mid-teens growth, full-year down ~10% year-over-year. DPT expected mid-to-high single digits growth. Operating profit expected in the range of $6.7 billion to $6.9 billion, up $150 million at the midpoint. Adjusted EPS raised to $4.20 to $4.35, free cash flow guidance $5.6 billion to $5.8 billion.

Risks

• Supply chain constraints impacting engine deliveries.
• Uncertainty in budget affecting R&D investments for next-generation programs.
• Delays in engine certifications and deliveries potentially affecting margins.

Question and Answer

Q: About 2025 EBIT growth, how to think about the walk to 2025?

A: Working through updated '25 outlook, in midst of strategic planning, will have more defined look closer to year end, with segments like commercial services, equipment, DPT, and corporate costs contributing.

Q: Regarding LEAP output projections, how to trade off Boeing strike, supply chain, and new HPT blade transition?

A: Focus on aftermarket demand and collaboration with suppliers; 18% sequential increase in Q3 from FLIGHT DECK efforts, new HPT blade expected to unlock capacity.

Q: Impact of Boeing 777X delay on GE Aerospace?

A: Operationally unchanged, financially, a few rev rec units in Q4, working with Boeing on '25 engine demand profile, program expected to ramp later with cost reduction plans.

Q: DPT profitability and 2025 margins?

A: Q4 margin pressure from R&D investment in next-gen programs, strong backlog for 2025 with mid-to-high single-digit growth and profit growing faster than margins.

Q: Details on shop visits and spare parts?

A: Balance between spare parts sales and shop visits, sequential improvement in deliveries, spare parts sales up, shop visits flat Y-o-Y in Q3 but improving in Q4 with backlog of shop visits to complete.