GE Aerospace (GE, Financial) is experiencing a surge, rising towards last week's highs after reaffirming its FY25 guidance amidst increasing economic uncertainty. The company is effectively countering potential tariff challenges by utilizing government programs like duty drawbacks and expanding foreign trade zones. GE is also managing costs and increasing prices to mitigate remaining impacts.
- GE's Q1 results were strong, continuing the trend of recent quarters. Adjusted EPS grew by 60% year-over-year to $1.49, with revenue increasing by 10.9% to $9.94 billion. Excluding insurance revenue, total sales rose by the same rate to $9.0 billion.
- Order growth remained robust, increasing by 12%, driven mainly by GE's commercial sector. In Commercial Engines & Services (CES), total orders jumped by 15%, with a 31% rise in services orders. Equipment orders, however, declined by 13% due to tough year-over-year comparisons. In Defense & Propulsion Technologies (DPT), total orders were flat year-over-year, but service orders grew by 14%, while equipment orders fell due to a challenging +34% comparison from last year.
- The gains in both commercial and defense sectors are promising despite recent cautious forecasts. Major airlines have reduced their outlooks due to weak travel demand. GE also highlighted uncertainties in its defense division, impacted by the U.S. administration's cost-cutting measures. Accenture (ACN, Financial) recently noted cuts in its government contracts.
- GE reaffirmed its FY25 outlook with adjusted EPS of $5.10-5.45 and low double-digit adjusted revenue growth. However, FY25 departures were adjusted to low single digits from mid-single digits, considering the effect of announced tariffs and GE's counteractions.
GE's Q1 performance is encouraging, despite supply challenges affecting departure growth. The company remains confident in offsetting trade policy impacts while maintaining its original FY25 guidance. GE plans to invest nearly $1.0 billion in U.S. factories and supply chains this year. The reduced departure forecast is due to supply issues, not demand, leading to a slower start but improved material input in February and March. This positions GE to potentially reach new highs in the coming months, building on momentum from Q4 results in January.
