GE raises 2023 profit forecast yet again on aviation boom

By Rajesh Kumar Singh and Abhijith Ganapavaram

(Reuters) - General Electric on Tuesday raised its full-year profit forecast for a third time this year after quarterly earnings topped Wall Street estimates on robust demand for jet engine parts and services and a better performance in its renewable business.

GE shares were up 6% at $113.14 in pre-market hours.

GE's aviation business, its cash cow, has been lifted by a surge in demand for aftermarket services as a strong rebound in air travel prompted airlines to use jets for longer against the backdrop of commercial plane shortages.

The business, however, is still grappling with supply-chain challenges. The company said high supplier delinquencies are impacting jet engine output, pushing out the deliveries for LEAP engines into 2024 and 2025.

"We're navigating a still-challenging supply chain environment to deliver for and support our customers," CEO Larry Culp said on an earnings call.

LEAP engines, which GE produces in a joint venture with France's Safran, power the narrowbody aircraft of Boeing Co and Airbus. The company now estimates the engine deliveries to be up 40% to 45% this year from 2022, down from a 50% increase estimated earlier.

Chief Commercial Officer Rahul Ghai said the company expects a similar growth in the engine deliveries next year.

GE's aerospace unit posted double-digit growth in orders, revenue and profit from a year earlier. Its margin expanded by 130 basis points in the quarter from a year ago.

The company's performance contrasts with rival RTX, which reported a near billion-dollar quarterly loss due to a major quality crisis at its subsidiary Pratt and Whitney affecting the popular Geared Turbofan (GTF) engines.

Profits at GE's grid and onshore wind businesses in the quarter helped narrow losses at its renewable unit.

Culp expressed confidence that the businesses would continue to improve, but said offshore wind was estimated to report losses of roughly $1 billion this year. He expected similar losses next year.

The renewable business has struggled due to a combination of weak demand and higher raw material and labor costs.

GE, which has completed the separation of its healthcare unit, said it would spin off its aerospace and energy, including renewables, businesses into independent companies in the beginning of the second quarter next year and would list them on the New York Stock Exchange.

GE generated $2.7 billion from the sale of a portion of its shares in AerCap Holdings NV in the third quarter. It said it expects to fully monetize its remaining about 14.5% stake in the aircraft leasing giant in an "orderly manner over time".

The Boston-based company now expects 2023 adjusted profit per share of $2.55 to $2.65, compared with an earlier forecast of $2.10 to $2.30.

Free cash flow for the year is estimated to be in a range of $4.7 billion to $5.1 billion, up from $4.1 billion to $4.6 billion expected in July.

Its adjusted profit for the third quarter came in at 82 cents per share, topping an average analysts' expectation of 56 cents per share, LSEG data showed.

(Reporting by Rajesh Kumar Singh in Chicago and Abhijith Ganapavaram in Bengaluru; Editing by Sriraj Kalluvila, Jason Neely and Jan Harvey)