GE Aerospace lifts 2024 outlook; cuts estimates for LEAP jet engine deliveries

By Rajesh Kumar Singh and Shivansh Tiwary

(Reuters) - GE Aerospace on Tuesday raised its full-year profit outlook for a second time in four months, but trimmed its revenue outlook and estimates for LEAP jet engine output this year due to persistent supply constraints.

Its shares were up more than 6% at $172.87 in morning trade.

The company said shortages of materials have hit shipments of engines for both narrowbody and widebody jets. Deliveries of LEAP engines, which power Airbus and Boeing narrowbody aircraft, were down 29% in the June quarter from a year ago.

It scaled down estimates for LEAP output this year for a second time since March, and now expects production to be flat to up 5% this year, against 10%-15% growth estimated in April.

Lower production will add to the headache for airlines, which are grappling with a shortage of new planes and spending billions on repairs to keep flying older, less fuel-efficient jets.

Airbus last month delayed a multi-year hike in narrowbody production, cut profit forecasts and trimmed its 2024 delivery target, blaming shortages of engines and other parts.

In an interview, GE Aerospace CEO Larry Culp said that while the company has made progress in improving supplies, it is not enough to satisfy all of its customers.

Culp said two-thirds of the 15 supplier sites to which GE Aerospace had previously attributed the bulk of delivery challenges have shown a "significant" step up in output, but the improvement was not across the board.

"Our suppliers are getting better at problem-solving and collaboration," Culp told Reuters. "We need to do more."

The company trimmed its full-year revenue outlook, citing lower engine output expectations.

PARTS AND SERVICES

GE Aerospace has a dominant share in the engine market for narrowbody jets and enjoys a strong position in widebodies. More than 70% of its commercial engine revenue comes from parts and services.

A lack of new planes has led to a surge in demand for its after-market services.

It reported a double-digit increase in commercial engine services revenue in the second quarter from a year ago. Services orders were up more than 30%.

The company said shop visits for maintenance and repairs of CFM56 engines, which have been the workhorse in the narrowbody market, are now expected to peak much later than in 2025.

Booming services demand amid labor and parts shortages has put pressure on it to reduce repair turnaround time.

GE Aerospace has set a goal to improve that by 30% from a year ago, and in the June quarter, turnaround time for LEAP shop visits fell to 86 days compared to roughly 100 days in 2023, it said.

"We have seen a lot of progress," Culp said. "(But) the airlines would clearly want it to be better."

GE Aerospace expects adjusted profit in the range of $3.95 to $4.20 per share in 2024, compared with its prior forecast of $3.80 to $4.05.

Adjusted profit for the second quarter came in at $1.20 per share, higher than 99 cents a share expected by analysts in a LSEG survey.

(Reporting by Rajesh Kumar Singh in Chicago and Shivansh Tiwary and Abhijith Ganapavaram in Bengaluru; Editing by Arun Koyyur, Sharon Singleton and Jan Harvey)