Is a Beat in the Offing for GE Aerospace in Q3 Earnings?

GE Aerospace GE is scheduled to report third-quarter 2024 results on Oct. 22, before market open.

The Zacks Consensus Estimate for its third-quarter earnings has increased 1.8% in the past 60 days. The company has an impressive earnings surprise history, having outperformed the consensus estimate in each of the preceding four quarters, the average surprise being 26.7%.

Let's see how things have shaped up for GE Aerospace this earnings season.

Factors Likely to Have Shaped GE's Quarterly Performance

GE Aerospace is expected to have benefited from a growing installed base and the higher utilization of engine platforms across commercial and defense end markets in the third quarter. Solid demand for LEAP, GEnx & GE9X engines and related services, supported by growth in air traffic, fleet renewal and expansion activities, is likely to have boosted GE's top-line performance.

Growing popularity for the company's propulsion & additive technologies, critical aircraft systems and aftermarket services in the defense sector is likely to have supported the Defense & Propulsion Technologies business' performance. Rising U.S. & international defense budgets, positive airline & airframer dynamics and robust demand for commercial air travel are anticipated to have boosted GE's performance in the third quarter.

The company has also been making investments to expand and upgrade manufacturing facilities in the United States and overseas. These investments are likely to have enabled GE Aerospace to boost its operational capacities and cater to the increased demand from its commercial and defense customers. This, along with its focus on operational execution, robust backlog level and aim to generate healthy free cash flow, is likely to have been a tailwind.

The company's portfolio reshaping actions include disposing of non-profitable businesses to unlock values for its shareholders. In April 2024, GE completed the spin-off of its Vernova business, which marked the completion of its multi-year portfolio restructuring actions. Although the spin-off is likely to have weighed on its year-over-year top-line comparison, the transaction is expected to have allowed GE to achieve better operational focus on its core aerospace business and financial flexibility. This is expected to have driven its margins and profitability in the third quarter.

However, it has been dealing with the adverse impacts of the high costs and operating expenses owing to certain projects and restructuring activities. Also, supply-chain challenges, such as the availability of raw materials and labor shortages, especially in the aerospace and defense markets, are likely to have affected GE Aerospace's delivery of finished products to its customers within the stipulated time.

Given the company's extensive geographic presence, its operations are subject to foreign exchange headwinds. A stronger U.S. dollar is also likely to have hurt GE's overseas business.

Amid this, the Zacks Consensus Estimate for GE's third-quarter total revenues is pegged at $8.97 billion, indicating a decline of 45.7% year over year. The consensus estimate for earnings is pegged at $1.13 per share, implying an increase of 37.8% from the prior-year level.

Earnings Whispers

Our proven model predicts an earnings beat for GE Aerospace this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here, as elaborated below.

Earnings ESP: GE Aerospace has an Earnings ESP of +0.57% as the Most Accurate Estimate is pegged at $1.14 per share, which is higher than the Zacks Consensus Estimate of $1.13.

Zacks Rank: GE presently carries a Zacks Rank of 3.

Other Stocks to Consider

Here are some other companies within the same space, which according to our model, have the right combination of elements to beat on earnings this reporting cycle.

3M Company MMM has an Earnings ESP of +1.81% and a Zacks Rank of 3 at present.

The company is slated to release third-quarter 2024 results on Oct. 22. 3M's earnings have surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 12.6%.

Parker-Hannifin Corporation PH has an Earnings ESP of +2.06% and a Zacks Rank of 2 at present. The company is slated to release its first-quarter fiscal 2025 results on Nov. 7.

PH's earnings have surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 11.2%.

RBC Bearings RBC has an Earnings ESP of +9.57% and a Zacks Rank of 3 at present. The company is scheduled to release second-quarter fiscal 2025 results on Nov. 1.

RBC's earnings have surpassed the Zacks Consensus Estimate thrice in the preceding four quarters while missing the mark once, the average surprise being 4.8%.

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