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GE Aerospace (GE +6%) soars to all-time highs today after delivering outstanding Q4 results, crushing the consensus on earnings and revenue. The aerospace engine maker is not anticipating its upward momentum to cease anytime soon either, projecting healthy figures for FY25, including robust free cash flow growth. As a result, GE also announced a $7 bln repurchase plan, translating to around 3% of its market cap, and a 30% hike to its dividend, representing an annual yield of around 0.7%.

• In Q4, EPS more than doubled yr/yr to $1.32 on top-line growth of 14% to $10.81 bln. Robust demand carried through to Q4, resulting in a 46% pop in total orders and supporting a 450 bp lift in operating margins to 20.1%. Each segment saw excellent growth.
• At Commercial Engines and Services (CES), orders shot up by 50% yr/yr, underpinned by accelerating equipment orders and sustained services demand. GE's recent wins poured more onto its massive $154 bln backlog, 90% of which is in services.
  • Shop visit revs, comprising around 60% of services revenue grew by double-digits in Q4, helped by higher work scopes and pricing, offsetting a 3% dip in volume due to material constraints. Meanwhile, the other component of services, spare parts, gained from higher volume and price.
  • Equipment revenue expanded by 38% as GE made progress on its lingering supply chain constraints that continued adversely affecting total deliveries, which crept 2% lower in Q4. Including LEAP deliveries, which power major aircraft, such as Boeing's (BA) 737 MAX and Airbus' (EADSY) A320neo, total deliveries fell by 5%. However, this was consistent with GE's expectations. Additionally, the lower volume was more than offset by customer mix and price.
• Defense & Propulsion Technologies (DPT) enjoyed a 22% uptick in orders during the quarter, with defense units nearly doubling sequentially. Propulsion & Additive Technologies inched just 2% higher yr/yr, weighed down by lower commercial volume at Avio (a subsidiary), which was still offset by growth in other businesses.
• GE is excited about the year ahead, projecting FY25 EPS of $5.10-5.45, a 15% lift yr/yr at the midpoint, and low double-digit revenue growth, expanding on a double-digit jump in FY24. Supply constraints remain a minor headwind that GE is focusing on fully resolving. From 1H24 to 2H24, GE already delivered meaningful improvements as material inputs jumped by 26%.

GE's impressive Q4 report showcases a sustained demand across the aerospace industry, including the commercial, defense, and aftermarket sectors. With GE focused on tackling supply constraints, investors' attention is likely shifting toward LEAP. Services reached profitability in 2024, and LEAP OE (equipment) is expected to see profitability in 2026 after reaching breakeven in 2025.

We mentioned in October that pullbacks offer solid entry points for buy-and-hold investors. We continue to like GE for the long term. However, it is worth noting that with the stock more than doubling over the past year, any setbacks in GE's profitability goals could generate significant selling pressure.