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By reiterating its FY25 guidance despite increasing broader economic uncertainty, GE Aerospace (GE +4%) is being cleared for take-off today, ascending toward last week's highs. The aerospace engine manufacturer provided encouraging remarks about its ability to offset potential tariff-induced headwinds, noting that it is leveraging available programs the current administration is providing businesses, including duty drawbacks and expanding foreign trade zones. GE is also taking additional actions to offset remaining impacts like controlling costs and hiking prices.

• GE's upbeat Q1 results were consistent with the past several quarters, posting wide beats on its top and bottom lines. Adjusted EPS rose by 60% yr/yr to $1.49 on revenue growth of 10.9% to $9.94 bln. On an adjusted basis, which backs out insurance revenue, total sales grew at the same rate to $9.0 bln.
• Order growth remained buoyant, jumping by 12%, supported primarily by GE's commercial business. In Commercial Engines & Services (CES), total orders climbed by 15%, with services orders up 31%. Conversely, equipment orders contracted by 13% due to a challenging yr/yr comparison. In Defense & Propulsion Technologies (DPT), total orders were unchanged yr/yr while service orders swelled by 14%. However, like in CES, equipment orders fell due to an unfavorable +34% comp from last year.
• The gains across both commercial and defense were encouraging given the cautionary forecasts and commentary lately. For instance, earlier this month, major commercial airlines slashed their outlooks for the year citing sluggish travel demand. Meanwhile, GE warned of uncertainty surrounding its defense division due to the current U.S. administration, which has been looking to cut costs. An example recently was Accenture (ACN) noting that its government contracts were being cut by the Department of Government Efficiency.
• Looking ahead, GE reaffirmed its FY25 outlook, including adjusted EPS of $5.10-5.45 and adjusted revenue growth in the low double digits. However, there was one tweak to FY25 departures, which GE lowered to low single digits from mid-single digits, incorporating the impact of announced tariffs net of GE's actions.
  • Essentially, GE is embedding a slower 2H25 in its estimate despite Q2 departures shaping up in line with Q1, which grew by 4%, due to a lag in converting orders to revenue due to supply chain dynamics. The cautionary forecast includes a reduction in North American departures, which comprises 25% of the total.

GE's Q1 report was encouraging. Even though supply headwinds are eroding departure growth, GE is confident in being able to offset trade policy effects and maintain its original FY25 guidance while simultaneously investing nearly $1.0 bln in its U.S. factories and supply chains this year. Also, the silver lining to its lowered departure forecast is that it stems from supply woes rather than demand problems. While this did lead to a slower start to the year, GE drove meaningful improvement in material input during February and March, fueling its confidence in accelerating output during Q2. As such, GE is positioned to maintain its upward momentum today, potentially moving back toward all-time highs set following Q4 results in January over the next few months.