GE Aerospace significantly exceeded expectations in the second quarter, with full-year guidance raised

Overview

This report is Bernstein's preliminary commentary on GE Aerospace's Q2 2026 results. The report believes that the company's second-quarter revenue, EPS, and segment profit all came in above market consensus expectations, with especially strong performance in CES services, spare parts, internal shop visits, and LEAP deliveries. Management also raised FY2026 full-year guidance for revenue, CES operating profit, and adjusted EPS, reinforcing a positive view on full-year growth momentum.

Core views

The core view is that GE Aerospace remains on a strong growth trajectory: CES service revenue grew 26%, internal shop visit revenue grew 25%, and spare parts revenue grew more than 25%; CES equipment revenue grew 30%, driven by 26% unit volume growth and 24% LEAP growth. Orders increased 17% year over year, including 18% growth in CES and 12% in DPT. Although CES year-over-year margin was pressured by growth in installed engines, GE9X investment, other investments, and inflation, the 27.3% margin was still slightly above Bernstein's estimate.

Analysis framework

The report mainly uses comparisons of actual results versus consensus expectations, Bernstein estimates, and company guidance, breaking down EPS, adjusted revenue, CES and DPT segment revenue and profit, and assessing the sustainability of the raised full-year guidance in conjunction with changes in services, equipment, LEAP deliveries, orders, and margins.

Methodology notes

• Valuation methodsForward terminal value EV/EBITDA valuation

  Based on a four-year forward terminal value, enterprise value is estimated using an EV/EBITDA multiple, then net debt is deducted, discounted to the valuation date, and the discounted value of shareholder cash distributions through the terminal value date is added.

  Bernstein states that its 12-month target price for GE is $405, using an absolute EV/EBITDA multiple of 30.3x.

• Performance comparisonActual results compared with consensus expectations and guidance

  Compare the company's reported quarterly EPS, revenue, segment profit, and margin with market consensus expectations and prior company guidance.

  This method is used to determine the extent of this quarter's outperformance and whether the raised full-year guidance is supported by genuine operating improvement.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• GE Aerospace equity

  Covered by the report, rated Outperform, with a target price of $405.00.

  Strengths

  Q2 EPS and revenue beat expectations; CES and DPT segment revenue and profit were both stronger than consensus expectations; strong growth in services, spare parts, LEAP deliveries, and orders; FY2026 guidance raised.

  Weaknesses

  CES margin contracted year over year due to the impact of growth in installed engines, GE9X-related spending, investments, and inflation.

  Comparison

  The report discloses that GE delivered an absolute gain of 35.4% over the past 12 months, versus 21.3% for the SPX, for relative outperformance of 14.1 percentage points.

  Risks

  Supply chain shortages, Airbus and Boeing production coming in below plan, and weaker airline financial performance could affect deliveries and engine aftermarket growth.

Key data

• Q2 2026 non-GAAP EPS$2.02Above the consensus expectation of $1.86.
• Q2 2026 adjusted revenue$12.6 billionAbove the consensus expectation of $11.9 billion.
• CES revenue and profitRevenue of $9.73 billion; segment profit of $2.66 billionAbove the consensus expectations of $9.16 billion and $2.47 billion, respectively.
• DPT revenue and profitRevenue of $3.44 billion; segment profit of $475 millionAbove the consensus expectations of $3.20 billion and $395 million, respectively.
• CES service growth+26%Internal shop visit revenue grew 25%, and spare parts revenue grew more than 25%.
• LEAP deliveriesUp 24% year over year, about 510 unitsYear-to-date LEAP deliveries reached 1,030 units.
• FY2026 adjusted EPS guidance$7.65-$7.85Previously $7.10-$7.40.
• FY2026 CES operating profit guidance$10.25 billion-$10.35 billionPrevious guidance was $9.6 billion-$9.9 billion.
• Share price performance12-month absolute gain of 35.4%, outperforming the SPX by 14.1 percentage pointsOne-year performance data disclosed in the table.

Impact & implications

The earnings beat and upward revision to full-year guidance provide positive support for GE Aerospace's share price, particularly validating the resilience of aircraft engine aftermarket services, spare parts demand, LEAP deliveries, and order growth. For investors, the key implication is that the company's FY2026 earnings expectations are moving higher, and improving service revenue growth enhances revenue quality; however, under a high valuation multiple, supply chain conditions, OEM production, and airline financial health will still affect the realization of upside.

Risks

• Supplier shortages may constrain GE's production and delivery capabilities.
• If Airbus and Boeing production comes in below current plans, it could weigh on GE's delivery pace.
• A significant deterioration in airline financial performance could ultimately affect growth in GE's engine aftermarket.
• CES margin may continue to face pressure from growth in installed engines, GE9X spending, investments, and inflation.

What to watch

• Whether FY2026 adjusted revenue can achieve high-teens growth.
• Whether CES revenue can deliver around 20% growth, especially whether service revenue can maintain low-20% growth.
• Execution of LEAP deliveries and the full transition to the LEAP-1B durability kit in early 2027.
• DPT's low double-digit revenue growth target and delivery of segment profit.
• Whether order growth can continue, especially momentum in CES and DPT orders.