GE Aerospace beat expectations in 2Q26 and raised full-year guidance; Goldman Sachs maintains Buy

Overview

This report is Goldman Sachs' update following GE Aerospace's 2Q26 results. GE Aerospace exceeded FactSet consensus on revenue, margin, EBIT, EPS, and free cash flow, and raised its 2026 guidance across the board. Goldman Sachs believes aviation fundamentals remain strong, especially in the aftermarket business, while GE's high market share in engines supports medium- to long-term earnings power.

Core views

The core view is to maintain the Buy rating. In the near term, volume, pricing, and operating performance continue to deliver upside surprises; in 2Q26, both Commercial Engines & Services and Defense & Propulsion Technologies achieved revenue growth and margins above Goldman Sachs' model. Over the long term, Goldman Sachs believes the market still underestimates the impact of GE's engine market share on long-term earnings power.

Analysis framework

The report uses earnings comparison, segment revenue and margin breakdown, full-year guidance changes, FY2026-2030E EBITDA forecast revisions, and the target valuation method for analysis. The target price is based on 2027E EV/EBITDA of 32.5X, with the multiple unchanged; the target price increase is mainly driven by upward earnings revisions.

Methodology notes

• Valuation methodsEV/EBITDA target multiple method

  2027E EV/EBITDA 32.5X

  Goldman Sachs derives the 12-month target price using 2027E EV/EBITDA of 32.5X; the multiple is unchanged this time, and the target price is raised from $395 to $410 due to upward earnings revisions.

• Factor analysisGS Factor Profile

  Growth、Financial Returns、Multiple、Integrated

  GS Factor Profile compares the stock with Goldman Sachs-covered stocks and industry peers across growth, financial returns, valuation multiple, and integrated score, providing investment context.

• M&A frameworkM&A Rank

  M&A Rank 3

  Goldman Sachs' M&A Rank measures the probability of a potential acquisition on a scale from 1 to 3, with 3 representing a low probability of 0%-15%; GE Aerospace has an M&A Rank of 3 and it is not included in the target price.

Asset mapping & comparison

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

• GE Aerospace (GE.US)

  Research coverage target, Buy rating

  Strengths

  High aircraft engine market share, strong aftermarket demand, and 2Q26 revenue, margin, EPS, and free cash flow all exceeded expectations, with 2026 guidance raised.

  Weaknesses

  Valuation multiples are relatively high, with 2026E P/E at 44.3X and EV/EBITDA at 30.7X.

  Comparison

  Versus FactSet consensus, the company's 2Q26 EPS, EBIT, and free cash flow all significantly exceeded expectations; versus Goldman Sachs' model, both CES and DPT margins were higher.

  Risks

  Supply chain challenges, downturn in air travel, and changes in defense budget priorities.

Key data

• 2Q26 adjusted EPS$2.02Above FactSet consensus of $1.86.
• 2Q26 revenue$12.6bnUp 24% year over year; Commercial Engines & Services revenue was $9.7bn, up 27% year over year; Defense & Propulsion Technologies revenue was $3.4bn, up 16% year over year.
• 2Q26 operating profit$2.75bn7% above consensus, with a margin of 21.7%.
• 2Q26 free cash flow$3.03bnAbove Goldman Sachs estimate of $2.0bn and consensus of $1.82bn.
• 2026 adjusted EPS guidance$7.65-$7.85Previously $7.10-$7.40; consensus is $7.56.
• 2026 free cash flow guidance$8.9-$9.2bnPreviously $8.0-$8.4bn; consensus is $8.37bn.
• Target price$410Raised from $395, based on 2027E EV/EBITDA of 32.5X.
• Market capitalization$365.8bnDisclosed in the report's Key Data.
• Enterprise value$375.0bnDisclosed in the report's Key Data.

Impact & implications

The earnings beat and guidance increase reinforce GE Aerospace's earnings visibility in aircraft engines and the aftermarket, and also support further upward revisions to earnings forecasts. If aviation demand, the supply chain, and the pricing environment remain solid, the stock price still has the upside implied by the target price.

Risks

• Supply chain challenges may constrain deliveries, costs, and margin performance.
• A downturn in air travel demand may affect commercial engine and services revenue.
• Changes in defense budget priorities may affect the Defense & Propulsion Technologies business.
• High valuation requires continued delivery of growth and margin improvement.

What to watch

• Delivery against the raised 2026 guidance, especially operating profit, EPS, and free cash flow.
• Internal shop visit revenue, spare parts sales, and volume trends at Commercial Engines & Services.
• Service and equipment growth in Defense & Propulsion Technologies, as well as business performance driven by Avio Aero.
• The impact of the supply chain, inflation, product mix, and capital expenditure on margins.
• Whether earnings forecasts continue to be revised upward, and whether the target price is adjusted further.