GE Aerospace shares fall on weak sales and supply constraints

General Electric’s sales fell short of Wall Street expectations last quarter, tempering enthusiasm for its improved profit outlook as the jet engine maker grapples with chain constraints of supply weighing the deliveries.

The manufacturer, known as GE Aerospace, reported adjusted revenue of $8.94 billion in the third quarter, according to a statement on Tuesday. That compares with the $9 billion average of analyst estimates compiled by Bloomberg. Adjusted earnings of $1.15 per share narrowly beat expectations.

GE Aerospace also raised its full-year profit and free cash flow guidance, while keeping its sales outlook unchanged.

Shares fell 9.05 percent on Tuesday to close at $176.66.

The revenue constraints highlight the challenges the company continues to endure in an industry beset by supply chain issues and lingering problems at planemaker Boeing. GE Aerospace recently had a shortfall in deliveries of Leap engines to Airbus due to a lack of high-pressure turbine blades.

“Growth eased in both the commercial and defense sectors,” Vertical Research Partners analyst Robert Stallard said in a note. The company’s performance was generally good, he said, but it may still disappoint investors because “expectations for the quarter were quite high.”

The stock had risen 91 percent this year through Monday’s close, far outpacing the S&P 500’s 23 percent gain.

The company is trying to show how it can stand on its own in its first few months as an independent, more focused business. Chief Executive Larry Culp in April parted ways with GE’s former energy-related businesses, completing a long-planned breakup of the storied conglomerate.

Culp said in an interview Tuesday that he was pleased with the performance despite the backlash to last quarter’s results. “We’re in the middle of a hell of a year,” he said.

GE Aerospace now expects adjusted earnings of up to $4.35 per share this year, down from a previous forecast of no more than $4.20. Its free cash flow guidance was also considered.

The commercial engines and services business continued its steady performance in the last quarter. Orders rose 29 percent over the same period in 2023, while services grew 10 percent due to increased sales of parts, increased store visits and improved prices, the company said.

Results in defense and propulsion operations were mixed, with revenue up 2%. Profits fell 18 percent to $220 million, hurt in part by inflation.

“This is a business that may not grow as quickly as commercial businesses,” Culp said. Still, “we are quite bullish on our defense business given the state of the world and given our competitive position.”

GE Aerospace’s recent supplier challenges stem in part from smaller manufacturers’ struggles to replace skilled workers who retired or left during the pandemic. The company cut its production increase for the Salt to 5 percent in July.

The shortfall may extend the life of its predecessor engine, the CFM56. This is a boost to the company’s maintenance business.

In August, GE Aerospace finalized an agreement with the Polish Ministry of National Defense for the planned purchase of 96 Boeing helicopters powered by GE Aerospace’s T700 engines.

GE Aerospace has continued with a plan to divest certain assets and resolve lingering issues with its legacy business lines. The company reported a pre-tax gain of $341 million when it completed the sale of its licensing business to Dolby Laboratories. It also reported a pre-tax charge of $328 million related to an agreement in principle to settle a lawsuit from legacy shareholders.