(Reuters) — GE Aerospace raised its full-year profit forecast on Tuesday, citing a “strong start to the year” driven by strong demand for jet engine parts and services as airlines are keeping their old planes flying to deal with a shortage of new commercial aircraft.
The company now expects operating profit of $6.2 billion to $6.6 billion for 2024, compared to an earlier forecast of $6 billion to $6.5 billion. Shares of the aerospace giant were up 1.8% before the bell.
Earlier this month, GE completed its split into three companies focused on aviation, energy and healthcare.
Since then, Wall Street analysts have been optimistic about the prospects for the aerospace sector, with some citing the dominant lead of CFM International, GE’s joint venture with Safran, as supplier to Airbus’ A320neo family of aircraft, over competing engine manufacturer Pratt & Whitney.
CFM is also the sole supplier of Boeing’s 737 MAX family of aircraft, whose production is currently reduced due to an ongoing safety crisis.
In the short term, however, GE Aerospace stands to benefit from increased sales of spare parts and services – which are priced higher – as airlines are forced to operate older planes.
Engine manufacturers typically sell engines to airlines at a discount and recoup the money by selling parts and services over the life of the engine.
“(GE Aerospace) has that crucial balance between OEM and aftermarket sales, with its large installed base more than offsetting losses from new engine deliveries,” Robert Stallard, an analyst at Vertical Research Partners, wrote in a note at the beginning of the month.
Last month, GE Aerospace forecast operating profit of around $10 billion in 2028.
On Tuesday, GE Aerospace reported that GE’s first-quarter adjusted profit, which included results from the aerospace and energy businesses, rose 76% to $1.5 billion, or 82 cents per share. Energy company GE Vernova completed its split on April 2.
GE’s total revenue for the quarter through March rose 11% to $16.1 billion.
(Reporting by Abhijith Ganapavaram in Bengaluru; Editing by Anil D’Silva)
