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Can GE Aerospace Boost Margin Performance Amid Cost Pressures?
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Key Takeaways
GE's Q1 operating profit rose 18%, though operating margin declined 200 basis points to 21.8%.
GE saw higher cost of sales, SG&A and R&D expenses tied to growth investments and production.
GE expects 2026 operating profit of $9.85-$10.25 billion, aided by LEAP and service demand.
GE Aerospace (GE - Free Report) recorded an operating profit of $2.5 billion in first-quarter 2026, an increase of 18% year over year. However, the company's operating profit margin was 21.8%, reflecting a decrease of 200 basis points (bps). The decline was attributable to the impacts of growth investments and inflation.
In the first quarter, GE’s cost of sales (comprising costs of equipment and services sold) surged 32% year over year to $7.9 billion. While selling, general and administrative expenses increased 23.7% to $1.08 billion, research and development expenses rose 22.6% to $440 million. The company is incurring high costs and expenses related to certain projects and increased production activities.
Nevertheless, GE Aerospace’s persistent strength across both commercial and defense aerospace sectors, driven by a strong pipeline of projects, is expected to drive its growth. Also, its focus on effective cost management and backlog conversion is expected to improve its margin performance. For 2026, the company expects to generate operating profit in the range of $9.85-$10.25 billion, indicating year-over-year growth of 10.4% at the mid-point.
For the year, GE expects its top-line and margin performance to benefit from higher LEAP engine deliveries, strong demand for aftermarket services and focus on operational execution. It's worth noting that the company expects more than 15% growth in LEAP deliveries this year.
Peer’s Margin performance
Among its major peers, RTX Corporation’s (RTX - Free Report) total costs and expenses increased 7.2% year over year to $19.59 billion in first-quarter 2026. Despite the rise in costs, RTX Corp.’s adjusted operating profit margin expanded 60 basis points (bps) to 13.7% in the quarter. RTX is benefiting from rising aerospace deliveries, growing aftermarket revenues and declining geared turbofan (GTF) engine-related cash costs.
Textron Inc.’s (TXT - Free Report) total costs and expenses rose 11.8% year over year in first-quarter 2026. Textron’s gross profit margin declined 100 bps to 17.8% in the quarter. The decline in Textron’s margin was due to the adverse impact from the mix of military programs and lower commercial volume in the Bell segment.
GE's Price Performance, Valuation and Estimates
Shares of GE Aerospace have gained 16.8% in the past three months against the industry’s 4.4% decline.
Image Source: Zacks Investment Research
From a valuation standpoint, GE is trading at a forward price-to-earnings ratio of 43.83X, above the industry’s average of 33.06X. GE Aerospace carries a Value Score of D.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for GE’s 2026 and 2027 earnings has increased over the past 60 days.
View the Zacks #1 Rank List
Image: Bigstock
Can GE Aerospace Boost Margin Performance Amid Cost Pressures?
Key Takeaways
GE Aerospace (GE - Free Report) recorded an operating profit of $2.5 billion in first-quarter 2026, an increase of 18% year over year. However, the company's operating profit margin was 21.8%, reflecting a decrease of 200 basis points (bps). The decline was attributable to the impacts of growth investments and inflation.
In the first quarter, GE’s cost of sales (comprising costs of equipment and services sold) surged 32% year over year to $7.9 billion. While selling, general and administrative expenses increased 23.7% to $1.08 billion, research and development expenses rose 22.6% to $440 million. The company is incurring high costs and expenses related to certain projects and increased production activities.
Nevertheless, GE Aerospace’s persistent strength across both commercial and defense aerospace sectors, driven by a strong pipeline of projects, is expected to drive its growth. Also, its focus on effective cost management and backlog conversion is expected to improve its margin performance. For 2026, the company expects to generate operating profit in the range of $9.85-$10.25 billion, indicating year-over-year growth of 10.4% at the mid-point.
For the year, GE expects its top-line and margin performance to benefit from higher LEAP engine deliveries, strong demand for aftermarket services and focus on operational execution. It's worth noting that the company expects more than 15% growth in LEAP deliveries this year.
Peer’s Margin performance
Among its major peers, RTX Corporation’s (RTX - Free Report) total costs and expenses increased 7.2% year over year to $19.59 billion in first-quarter 2026. Despite the rise in costs, RTX Corp.’s adjusted operating profit margin expanded 60 basis points (bps) to 13.7% in the quarter. RTX is benefiting from rising aerospace deliveries, growing aftermarket revenues and declining geared turbofan (GTF) engine-related cash costs.
Textron Inc.’s (TXT - Free Report) total costs and expenses rose 11.8% year over year in first-quarter 2026. Textron’s gross profit margin declined 100 bps to 17.8% in the quarter. The decline in Textron’s margin was due to the adverse impact from the mix of military programs and lower commercial volume in the Bell segment.
GE's Price Performance, Valuation and Estimates
Shares of GE Aerospace have gained 16.8% in the past three months against the industry’s 4.4% decline.
Image Source: Zacks Investment Research
From a valuation standpoint, GE is trading at a forward price-to-earnings ratio of 43.83X, above the industry’s average of 33.06X. GE Aerospace carries a Value Score of D.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for GE’s 2026 and 2027 earnings has increased over the past 60 days.
Image Source: Zacks Investment Research
The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.