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Can GE Aerospace Boost Profit Margin Amid Cost Pressures?
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Key Takeaways
GE Aerospace's Q2 operating profit rose 18% to $2.75B, while margin fell 130 bps to 21.7%.
GE's cost of sales jumped 26.7% to $8.7B, with R&D expenses rising 28.1% to $460M.
GE Aerospace raised 2026 operating profit guidance to $10.55B-$10.75B, implying 17% growth at midpoint.
GE Aerospace (GE - Free Report) recorded an operating profit of $2.75 billion (on a non-GAAP basis) in second-quarter 2026, an increase of 18% year over year. However, the company's operating profit margin (non-GAAP) was 21.7%, reflecting a decrease of 130 basis points (bps). The decline was attributable to the impacts of growth investments and cost inflation.
In the second quarter, GE’s cost of sales (comprising costs of equipment and services sold) surged 26.7% year over year to $8.7 billion. While selling, general and administrative expenses increased 10.9% to $1.1 billion, research and development expenses rose 28.1% to $460 million. The company is incurring high costs and expenses related to certain projects and increased production activities.
Nevertheless, GE Aerospace’s solid momentum 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 (non-GAAP) in the range of $10.55-$10.75 billion compared with the previous forecast of $9.85-$10.25 billion. The updated guidance indicates year-over-year growth of 17% 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.
Peer’s Margin Performance
Among its major peers, RTX Corporation’s (RTX - Free Report) total costs and expenses increased 12.8% year over year to $21.96 billion in second-quarter 2026. Despite the rise in costs, RTX Corp.’s consolidated adjusted segment margin expanded 40 basis points to 12.4% 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 3.2% year over year in second-quarter 2026. Textron’s net income margin declined 10 bps to 6.5% in the quarter. If pricing and volume growth continue to be offset by mix and execution costs, Textron’s earnings may grow at a slower pace than revenues.
GE's Price Performance, Valuation and Estimates
Shares of GE Aerospace have gained 10.5% in the past three months against the industry’s decline of 1%.
Image Source: Zacks Investment Research
From a valuation standpoint, GE is trading at a forward price-to-earnings ratio of 41.19X, above the industry’s average of 31.99X. GE Aerospace carries a Value Score of D.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for GE’s earnings has increased for both 2026 and 2027 over the past 60 days.
View the Zacks #1 Rank List
Image: Bigstock
Can GE Aerospace Boost Profit Margin Amid Cost Pressures?
Key Takeaways
GE Aerospace (GE - Free Report) recorded an operating profit of $2.75 billion (on a non-GAAP basis) in second-quarter 2026, an increase of 18% year over year. However, the company's operating profit margin (non-GAAP) was 21.7%, reflecting a decrease of 130 basis points (bps). The decline was attributable to the impacts of growth investments and cost inflation.
In the second quarter, GE’s cost of sales (comprising costs of equipment and services sold) surged 26.7% year over year to $8.7 billion. While selling, general and administrative expenses increased 10.9% to $1.1 billion, research and development expenses rose 28.1% to $460 million. The company is incurring high costs and expenses related to certain projects and increased production activities.
Nevertheless, GE Aerospace’s solid momentum 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 (non-GAAP) in the range of $10.55-$10.75 billion compared with the previous forecast of $9.85-$10.25 billion. The updated guidance indicates year-over-year growth of 17% 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.
Peer’s Margin Performance
Among its major peers, RTX Corporation’s (RTX - Free Report) total costs and expenses increased 12.8% year over year to $21.96 billion in second-quarter 2026. Despite the rise in costs, RTX Corp.’s consolidated adjusted segment margin expanded 40 basis points to 12.4% 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 3.2% year over year in second-quarter 2026. Textron’s net income margin declined 10 bps to 6.5% in the quarter. If pricing and volume growth continue to be offset by mix and execution costs, Textron’s earnings may grow at a slower pace than revenues.
GE's Price Performance, Valuation and Estimates
Shares of GE Aerospace have gained 10.5% in the past three months against the industry’s decline of 1%.
Image Source: Zacks Investment Research
From a valuation standpoint, GE is trading at a forward price-to-earnings ratio of 41.19X, above the industry’s average of 31.99X. GE Aerospace carries a Value Score of D.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for GE’s earnings has increased for both 2026 and 2027 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.