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GE Aerospace Faces Margin Pressure From Rising Costs: Can It Recover?
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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 and SG&A expenses also rising.
GE now expects 2026 operating profit of $10.55B-$10.75B, implying 17.6% growth at midpoint.
GE Aerospace (GE - Free Report) recorded an operating profit of $2.75 billion in second-quarter 2026, an increase of 18% year over year. However, the company's operating profit margin was 21.7%, reflecting a decrease of 130 basis points (bps). The decline was attributable to the impacts of growth investments and 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.
Despite this, GE Aerospace’s strong momentum across both commercial and defense aerospace sectors, driven by a robust pipeline of projects, is expected to drive its growth. Also, its focus on 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 $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 17.6% at the midpoint.
For 2026, 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 high-teens growth in LEAP deliveries this year.
Peer’s Margin performance
Textron Inc.’s (TXT - Free Report) cost of sales rose 4.2% year over year to $3.09 billion in second-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 reduced margin in the Bell segment.
RTX Corporation’s (RTX - Free Report) total costs and expenses increased 12.8% year over year to $22 billion in second-quarter 2026. Despite the rise in costs, RTX Corp.’s adjusted operating profit margin expanded 150 basis points (bps) to 11.4% in the quarter. RTX is benefiting from rising aerospace deliveries, growing aftermarket revenues and declining geared turbofan (GTF) engine-related cash costs.
GE's Price Performance, Valuation and Estimates
Image Source: Zacks Investment Research
Shares of GE Aerospace have gained 7.9% in the past six months against the industry’s 12.2% decline.
Image Source: Zacks Investment Research
From a valuation standpoint, GE is trading at a forward price-to-earnings ratio of 36.60X, above the industry’s average of 28.96X. 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
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GE Aerospace Faces Margin Pressure From Rising Costs: Can It Recover?
Key Takeaways
GE Aerospace (GE - Free Report) recorded an operating profit of $2.75 billion in second-quarter 2026, an increase of 18% year over year. However, the company's operating profit margin was 21.7%, reflecting a decrease of 130 basis points (bps). The decline was attributable to the impacts of growth investments and 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.
Despite this, GE Aerospace’s strong momentum across both commercial and defense aerospace sectors, driven by a robust pipeline of projects, is expected to drive its growth. Also, its focus on 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 $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 17.6% at the midpoint.
For 2026, 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 high-teens growth in LEAP deliveries this year.
Peer’s Margin performance
Textron Inc.’s (TXT - Free Report) cost of sales rose 4.2% year over year to $3.09 billion in second-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 reduced margin in the Bell segment.
RTX Corporation’s (RTX - Free Report) total costs and expenses increased 12.8% year over year to $22 billion in second-quarter 2026. Despite the rise in costs, RTX Corp.’s adjusted operating profit margin expanded 150 basis points (bps) to 11.4% in the quarter. RTX is benefiting from rising aerospace deliveries, growing aftermarket revenues and declining geared turbofan (GTF) engine-related cash costs.
GE's Price Performance, Valuation and Estimates
Image Source: Zacks Investment Research
Shares of GE Aerospace have gained 7.9% in the past six months against the industry’s 12.2% decline.
Image Source: Zacks Investment Research
From a valuation standpoint, GE is trading at a forward price-to-earnings ratio of 36.60X, above the industry’s average of 28.96X. 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.
The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.