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GE Aerospace's Costs Rise in Q3: Is Margin Pressure Set to Persist?
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Key Takeaways
GE Aerospace plans to invest over $1 billion in global MRO facilities over five years.
LEAP shop visit volume rose over 40% year over year, while turnaround time fell by two weeks.
Costs rose 17.2% to $9.1 billion, while operating profit margin fell 80 basis points to 19.9%.
GE Aerospace (GE - Free Report) continues to invest heavily in expanding its manufacturing and maintenance, repair and overhaul (MRO) capabilities to capitalize on growing demand for engines and services. However, rising costs and expenses remain a concern, putting pressure on the company's profitability.
GE Aerospace plans to invest more than $1 billion over the next five years to expand its global MRO facilities. In 2025, the company invested $1 billion in U.S. manufacturing and technology and plans to invest another $1 billion in 2026. It also intends to invest more than €110 million across its European manufacturing facilities in 2026.
In the third quarter of 2026, GE Aerospace agreed to acquire Consolidated Precision Products for $11.75 billion to expand capacity for mission-critical castings. The deal is expected to close in the second half of 2027.
These investments are supporting aftermarket growth. During the third quarter, LEAP internal shop visit volume increased more than 40% year over year, while turnaround time declined by roughly two weeks. However, expanding production and service capabilities requires substantial spending.
In the third quarter of 2026, GE Aerospace's cost of sales increased 17.2% year over year to $9.1 billion. The company’s research and development expenses rose 10.4% to $458 million. As a result, GE’s operating profit margin contracted 80 basis points to 19.9%.
Higher production activity, unfavorable product mix and persistent inflation continue to weigh on profitability. If costs remain elevated, it is likely to hurt the company’s bottom line and margins in the quarters ahead.
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) costs and expenses increased 8.8% year over year to $21.79 billion in third-quarter 2026. Despite the rise in costs, RTX Corp.’s adjusted operating profit margin expanded 310 basis points (bps) to 15.2% 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
Shares of GE Aerospace have gained 3.9% in the past six months against the industry’s 10.9% decline.
Image Source: Zacks Investment Research
From a valuation standpoint, GE is trading at a forward price-to-earnings ratio of 33.19X, above the industry’s average of 27.24X. GE Aerospace carries a Value Score of D.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for GE’s 2026 earnings has gone up 3.4% over the past 60 days.
View the Zacks #1 Rank List
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GE Aerospace's Costs Rise in Q3: Is Margin Pressure Set to Persist?
Key Takeaways
GE Aerospace (GE - Free Report) continues to invest heavily in expanding its manufacturing and maintenance, repair and overhaul (MRO) capabilities to capitalize on growing demand for engines and services. However, rising costs and expenses remain a concern, putting pressure on the company's profitability.
GE Aerospace plans to invest more than $1 billion over the next five years to expand its global MRO facilities. In 2025, the company invested $1 billion in U.S. manufacturing and technology and plans to invest another $1 billion in 2026. It also intends to invest more than €110 million across its European manufacturing facilities in 2026.
In the third quarter of 2026, GE Aerospace agreed to acquire Consolidated Precision Products for $11.75 billion to expand capacity for mission-critical castings. The deal is expected to close in the second half of 2027.
These investments are supporting aftermarket growth. During the third quarter, LEAP internal shop visit volume increased more than 40% year over year, while turnaround time declined by roughly two weeks. However, expanding production and service capabilities requires substantial spending.
In the third quarter of 2026, GE Aerospace's cost of sales increased 17.2% year over year to $9.1 billion. The company’s research and development expenses rose 10.4% to $458 million. As a result, GE’s operating profit margin contracted 80 basis points to 19.9%.
Higher production activity, unfavorable product mix and persistent inflation continue to weigh on profitability. If costs remain elevated, it is likely to hurt the company’s bottom line and margins in the quarters ahead.
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) costs and expenses increased 8.8% year over year to $21.79 billion in third-quarter 2026. Despite the rise in costs, RTX Corp.’s adjusted operating profit margin expanded 310 basis points (bps) to 15.2% 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
Shares of GE Aerospace have gained 3.9% in the past six months against the industry’s 10.9% decline.
Image Source: Zacks Investment Research
From a valuation standpoint, GE is trading at a forward price-to-earnings ratio of 33.19X, above the industry’s average of 27.24X. GE Aerospace carries a Value Score of D.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for GE’s 2026 earnings has gone up 3.4% over the past 60 days.
Image Source: Zacks Investment Research
The company currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.