GE Aerospace (GE)
Aeroespacial / Motores de avión
The best aerospace business in the West: jet engines plus a decades-long services aftermarket on an installed base of ~50,000 commercial engines (the annuity). But at ~$346 it trades at ~36× — the most expensive multiple in the entire sector, and above its own history. Base 5-year value ~$371 (+2%/year): Preserves value — priced for perfection; the multiple's compression toward a still-generous band eats up nearly all the growth.
- Price
- $346.35
- Intrinsic value (5y, base)
- $371
- Total annual return (5y)
- 2.2%
- Status (nominal)
- Preserves value
- Margin of safety
- No margin
The essentials
- The world's leading maker of jet engines, after spinning off GE Vernova (2024) and GE HealthCare (2023). The real engine is the aftermarket: roughly 70% of revenue is services (parts + maintenance) on an installed base of ~50,000 commercial engines + ~30,000 military — a decades-long annuity, with high switching costs and, on some Boeing models, GE Aerospace as the sole engine source. Contracted backlog (RPO) of US$190.6bn (+11% year-over-year), of which 85.5% is services.
- In the midst of the aerospace-cycle recovery, with the LEAP ramp (the dominant narrow-body engine, 1,802 units delivered in 2025, +28% vs. 2024, marketed through CFM International, the 50-50 joint venture with Safran) and segment margins that already reflect the services mix: Commercial Engines & Services at a 26.6% margin and Defense & Propulsion Technologies at 12.3%. Larry Culp (ex-Danaher) imposed operating discipline.
- ⚠️ At ~$346 it trades at ~36× — the most expensive multiple in the entire aerospace sector, and above its own history. The aftermarket justifies a premium, but not this level. As the multiple reverts toward a still-generous aerospace band (20×), the compression eats up almost all of the operating income growth; the dividend is a mere 0.5%. It also carries an insurance legacy (US$36.9bn of liabilities) that requires maintaining statutory capital at 300% of the authorized control level.
Intrinsic value — two valuation methods
Total return at 5 years: 2.1%/year = 1.4% appreciation + 0.7% dividend. The target price ($371) is ex-dividend; the $13 in dividends collected over 5 years are added separately.
By both methods, the value today (DCF $273 · Multiples $309) is below the market price ($346).
Pillars of the analysis
The verdict — today vs 5 years
Today — expensive, no margin of safety: at $346 trades ~12.0% above its value discounted to today (~$309); the expected return does not even reach the risk-free rate (4.5%).
At 5 years — Preserva valor: the target price ($371) plus dividends yield just enough to preserve nominal capital, below the required 4% floor.
The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$193.
Thesis
The business
GE Aerospace is arguably the best aerospace business in the West: the largest engine maker by installed base (~50,000 commercial + ~30,000 military), with a services aftermarket (~70% of revenue) that is a decades-long annuity with high switching costs and pricing power over a captive base, a wide moat, a high ROIC (~28%) and a contracted backlog of US$190.6bn (85.5% services). The LEAP ramp grows the base. Larry Culp (Chairman and CEO, ex-Danaher) imposed operating discipline. There is almost nothing wrong with the business.
The valuation
An aerospace business with an aftermarket is valued on EV/EBIT over operating income (stock-based compensation is low, no trap to correct for). TTM operating income is ~US$10.2bn. At ~$346, that's ~36× — the most expensive multiple in the entire aerospace sector (RTX ~27×, Honeywell ~14×, TransDigm ~21×) and above GE's own history. The market is paying for aftermarket quality + the cycle recovery + the LEAP ramp, with guidance raised over the past year.
The base scenario projects operating income growing ~13%/year (cycle recovery + compounding aftermarket + margin expansion) from ~US$10.2bn to ~US$18.6bn in five years, at an exit multiple of 20× — the high end of the aerospace band (15-22×), the maximum defensible level for the sector's best aftermarket, but well below today's ~36×. With buybacks (~2.4%/year), that gives ~$371/share → a total return of +2%/year.
The margin of safety
No margin of safety: at this price capital is preserved, but it is not bought below its value. Operating income nearly doubles in five years (~US$10.2bn → ~US$18.6bn), but the multiple reverts from ~36× to ~20× — and that compression eats up almost all the growth, leaving the price barely above today's. The dividend (0.5%) is too small to move the needle. The result is a total return of +2%/year: the verdict is Preserves value. It's the pattern of a top-quality business priced for perfection — like a top-tier oil major at a peak-cycle multiple: there's nothing wrong with GE Aerospace, what's expensive is the price. The favorable scenario (sustained aerospace cycle + margin toward 25% + multiple at the top of the band) crosses into 'Fairly valued'; the adverse one (falling traffic + ramp stumble + multiple at the bottom of the band) takes the value well below the price. If the price corrects toward the zone where the aftermarket compounds faster than the multiple compression, GE Aerospace goes back to being one of the best franchises you can buy.
What to watch
Three things. The multiple: at ~36× EV/EBIT, GE Aerospace is discounting near-flawless execution — any disappointment (a cycle slowdown, a LEAP ramp stumble) can trigger a sharp compression. The LEAP ramp: the pace of deliveries (1,802 units in 2025, +28%) and the resolution of the execution risks the 10-K itself names — durability, time on wing, supply chain — are the proof that the installed base is growing as promised, which is what sustains the future annuity. And the insurance legacy: the US$36.9bn of run-off liabilities, with the capital requirement at 300% of the authorized control level and the ongoing Bank BPH litigation, are a tail that could demand capital if reserves prove insufficient. The business is superb; at this price, the margin for error is minimal.
Educational / informational. Does not constitute investment advice.