JPMorgan analysts have reduced their Q2 sales estimate for GE Aerospace (GE) to $8.4 billion, citing ongoing supply chain constraints affecting new engine deliveries. According to analysts, "management highlighted challenges here recently," and these issues may threaten the annual delivery targets as well.
Despite the lower sales forecast, JPMorgan maintains its profit and cash flow estimates, noting that many of the new engine deliveries are loss-generating. Therefore, adjusted EPS and free cash flow (FCF) estimates remain unchanged. The firm keeps its December 2024 price target at $175 and its Overweight rating on the stock.
The revised Q2 sales estimate is now 5% below consensus, implying a year-over-year growth of 5% for Q2 2024 and 10% for the first half of the year. This is at the low end of the guidance range for “about low-double-digits.” Commercial OEM revenue is expected to decrease to $1.5 billion from $1.7 billion in Q1 2024 due to fewer engine deliveries and a less favorable mix.
However, commercial services sales are anticipated to increase by $465 million, equating to 17-18% year-over-year growth. This would bring commercial services growth in the first half of 2024 to 15%, aligning with guidance for mid-teens growth for the full year.
The LEAP engine delivery target for 2024 appears challenging, with JPMorgan lowering its annual delivery expectation to 1,700 engines. The firm awaits GE’s Q2 earnings update for more clarity on the second half of the year.