GE — GE Aerospace

The sell-side remains bullish: 24 Buy/Outperform ratings, 11 Holds, and a $408.73 consensus target, with Q3 orders up 49% and FY2026 EPS guidance lifted to $8.00–$8.10. But the tape is not confirming—GE fell 4.4% on 2026-10-20, is down 13.3% over three months, and sits below all key moving averages, so near-term market sentiment is more cautious than analyst sentiment.

Revenue growth is strong but decelerating: YoY growth was +24.7% in Q1 2026, +21.1% in Q2, and +15.5% in Q3, with revenue rising sequentially from $12.392B to $13.349B to $14.118B. The 2023–24 comparisons are distorted by the post-spinoff/divestiture reset (Q4 2023 revenue $19.4B vs Q1 2024 $8.96B), so sequential 2025–26 trends are cleaner. Operating margin compressed to 16.8% in Q3 2026 from 22.9% in Q3 2025 and 18.6% in Q2 2026, even as revenue grew—top-line strength is not flowing through to operating profit at the same rate. EPS was $1.81, $2.26, and $2.20 in Q1–Q3 2026, with TTM EPS $8.68. Free cash flow remains robust: Q3 FCF $1.816B, 2026 YTD $6.17B, and TTM about $8.0B, versus full-year guidance of $9.1–$9.4B.

Expensive. At $297.50 on 2026-10-20, GE trades at 34.2x TTM EPS of $8.684, about 37x the FY2026 guided EPS midpoint of $8.05, and 37.5x the $7.935 next-FY consensus EPS. PEG is 2.29, P/S is 5.87 versus a 5-year average of 3.62, and P/B is 17.8. The 5-year average P/E of 322 is not meaningful because historical earnings were depressed by the portfolio reset. On P/S and forward P/E, the stock is rich versus its own history and leaves little room for margin slippage.

The stock is not paying for the Q3 beat: estimates and guidance moved higher, but the shares fell 4.4% on 2026-10-20 and are down 13.3% over three months. That disconnect can be read two ways—either the market is wrongly discounting a $170B backlog and 2027 aftermarket conversion, or it is correctly anticipating margin compression and slower 2027 EPS growth. With a ~37x forward P/E and 2.29 PEG, the price already embeds a lot of good news; Q4 FCF delivery and 2027 guidance are needed to justify the multiple.

As of 2026-10-20, RSI(14) was 31.67—near oversold but not deeply below 30—and price was 5.06% below the 20-day SMA, 9.85% below the 50-day SMA, and 8.71% below the 200-day SMA. The stock returned -3.93% over one week, -5.96% over one month, -13.26% over three months, and +3.07% over six months. The trend is broken short and medium term; an oversold bounce is possible, but there is no reversal signal yet. Entry timing would improve on a reclaim of the 20-day SMA or RSI recovery above 40.

• Jet fuel costs and airline capacity: geopolitical disruption to oil shipping has raised fuel costs, prompting some airlines to tighten capacity; GE says 2026 contracted shop visits are largely locked, but a prolonged capacity cut would pressure aftermarket demand.
• Aerospace supply chain: bottlenecks are easing but still constrain engine deliveries and MRO turnaround times; the $11.75B CPP acquisition and $225M capacity investment are aimed at securing castings and reducing bottlenecks.
• Defense spending: U.S. and allied prioritization of next-generation military programs, including the Navy F/A-XX, supports GE's Defense & Propulsion Technologies segment.
• Rates and industrial valuation: at ~34x TTM earnings, GE is sensitive to discount rates and rotation out of premium industrials; higher-for-longer rates pressure high-multiple names.
• OEM build rates and air traffic: Boeing/Airbus production plans, widebody recovery, and 777X/GE9X milestones drive engine demand and the long-tail spares cycle.

• Q4 2026 earnings and initial 2027 outlook, including conversion of the $170B+ commercial services backlog and delivery of the $9.1–$9.4B full-year FCF guidance.
• Turkish Airlines' 300+ LEAP-1B engine order and long-term service agreement, plus additional LEAP-1B/1A wins that expand the installed base.
• CPP acquisition integration and supply-chain capacity investments, which could ease casting bottlenecks and support aftermarket throughput.
• GE9X/777X testing milestones and Edison Works advanced engine progress; U.S. defense program awards such as F/A-XX.

• Aftermarket slowdown: if airline fuel costs and geopolitical stress force deeper capacity cuts, shop-visit growth and spare-parts demand could decelerate faster than management expects.
• Margin compression: Q3 2026 operating margin fell to 16.8% from 22.9% a year earlier; if mix, inflation, or supply-chain costs persist, EPS estimates could be cut.
• Valuation de-rating: 34x TTM and ~37x forward EPS plus 5.87x sales leave little cushion for disappointment, especially with a 2.29 PEG.
• Execution risk: integrating CPP, ramping LEAP output, and resolving GE9X technical issues could absorb cash and management attention.
• Cyclical aerospace downturn: a broader decline in air travel or OEM production cuts would hit both original equipment and aftermarket revenue.

GE Aerospace is a high-quality aftermarket cash compounder with a $170B backlog, 49% order growth, and raised 2026 guidance, but at $297.50 it trades at ~34x TTM and ~37x forward EPS while Q3 operating margin compressed to 16.8%. The risk/reward is balanced—not a compelling fresh entry until either the price offers a better multiple or margin/FCF execution confirms the growth; the quality is real, but so is the valuation risk.

Blended 33x FY2026 adjusted EPS midpoint of $8.05 ($265.65) with a 3.1% FCF yield on $9.25B guided 2026 FCF (~$287.60/share), averaging to about $276.6. This assumes a modest de-rating from the current ~37x forward P/E and ~3.0% FCF yield to reflect margin pressure.