The paragraph discusses the GE Aerospace Third Quarter 2024 Earnings Conference Call. The operator introduces the call, and Blaire Shoor from the GE Aerospace Investor Relations team welcomes attendees and introduces Chairman and CEO Larry Culp and CFO Rahul Ghai. Blaire notes that some statements will be forward-looking. Larry Culp then discusses GE Aerospace's commitment to safety and innovation in aviation, guided by their operating model called FLIGHT DECK, and highlights the dedication of their 52,000 employees. He notes that their third quarter performance was strong, with a 28% increase in orders, driven by robust demand, resulting in strong earnings and cash flow.

The paragraph discusses a company's financial performance, reporting a 6% rise in revenue driven by growth in services and equipment, a 14% increase in operating profit, and a 25% boost in adjusted EPS. Free cash flow reached $1.8 billion with over 140% conversion. In the Commercial Engines & Services (CES) sector, orders surged by 29%, and services revenue grew by 10%, supported by a $149 billion backlog, mostly in services. Despite progress in deliveries and spare part sales, further work is required. The Defense & Propulsion Technologies (DPT) sector saw a 19% increase in orders, though profit declined. The company focuses on improving its defense programs and technology development. Thanks were extended to teams working during hurricanes. Strong results have led to an increase in the full-year guidance. Additionally, there is a close coordination with Boeing as service demand remains high, with LEAP's global narrowbody share growing over 20%.

The company is actively working with suppliers to increase material inputs and expand operational capacity to meet rising demand. Engine output has grown by 22% quarter-over-quarter, with significant increases in both commercial and defense sectors. Efforts to improve supply chain efficiency have resulted in an 18% output increase at priority supplier sites. Initiatives like joint Kaizen projects are showing measurable improvements. The company is also enhancing the LEAP engine's durability with new upgrades, expecting certification soon, leading to a 2.5x improvement in operational time. As the LEAP fleet is projected to double by 2030, the company is expanding capacity to support this growth, utilizing strategies to improve shop visit outputs and reduce turnaround times.

At the MRO facility in Selma, Brazil, value stream mapping and problem-solving techniques have reduced the LEAP test cycle time by nearly 50%, increasing shop visit output by over 20% in the third quarter. The company is investing $1 billion over five years to expand internal capacity, including a new LEAP MRO shop in Poland in partnership with Lufthansa Technik. The third-party network is also growing, with Akasa Airlines selecting ST Engineering for their fleet's restoration shop visits. The company is focused on improving service delivery while maintaining safety and quality, with plans to increase output further in the fourth quarter and into 2025. They have secured multiple service contracts, including adding 75 LEAP-1A-powered A320 aircraft to Avalon’s fleet and commitments from Eva Air and Qatar Airways for engine supplies. In defense, Poland's Ministry of National Defense will acquire over 200 T700 engines for their Boeing Apache Guardian helicopters.

The article discusses GE Aerospace's recent achievements and future plans. The company is upgrading GEnx 2B engines for the U.S. Air Force's SAOC and advancing technologies like the RISE initiative for sustainable aviation. They are pioneering turboprop technology with a catalyst engine and progressing the T901 engine for Blackhawk and Apache modernization. Key developments include the digital backbone for Bell's aircraft and the XA100 engine testing, contributing to the U.S. Air Force's NGAD program. Financially, GE Aerospace reported a strong quarter with increased orders, profit growth, and revenue, despite lower engine shipments and higher inflation impacts.

The company reported strong financial results, with operating margins increasing by 150 basis points to 20.3% and adjusted EPS rising by 25% due to increased operating profit and preferred equity redemption. Free cash flow reached $1.8 billion, up 5% from higher earnings, despite a $600 million use of working capital and inventory growth due to material availability challenges. Year-to-date revenue increased by 8%, with operating profit up over $1 billion or 25%, driven by commercial services. Total free cash flow amounted to $4.6 billion, up by $1 billion year-over-year at nearly 130% conversion. In the CES segment, third-quarter revenue grew 8%, with services up 10% due to higher spare part sales and improved pricing and equipment revenue up 5% despite supply chain constraints. CES achieved a profit of $1.8 billion, up 16%, with a 180-basis point margin expansion. Year-to-date, CES profits increased by $750 million, with 170 basis points of margin expansion. Meanwhile, the DPT segment saw a 19% increase in orders, with a strong defense book-to-bill ratio of 1.6% for the quarter and 1.2% year-to-date.

The paragraph discusses the company's financial performance, highlighting a $1 billion increase in their DPT backlog, totaling $18 billion, and a 2% revenue growth despite a decline in Defense & System systems revenue. Although propulsion and additive technologies saw a 9% growth, profit decreased by 18% due to factors like inflation and adverse engine mix. Year-to-date revenue and profit rose by 6% and 22%, respectively, with margins improving by 150 basis points. Corporate costs were reduced by 25% due to restructuring efforts post-spin-off. Non-GAAP adjustments included the sale of a licensing business and a legacy lawsuit settlement, while Colibrium Additive remains a key focus. Overall strong performance has led the company to raise earnings and cash guidance, with expectations of continued LEAP deliveries to Boeing, though full-year deliveries will be down 10%.

The paragraph discusses the financial outlook and performance of a company, highlighting expectations for mid-to-high single-digit growth in DPT, with operating profit now anticipated to be between $6.7 billion and $6.9 billion, indicating over 200 basis points of year-over-year margin expansion. CES operating profit is expected to be within $6.6 billion to $6.8 billion. Internal shop visit growth is projected to decrease but will be counterbalanced by higher spare part sales and work scope mix. DPT profits are predicted to be at the low end of a $1 billion to $1.3 billion range due to various factors. Corporate costs are expected to decrease, and the tax rate is projected to be around 20%. The company raised its EPS guidance to $4.20-$4.35 and free cash flow to $5.6 billion-$5.8 billion due to improved profit and lower taxes. GE Aerospace is noted to have a solid year, reinforced by sustainable competitive advantages across different sectors, and has returned over $4 billion to shareholders so far.

The paragraph discusses GE Aerospace's focus on delivering industry-leading services and technology with an emphasis on safety, quality, delivery, and cost. They aim to provide greater efficiency, reliability, and quicker turnaround for customers while innovating for a sustainable future. Their strategy, FLIGHT DECK, aligns their goals with outcomes, benefiting customers and shareholders. Looking ahead, GE Aerospace anticipates significant profit and free cash flow growth in 2025 and plans to return around $25 billion to shareholders. The Q&A section follows, with David Strauss from Barclays asking CEO Lawrence Culp about the 2025 profit outlook, given the increased 2024 EBIT guidance, to which Culp responds that they are currently updating their plans.

The paragraph discusses the company's budget preparation process for 2025, highlighting a significant increase in their starting budget compared to March. It outlines strong future prospects for commercial services, driven by a substantial backlog of shop visits and price increases, with positive trends in the CFM56 and GE90 engines. Although equipment growth will be slower in 2024, it is expected to pick up in 2025, including higher 9X shipments, which may affect margins but are essential for long-term growth. Furthermore, the company's DPT (Direct Product Transaction) side shows strong book-to-bill ratios and a robust backlog entering 2025, anticipating profit growth outpacing margins. Additionally, the corporate side has achieved significant cost reductions of 25% to 30%.

The paragraph discusses the challenges and strategies related to the production of LEAP engines amid various constraints. Lawrence Culp mentions that despite supply chain issues, a Boeing strike, and the transition to new HPT blades, there is strong demand and an extensive backlog for the engines. The focus is on managing production in collaboration with Airbus and Boeing, especially as Airbus aims to increase production rates and Boeing resolves its work stoppage. The goal is to meet growing demand while supporting airlines and airframers with reliable engine supply and service.

The paragraph discusses the company's performance and expectations regarding its work with suppliers and the production of new engines. They observed an 18% sequential growth in the third quarter, which was driven by improved collaboration and problem-solving with critical suppliers. While new LEAP engine deliveries are expected to decrease year-over-year, the company is optimistic about growth in 2025, partly due to a new, more durable, and easier-to-manufacture HPT blade. They are focused on unlocking capacity and addressing their significant backlog to support airframers and airlines in the coming years.

In the paragraph, Robert Stallard asks about the implications of Boeing's 777X program delay on GE Aerospace. Lawrence Culp responds by stating that, operationally, there is no change for GE Aerospace as they continue to test and prepare for production, and there is strong customer interest in the aircraft. Rahul Ghai discusses the financial perspective, mentioning that some engine deliveries to Boeing have occurred, and more will follow. GE Aerospace is working with Boeing to determine future engine needs and plans to reduce costs significantly. They aim for the program to become profitable by 2030.

In the paragraph, Myles Walton inquires about potential customer concessions or penalties related to GE's delivery delays in both the commercial and military sectors, affecting financial performance despite worsening deliveries. Rahul Ghai responds, stating that GE is managing these issues within their financial guidance and that any necessary accruals are accounted for. He notes that penalties have not been substantial so far in 2024, and the company is working to improve delivery performance amidst supply chain challenges. GE's deliveries have improved sequentially from the third to the fourth quarter. Sheila Kahyaoglu then asks about GE's Defense and Power Technologies (DPT), noting strong orders and backlog but weakness in profitability, partly due to combat engine issues and broader pressures in propulsion and additive. She queries about the expected decline in Q4 margins into 2025, indicating concerns over ongoing margin pressures.

In the paragraph, Rahul Ghai discusses the primary pressure points for the fourth quarter, highlighting the significant investment in R&D to support next-gen programs as the biggest driver. Despite budget uncertainties, the company continues to invest to meet customer timelines. There's also some pressure from product mix in Avio Aero affecting propulsion and additive technologies. Looking forward to 2025, the backlog is strong, supporting expected growth and profit margins. Ronald Epstein from Bank of America asks about shop visits, noting LEAP was up, while others were down. Lawrence Culp attributes this to widespread supply chain challenges affecting all programs, not just LEAP.

The paragraph discusses efforts to improve flight deck operations by increasing efficiency and consistency in the supply chain, with over 550 engineers collaborating with suppliers. While there have been delays due to inconsistent flow, progress is evident in new engine deliveries and spare parts growth, although internal shop visits have decreased. The company is optimistic about future performance and financial guidance due to momentum with suppliers. Emphasis is placed on meeting customer demands, with a focus on balancing supply needs to minimize turnaround times for airline customers.

In the paragraph, the company reports that spare part sales were higher in the third quarter, although shopper numbers remained steady year-over-year. Moving into the fourth quarter, there is a significant backlog of shop visits that need to be addressed, with over 80% of projected spare part sales already in the backlog. The company feels confident in maintaining its services growth outlook for the year due to strong performance in spare parts and shop visits, as well as third-quarter price increases. In response to a question from Seth Seifman of JPMorgan, Rahul Ghai acknowledges that next year's engine delivery output might be lower than expected in March, potentially reducing engine losses. Additionally, improvements in LEAP engine aftermarket profitability are anticipated.

The paragraph discusses various dynamics affecting a company's engine business, highlighting positive developments with their LEAP engines and spare part sales. The LEAP engines are expected to reach CFM56 durability levels by 2025, leading to increased growth in spare parts sales, especially through external third-party networks. This is seen as a profitable venture and will be factored into future guidance. Additionally, there's mention of a delay in the 9X engine's entry into service, causing slower ramping of deliveries. Despite this, CFM56 engine utilization is expected to remain high, which is beneficial for the company.

In the paragraph, Scott Deuschle asks Lawrence Culp if CES has received a large number of new HPT blades for the LEAP 1A and whether their certification will boost LEAP output in the fourth quarter. Culp explains that the new blade is already in production and will be delivered once certified, emphasizing that it aids production efficiency and safety but isn't the sole factor for increased output. He highlights that most fourth-quarter deliveries will rely on existing designs, and achieving improvements involves multiple factors. The certification of the new blade supports these efforts. Subsequently, Gautam Khanna asks about expectations for CFM shop visits over the coming years.

In the paragraph, Rahul Ghai discusses the forecast for shop visits and revenue growth related to aircraft engines. Initially, shop visits were expected to peak in 2025 and decline in 2026-2027. However, they now anticipate the peak to extend until 2027 before gradually declining. Revenue growth is expected to continue due to second and third shop visits and price increases. For GE90 engines, 75% have not yet undergone a second shop visit, contributing to revenue growth in 2024 and beyond. On the NX side, shop visit volumes are expected to remain flat for the next three to four years due to improved time on wing, shifting visits from 2025-2028 to 2028-2031. This is considered positive, as the company services over 60% of this portfolio under long-term contracts, enhancing program profitability.

In the conversation between Ken Herbert and Lawrence Culp, they discuss the growth and future plans for increasing material output at priority sites. Culp acknowledges the 18% sequential growth but stresses the need for more improvement due to high demand in the aftermarket and new production. The strategy involves close collaboration with suppliers and applying the "FLIGHT DECK" approach to identify and resolve constraints, enhancing capacity and preparing for future needs, particularly through 2030. Additionally, Culp mentions a $1 billion investment planned over the next five years in the MRO network to further improve deliveries and meet customer demand, alongside developing a third-party network.

In the article paragraph, Rahul Ghai addresses questions from Noah Poponak regarding financial projections and headwinds related to the 777X 9x aircraft. Ghai explains that the transition from the third to the fourth quarter in CES will see strong services and original equipment (OE) growth, but also some margin pressure due to 9X shipments and increased R&D spending. He confirms a specific headwind associated with the 777X 9x in the 2025 financial projections, as previously mentioned. Overall, the company anticipates resolving issues to improve capacity and customer service.

In Paragraph 23, the speakers discuss the challenges and timeline related to a specific program at GE Aerospace involving engine deliveries and associated costs. They cannot yet quantify certain volume assumptions for 2025 with Boeing, expecting further analysis in January. The projected financial losses for the program are anticipated to peak later in the decade, with profitability expected by 2030. Lawrence Culp ends by expressing confidence in GE Aerospace's innovation and commitment to sustainable aviation, thanking the participants for their interest.

This summary was generated with AI and may contain some inaccuracies.