(Bloomberg) -- General Electric Co.’s sales fell short of Wall Street’s expectations last quarter, tempering enthusiasm for its improved profit outlook as the jet engine maker grapples with supply-chain limitations that are weighing on deliveries.
The manufacturer, known as GE Aerospace, reported adjusted revenue of $8.94 billion in the third quarter, according to a statement Tuesday. That compares with the $9 billion average of analyst estimates compiled by Bloomberg. Adjusted earnings of $1.15 a share narrowly topped expectations.
GE Aerospace also boosted its profit and free cash flow guidance for the full year, while keeping the sales outlook unchanged.
The revenue constraints highlight the challenges the company continues to endure in an industry beset by supply-chain woes and persistent issues at planemaker Boeing Co. GE Aerospace recently had a shortfall in Leap engine deliveries to Airbus SE due a lack of high-pressure turbine blades.
“Growth eased in both Commercial and Defense,” Robert Stallard, an analyst with Vertical Research Partners, said in a note. The company’s performance was generally good, he said, but it may still disappoint investors because “expectations for the quarter were pretty high.”
GE Aerospace shares fell 6.2% after trading opened in New York, the biggest intraday decline in seven weeks. The stock had surged 91% this year through Monday’s close, far outpacing the 23% gain in the S&P 500 Index.
The company is trying to show how it can stand on its own in its first months as an independent — and more narrowly focused — business. Chief Executive Officer Larry Culp in April spun off GE’s former energy-related businesses, completing a long-planned breakup of the storied conglomerate.
Culp said in an interview Tuesday that he was pleased with the performance despite the reaction to last quarter’s results. “We are in the midst of a heck of a year,” he said.
GE Aerospace now anticipates adjusted earnings of as much as $4.35 a share this year, up from a prior forecast of no more than $4.20. Its free cash flow guidance was also raised.
The commercial engines and services business continued its steady performance last quarter. Orders were up 29% over the same period in 2023, while services grew 10% on the back of higher spare parts sales, increasing shop visits and improved pricing, the company said.
Results in the defense and propulsion operations were mixed, with revenue up 2%. Profit was down 18% to $220 million, hurt in part by inflation.
“This is a business that maybe won’t grow as rapidly as the commercial businesses,” Culp said. Still, “we’re quite bullish on our defense business given the state of the world and given our competitive position.”
GE Aerospace’s recent supplier challenges stem in part from struggles by smaller manufacturers to replace skilled laborers that retired or quit during the pandemic. The company cut its output increase for the Leap to 5% in July.
The shortfall may extend the service life of its predecessor engine, the CFM56. That stands to provide a boost to the company’s maintenance business.
In August, GE Aerospace finalized an agreement with the Polish Ministry of National Defense for the expected purchase of 96 Boeing helicopters powered by GE Aerospace’s T700 engines.
GE Aerospace has continued a plan to exit certain assets and resolve lingering issues with its legacy business lines. The company recorded a pretax gain of $341 million as it completed the sale of its licensing business to Dolby Laboratories. It also reported a pretax charge of $328 million related to an agreement in principle to settle a legacy shareholder lawsuit.
(Updates to add analyst comment in fifth paragraph.)
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