By Rajesh Kumar Singh and Shivansh Tiwary
Oct 20 (Reuters) - GE Aerospace on Tuesday raised its 2026 profit forecast for the second time this year, as demand for aircraft engine repairs and spare parts remained strong despite surging fuel costs that have squeezed airline profits.
But the company's updated outlook implied weaker-than-expected fourth-quarter earnings, while the US engine maker said it expects additional costs next year from ramping up production of engines for Boeing's delayed 777X aircraft.
Airlines worldwide are cutting costs and capacity after the Iran war disrupted oil shipping routes, driving up jet fuel costs and adding to pressure on the industry.
The cuts pose a risk to engine makers, as fewer flights could eventually mean less demand for repairs and spare parts. But airlines are holding on to their aircraft, while a backlog of engines awaiting repairs is helping sustain maintenance demand.
GE Aerospace now expects adjusted earnings of $8.00 to $8.10 per share in 2026, up from its previous forecast of $7.65 to $7.85 and above analysts' consensus estimate of $7.92, according to data compiled by LSEG.
The outlook, however, implies fourth-quarter adjusted earnings of roughly $1.87 to $1.97 per share, below the LSEG consensus estimate of $2.04, according to Reuters calculations.
Analysts at TD Cowen said the revised full-year guidance implied fourth-quarter earnings per share and operating profit about 6% and 5% below Wall Street expectations, respectively, despite stronger-than-expected orders.
The company's shares fell about 4% in early trading on Tuesday.
Revenue at GE Aerospace's commercial engines and services business rose 21% to $10.34 billion in the third quarter. Within that business, services revenue climbed 17%, with spare-parts revenue growing more than 20%.
The company said that prolonged high fuel prices could lead airlines to reduce flying, weakening demand for engine repairs, spare parts and spare engines. The company said the Middle East conflict had not materially affected its operations through September.
BOEING ENGINE DELIVERIES
GE Aerospace finance chief Rahul Ghai said the company delivered more than 50 GEnx engines to Boeing in the third quarter, with shipments increasing each month as the planemaker works toward producing 10 787 Dreamliners a month.
Boeing Chief Executive Kelly Ortberg said in September that engine deliveries had not yet improved enough to support the higher production rate and that the company was working with GE on a recovery plan.
Ghai said GE Aerospace's engine shipments outpaced Boeing's aircraft deliveries in recent months, allowing the planemaker to build up its engine inventory. Ghai said the company still needs to sustain the higher delivery rates to support Boeing's production increase.
Separately, GE Aerospace has been delivering GE9X engines fitted with an upgraded midseal to Boeing for its delayed 777X aircraft since August and is targeting FAA certification of the upgrade by the end of 2026. GE Aerospace expects increased GE9X deliveries to create an additional $300 million profit headwind in 2027 compared with this year.
REPAIR BACKLOG OFFERS CUSHION
GE Chief Executive Larry Culp said the number of parked aircraft and retirements declined in the third quarter despite higher fuel costs. Engines awaiting entry into GE Aerospace's repair shops had increased 20% since the start of the year, while engine removal rates remained steady.
The company expects flight departures to grow in 2027 after rising about 1% in the third quarter. More flights mean greater wear on engines, eventually generating demand for repairs and spare parts. The company expects commercial services revenue to grow at a low-double-digit pace in 2027, supported by a backlog exceeding $170 billion. It reported adjusted earnings of $2.25 per share for the September quarter, beating Wall Street expectations of $2.01.
(Reporting by Rajesh Kumar Singh in Chicago and Shivansh Tiwary in Bengaluru; Editing by Anil D'Silva and Louise Heavens)
