GE Aerospace's Engine Orders Just Rewrote the Capital Allocation Playbook

The old General Electric — the sprawling conglomerate that touched everything from lightbulbs to financial services — is gone. What remains is GE Aerospace, a pure-play jet engine and aviation services company spun out in April 2024. The separation unlocked a business with characteristics that the conglomerate structure had been masking for decades.

GE Aerospace operates in a duopoly with Rolls-Royce for wide-body engines and with the CFM joint venture (with Safran) dominating narrow-body. These are 20-30 year product cycles with massive aftermarket revenue streams. Once an engine goes on a wing, the operator is locked into GE's parts and service network for the life of the aircraft.

We've tracked GE through the breakup process, and the transformation has been nothing short of remarkable. Management has gone from apologising for industrial conglomerate complexity to deploying capital with the precision of a focused aerospace pure-play.

Engine sales are important, but the aftermarket is where the real value creation happens. Every LEAP engine sold generates an estimated $15-20 million in lifetime aftermarket revenue — spare parts, maintenance, and overhauls spread over 25+ years. The installed base of GE and CFM engines now exceeds 44,000 units globally.

As the post-COVID fleet returns to full utilisation and the pre-pandemic engines hit their first major overhaul windows, aftermarket revenue is inflecting. Shop visits were up 18% in the latest quarter, and management expects continued double-digit growth through 2028.

The margin profile of aftermarket revenue is staggering. Spare parts carry 50-60% gross margins versus 15-20% for new engine sales. As the revenue mix shifts toward aftermarket, GE Aerospace's overall margins expand mechanically without any operational improvement needed.

Management repurchased $6.9 billion in shares in 2025, funded entirely by operating cash flow. That is capital allocation competence. The company didn't touch the balance sheet, didn't cut the dividend, and still invested $2.3 billion in R&D. When a company can fund growth investment, shareholder returns, and debt reduction simultaneously, it tells you the cash flow engine is operating at a different level.

GE Aerospace trades at approximately 38x forward earnings and 13x EV/revenue. On an absolute basis, that's expensive. Relative to the quality of the cash flow stream — recurring, high-margin, 20-year visibility — it's reasonable.

The closest comparable is Rolls-Royce, which trades at 28x forward earnings but has lower margins and a weaker aftermarket position. RTX's Pratt & Whitney division, dealing with the powder metal recall, trades at a discount for good reason. Safran, GE's CFM partner, trades at 32x.

At $216 billion market cap and a target consensus of $228, the street sees limited near-term upside. We think the aftermarket compounding effect is being underestimated. By 2028, as the LEAP fleet hits its first major maintenance cycle, GE Aerospace could be generating $10+ billion in annual FCF. At a 25x FCF multiple, that implies a $250 billion+ valuation.