While 2024 proved challenging for aircraft OEMs, engine OEMs enjoyed a standout year. In the final quarter, Boeing (BA US) faced a seven-week strike at its West Coast facilities, crippling B737-MAX production and requiring potentially up to six months of recovery to pre-strike output levels. Meanwhile, Airbus (AIR FP) grappled with its own supply chain setbacks—specifically engine and cabin component shortages—which caused the airframer to narrowly miss its revised 2024 delivery target of 770 aircraft. As a result, combined passenger aircraft deliveries from Airbus and Boeing are projected to decline by 10% in 2024. Although engine OEMs also faced delivery shortfalls due to supply chain disruptions, they performed notably better, buoyed by strong aftermarket demand with an increase in aircraft utilisation by airlines pushing their mature fleets harder.
3Q24 marked another strong quarter for engine OEMs but was a slightly underwhelming one for airframers. GE Aerospace (GE US) and RTX (RTX US) posted solid results, driven by robust aftermarket momentum and positive revenue that boosted margins. This led both companies to raise their FY24 adjusted EPS guidance by 4.9% and 2.6% respectively, marking the third consecutive quarter that they have raised guidance. While Airbus's adjusted EPS beat expectations by 16%, the airframer struck a cautious tone regarding supply chain pressures, maintaining its 2024 guidance, and tempering market expectations for delivery growth. Meanwhile, Boeing faced a challenging quarter due to work stoppages, posting negative free cash flow of USD2.0bn, with its defence segment continuing to suffer from cost overruns in several fixed-price development programmes.
2025 could herald a shift in the aerospace sector, with aircraft OEMs poised to outpace engine OEMs. Although we remain positive on the overall sector, we believe engine OEMs, after a stellar run, will take a step back in 2025, allowing aircraft OEMs to take centre stage as supply chain conditions progressively stabilise, enabling meaningful production increases. Boeing’s production lines are now fully operational, and we are optimistic that its quality enhancements, corrective measures, and stronger balance sheet (following its equity fundraising) will drive an earnings inflection (deliveries +35–40% y/y) from 2025. Similarly, we expect Airbus’s earnings to surge alongside an estimated 10.0% increase in deliveries in 2025, compared to approximately 4% in 2024, supported by a projected 15– 20% boost in engine output from RTX and GE Aerospace/Safran. While sector fundamentals remain favourable in the aftermarket, we believe moderating earnings growth momentum could cause engine OEMs to underperform compared to their counterparts.
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