GE Aerospace shares slipped 2.1% by 11 a.m. ET Tuesday despite beating third-quarter estimates, with earnings of $2.25 per share versus a $2 forecast and sales near $13.3 billion versus $12.85 billion expected. GAAP revenue rose 16% to $14.1 billion, driven mainly by engine sales to commercial carriers, with commercial sales up 21% and defense up 7%. Profit margin fell 80 basis points to 19.9% and free cash flow declined to $2 billion, but total orders rose 49% to $19 billion. Management raised its full-year outlook to revenue growth of at least 19%, operating profit of perhaps $11 billion, adjusted EPS of about $8.05, and free cash flow of at least $9.1 billion. The author argues that the stock's price of more than 36x free cash flow, against an 18% growth rate, sits at the upper edge of a fair price, which could explain the decline after the beat.
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