GENERAL ELECTRIC CO (GE) stock intrinsic value fair value estimate & owner earnings analysis

GE Aerospace is what remains of General Electric after the spin-offs of GE HealthCare (January 2023) and GE Vernova (April 2024). It designs, builds and, above all, services jet engines: the LEAP (through CFM International, its 50/50 venture with Safran) on the Airbus A320neo and Boeing 737 MAX, the older CFM56 that powers most of today's narrowbody fleet, the GEnx and GE9X on widebodies, plus military engines and avionics. The economics are razor-and-blade: engines are sold at thin or negative margins and earn decades of high-margin spare parts and overhaul work. 2025 revenue was $45.9 billion, about 40% in the United States and the rest spread across Asia ($10.8 billion), Europe (about $8.6 billion), the Middle East and Africa ($4.6 billion) and the rest of the Americas ($3.7 billion). How we measured earnings. We start from operating cash flow of the continuing aerospace business, strip out working-capital timing swings, subtract stock compensation as a real cost, and subtract the capital spending needed to maintain the business (spending tied to revenue growth is treated as investment). Before interest, the business produced about $4.4 billion of cash in 2023, $6.3 billion in 2024 and $8.5 billion in 2025 ($7.94 per diluted share). Earlier years are not used: they belong to the old conglomerate, and 2022-2023 were still pandemic-recovery years. 2024 also carried separation costs from the Vernova spin. Our starting point is the 2025 level, the first full year as a standalone company, and the first half of 2026 supports it: continuing operating cash flow rose to $5.1 billion from $3.9 billion a year earlier, and revenue rose 23%. We do not count GE's roughly $0.8 billion a year of non-cash pension accounting income, because our measure is built from cash. Growth we credit, and why. The contracted order book (remaining performance obligations) stood at $210.8 billion at June 30, 2026, up from $190.6 billion six months earlier, most of it long-term service agreements on engines already flying. GE delivered 1,802 LEAP engines in 2025 (1,407 in 2024), and every one of them adds future shop visits; internal shop-visit revenue grew 27%, 19% and 24% in 2023-2025. That installed-base and contracted-services growth is what we credit. We do not credit new engine programs not yet flying (such as the open-fan RISE concept), further price increases beyond what is contracted, or margin gains on LEAP services. In 2025 cash flow per share grew about 39%; our base case assumes 15% for 2026, below that pace. Base case ($166 per share). Cash flow grows 15% in 2026, 8% a year in 2027-2028 as LEAP shop visits climb, then an ordinary aviation downturn costs 10% in 2029 (the industry has had one roughly every decade: 2001-03, 2008-09, 2020) before recovering, with 4% growth in 2032-2035 as LEAP deliveries from the backlog offset the slow retirement of CFM56 engines. Engines in service run 25-30 years and GE has won a leading position on each new generation of jet engines for decades, so we hold the 2035 level of about $14 billion flat for twenty years and then fade it to zero over ten. That business is worth about $185 billion at a 6% discount rate. GE owes $19.2 billion of borrowings at June 30, 2026, but most of it is long-dated senior notes at about 4.0% (maturities spread from 2027 to 2050), which is worth roughly $2.5 billion less than its face value to a 6% investor; against that it holds $9.3 billion of cash, of which we treat about $6.3 billion as surplus. Net debt is about $10.3 billion, leaving about $174 billion for shareholders, or $166 per share on 1,050 million diluted shares. Bear case ($92 per share). A sharp air-travel downturn in 2027-2028 cuts cash flow 20% and then a further 10% as airlines defer overhauls and spare-parts demand normalizes, recovery takes two years, and growth is only 2% a year thereafter. The run-off long-term-care insurance and the Bank BPH mortgage litigation in Poland, both described in the annual report as able to require further capital, absorb $5 billion over 2027-2029 (a reserve shortfall in 2018 cost GE about $15 billion of contributions over seven years). The later years are held flat for fifteen years and faded over ten. The business is worth about $107 billion, owes the same $10.3 billion net, leaving about $96 billion. Even at the trough, cash flow covers the roughly $0.9 billion annual interest bill about seven times, so the debt does not threaten shareholders in this case. Bull case ($256 per share). 2026 grows 25% (close to the first-half pace), the LEAP shop-visit wave and the services backlog deliver 11% a year through 2030 and 6% through 2035 with no serious downturn, and the 2035 level of about $21.5 billion holds for twenty-five years before fading. The business is worth about $279 billion; after $10.3 billion of net debt, about $269 billion is left for shareholders. Changes since our previous estimate. Our earlier estimate was $36 / $130 / $177. We now value every business with the same fixed 6% required return and no assumed perpetual growth, rather than a higher, risk-loaded rate; risk is carried in the cases instead, which is why the base case now includes a downturn and the bear case a larger insurance call. We no longer subtract the pension deficit, because current pension payments already come out of the cash flow we measure, and we credit the low fixed coupons on GE's long-dated bonds. New evidence also helped: the first half of 2026 ran well ahead of 2025 and the order book grew by $20 billion in six months. What would make this estimate wrong: a pandemic-scale collapse in flying (2020 cut the aviation unit's profit by roughly 80%), a durability problem on LEAP that forces costly fixes across the fleet, or a much larger insurance reserve shortfall. We could not reconcile the 2026 first-half working-capital detail from the quarterly filing, so the 2026 growth assumptions rest on reported operating cash flow and revenue.