GE Aerospace’s latest earnings release reignited a familiar debate among investors: does a high-quality industrial franchise remain attractive when its valuation already reflects much of the good news? Following the company’s fourth-quarter report on January 22, shares pulled back more than 7%, even as underlying results showed robust growth. The reaction highlights the tension between near-term expectations and long-term fundamentals at a time when aerospace demand remains structurally strong.

Commercial Strength Meets Cautious Guidance

In the fourth quarter, GE Aerospace posted a 24% year-on-year increase in commercial revenue to $9.5 billion, supported by a healthy 24% operating margin. Defense revenue also advanced 13% to $2.8 billion, reinforcing diversification across end markets. Despite these solid figures, management’s outlook for mid-teens commercial engine revenue growth in 2026 came in slightly below what some investors had priced in, triggering the post-earnings selloff.

From a strategic standpoint, the caution appears more about calibration than deterioration. Airlines globally continue to face delivery delays for newer aircraft models, extending the operational life of existing fleets. This dynamic directly benefits GE Aerospace’s aftermarket business, where servicing older engines generates high incremental margins and recurring cash flows.

Aftermarket Economics Drive Long-Term Value

The core of GE Aerospace’s investment case lies in its dominant aftermarket position. With engines powering roughly three-quarters of global commercial flights, the company benefits from a massive installed base that typically remains in service for more than two decades. As aircraft continue flying longer than initially planned, demand for maintenance, repair, and overhaul services rises, often at margins well above those of original equipment manufacturing.

Over the next decade, the company is expected to generate around 6% annual growth in aftermarket revenue, accompanied by margin expansion that could lift overall operating margins beyond 27%. Manufacturing growth, driven by newer engine platforms, is forecast to compound at a faster pace, but it is the stability and profitability of services that anchor valuation resilience.

Valuation: Quality Recognized, But Not Cheap

Following recent updates, fair value estimates for GE Aerospace stand near $293 per share, placing the stock close to intrinsic value based on long-term cash flow assumptions. At roughly 24 times projected 2026 EBITDA, the valuation reflects both the firm’s wide economic moat and its ability to compound earnings through cycles.

This pricing suggests limited room for multiple expansion in the absence of upside surprises. Instead, shareholder returns are likely to be driven by steady earnings growth, rising dividends, and ongoing share repurchases. For long-term investors, the appeal lies less in a near-term re-rating and more in the durability of returns from a business that consistently earns above its cost of capital.

Looking Ahead

The key variable for GE Aerospace is execution. Sustained shop visit volumes, efficiency gains, and disciplined capital allocation could steadily lift intrinsic value over time. Risks remain tied to aircraft delivery schedules, defense spending cycles, and broader macro conditions, but the company’s competitive position provides a meaningful buffer. For investors, the stock appears fairly valued today, with future gains dependent on patience and the continued strength of global air travel.