Summary
Morgan Stanley has initiated coverage of GE Aerospace with an Overweight rating and a $425 price target, arguing that the market understates the company’s long-term free cash flow potential and its ability to sustain pricing power in the aftermarket. The jet engine manufacturer’s shares gained 1.5% during Friday premarket trading.
Analyst case and valuation framework
The $425 price target that Morgan Stanley attached to GE Aerospace is anchored on an estimated 2028 free cash flow per share of $10.85, valued at roughly a 39-times multiple. In addition to the base case, Morgan Stanley laid out a bull scenario with a $615 target and a bear scenario of $230, which the bank characterizes as indicating a favorable risk-reward profile.
The bank also highlighted that GE Aerospace currently trades at about a 30% discount to leading commercial aerospace peers on a 2028 price-to-free-cash-flow basis, a gap Morgan Stanley says leaves room for multiple expansion if earnings and cash flow expectations rise.
Free cash flow and model outlook
Morgan Stanley’s free cash flow projections for GE Aerospace are as follows: $9.8 billion in 2027, $11.0 billion in 2028, $12.2 billion in 2029 and $13.5 billion in 2030. Those forecasts run approximately 8% to 14% above consensus in the 2027-2030 period, and cumulative free cash flow for 2028 through 2030 is about 12.5% higher than consensus.
The bank attributes its more optimistic numbers to services growth, a rising installed base, increasing engine shop visits and continued strength in aftermarket pricing. Morgan Stanley also expects further upward revisions to earnings and cash flow estimates, noting that consensus forecasts for 2027 and 2028 free cash flow have already been moving higher.
Balance sheet and capital deployment
Morgan Stanley projects GE Aerospace’s net debt to EBITDA will be about 0.7-times in 2027, a level the bank describes as offering flexibility for capital deployment.
Context on product economics
Analysts at Morgan Stanley emphasized that aircraft engines are mission-critical products with high barriers to entry. That economic characteristic, the bank argues, has supported sustained pricing power and growth above trend, particularly in aftermarket services.
Market reaction
Following the coverage initiation and the publication of the bank’s forecasts, shares of GE Aerospace increased 1.5% in Friday premarket trading.
Note on limitations
The article reflects Morgan Stanley’s published forecasts, valuation framework, and market reaction at the time of initiation of coverage. It does not include additional third-party analysis or external data beyond what the bank disclosed.