GE Aerospace delivered $3B free cash flow in Q2, up 43% YoY, as Larry Culp's restructuring gains traction. Morningstar raised its fair value to $347.
Larry Culp's overhaul of General Electric is producing the kind of cash-flow results that analysts at Morningstar now call undervalued. GE Aerospace, the jet-engine giant that emerged from the conglomerate's three-way split, reported $3 billion in free cash flow for the second quarter of 2026, up 43% from a year earlier. The gain came from higher earnings and a reduction in working capital, the company said.
Adjusted earnings per share of $2.02 beat the consensus estimate of $1.86, according to FactSet data cited by Fortune. Adjusted revenue rose 24% year-over-year to $12.63 billion, also topping forecasts of about $11.86 billion. That marked the fifth straight quarter of at least 20% revenue growth.
Morningstar raised its fair value estimate for GE Aerospace to $347 a share from $307, citing stronger profit growth in the aftermarket business. Analyst Nicolas Owens said the company's market position and disciplined execution support its long-term outlook, even in an uncertain environment. The stock now trades near that estimate, he noted.
The Q2 print is the clearest evidence yet that the turnaround Culp began in 2018 is paying off for shareholders. When he took over, GE's market cap had collapsed to about $96 billion, down more than 80% from its 2000 peak. The company carried roughly $150 billion in debt and chronically underperformed on cash flow, according to a Fortune feature by Shawn Tully.
Culp's first moves focused on deleveraging and simplification. He cut central overhead and dismantled the headquarters structure that had ballooned under previous management. That groundwork enabled the breakup into GE HealthCare, GE Vernova, and GE Aerospace across 2023 and 2024.
The three public companies now have a combined equity value approaching $700 billion, roughly double the annualized return of the S&P 500 over Culp's tenure, Tully wrote. The operating engine behind that outcome is a lean-management system heavily influenced by the Toyota Production System and Culp's own experience at Danaher.
For investors, the most compelling cash-flow story sits at GE Aerospace. Culp has led the company since it became a separate entity in 2022. The aftermarket business, which includes spare parts and services for the installed base of jet engines, is the primary earnings driver. Morningstar expects the company to keep increasing its dividend and repurchasing shares.
The turnaround is not just about the numbers. It's about the process, Culp told Fortune. When you combine balance-sheet repair, lean operations, and disciplined capital allocation, even a struggling company can become a steady growth story.
On the GE stock page, AlphaScala gives GE a score of 61 out of 100, a Moderate rating in the Industrials sector.
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