GE Aerospace Secures Saudia 787 Engine Deal, Bolstering Backlog Amid Persistent Risks

What happened

Saudia Group has selected GE Aerospace's GEnx-1B engines to power 39 new Boeing 787 Dreamliners, including a multi-year maintenance, repair, and overhaul program and spare engines. This agreement aligns with GE's strategy of leveraging its large installed base and ~70% services revenue mix, as highlighted in recent SEC filings. However, the company continues to face significant execution risks, such as supply chain disruptions and delays in the 777-9 widebody program, now pushed to at least 2027. GE's valuation remains elevated with a P/E of approximately 40 and EV/EBITDA around 83, indicating limited downside protection. While this order reinforces demand, it does not address the core challenges of the LEAP ramp and external policy uncertainties.

Implication

Investors should see the Saudia order as a positive yet incremental boost to GE's $176 billion backlog, primarily services-driven. It underscores the company's aftermarket strength but does not mitigate key headwinds like supply chain bottlenecks and widebody program delays. The stretched valuation multiples suggest limited margin of safety, requiring sustained execution improvements for upside. Monitoring LEAP delivery cadence and OEM production rates remains critical, as misses could pressure the stock. Overall, this news supports the existing HOLD thesis, emphasizing caution amid ongoing risks.

Thesis delta

The Saudia order for GEnx engines provides minor support to GE's widebody segment but does not materially shift the investment thesis. Core issues—such as the LEAP ramp execution, supply chain normalization, and valuation concerns—remain unchanged. Thus, no alteration to the HOLD rating is justified.