Major business jet makers post strong earnings with stable backlogs - Is it time to consider the 2024 aircraft market?

As we are now in the final quarter of 2023, we can start to look toward the coming year when it comes to what the aircraft sales market might look like. Since the pandemic, the market for preowned business aircraft has seen plane prices soar as the number of available jets and turboprops shrank. One of the key drivers has been the lack of new planes entering into service, due to the lack of availability of everything from microchips to raw materials. That chain has gotten a bit stronger as the global workforce has returned to business. However, bumps in the road remain and new issues in finance and geopolitics have risen. In the past week, we have gotten earnings reports and production updates from some of the top aircraft makers. Here is what they show and what it might mean for the fourth quarter and beyond. Earnings from Textron Looking at the numbers shared with Wall Street in recent days, we can conclude that the strong book-to-bill ratios among the major plane manufacturers are not going anywhere, even with new models coming online. Textron reported strong earnings and raised its outlook considerably. Its earnings per share rose 30% from a year ago in the third quarter, finishing at an adjusted $1.49. The full-year EPS outlook was bumped from $5.45 to $5.55. Its stock jumped nearly 4.2% on the news, but much of that had been wiped out by Friday afternoon. "At Aviation, we saw our strongest order quarter of the year with a 12% increase over the third quarter of 2022," Textron Chairman and CEO Scott C. Donnelly said in a statement announcing the numbers.RELATED STORY: Cessna Citation CJ3 Gen2 announced at NBAA-BACE, Textron names first customer For Textron's aviation sector, which includes a handful of well-known brands and models, including the Cessna Citation series, revenues were $1.3 billion, up $171 million from last year's third quarter, reflecting higher volume and mix of $89 million and higher pricing of $82 million. The company delivered 39 jets in the quarter, flat with last year, and 38 turboprops, up from 33 in last year's third quarter. Segment profit was $160 million in the third quarter, up $29 million from a year ago, with the company attributing it to favorable pricing and inflation offset by supply chain and "labor inefficiencies." Textron's aviation backlog at the end of the third quarter was worth $7.4 billion. Earnings from General Dynamics The parent company of the Gulfstream line of private jets, General Dynamics reported on Wednesday third-quarter 2023 net earnings of $836 million on revenue of $10.6 billion, for a diluted earnings per share of $3.04. On the aviation side of the defense behemoth, its aerospace division booked $2.9 billion in new orders during the quarter, growing its backlog north of the $20 billion mark. Its book-to-bill for the third quarter was 1.4x, and its backlog has grown by 72% since the end of 2020. Aircraft makers are also finding success in the services sector, where Gulfstream's revenue was up 7.7% year to year for the third quarter. The aerospace sector for General Dynamics actually declined in earnings year to year, making a profit of $268 million, down from $312 million in 2022, a 14.1% drop, according to its third-quarter report. However, its operating margin for the aerospace sector was effectively the same, at 13.2% compared to 13.3% last year. As Alasdair Whyte of Corporate Jet Investor noted this week, that book-to-bill number may have been higher than Gulfstream would have liked. "At the start of this year Gulfstream planned to hand over 145 aircraft," Whyte wrote. "In the first nine months of the year, it shipped 72. It now plans to deliver between 40 and 45 in-service aircraft in the next three months."RELATED STORIES: Deliveries dip in Q1 for Gulfstream - but the G700 looks to change that Rolls-Royce gains FAA approval for Pearl 700 engine used in Gulfstream G700, G800The big sticking point is the delay in FAA certification for the Gulfstream G700. General Dynamics Chair and CEO Phebe Novakovic had said in her remarks on the first-quarter earnings report earlier this year that they were targeting summer. In this week's call, according to Whyte, the company said it has 15 completed G700 aircraft "ready to be delivered as soon as the FAA certificates the aircraft." Novakovic had said six months ago that they expected those planes to begin being delivered in the third and fourth quarters. But now, nearing November and roughly a month since its engines were certified, the government has yet to give a green light. Embraer updates its backlog and deliveries In an update released late on Thursday, Brazilian aircraft maker Embraer reported that it achieved double-digit delivery growth for a second consecutive quarter, putting 43 jets in the hands of customers during the third quarter, a year-over-year gain of 30% when 33 planes were delivered. Of that, 28 jets were delivered from its executive aviation segment, 19 light and nine medium, a 22% increase. Through the first nine months of the year, Embraer delivered 105 aircraft, 39 commercial and 66 private jets, a 33% jump. Embraer's executive aircraft backlog is valued a $ 4.3 billion, with a book to bill 1.5x. The Phenom 300 series became the most-flown business jet in the United States, the company announced in August, surpassing 2 million flight hours.RELATED STORY: Embraer unveils Phenom 100EX, to debut at NBAA-BACE The aircraft maker also rolled out its Phenom 100EX during NBAA-BACE, which provides cabin and cockpit upgrades. Embraer services andamp; support backlog ballooned to $ 2.8 billion in the quarter, a company record. Also this month, came news of successful tests of the Phenom 300E and Praetor 600 on sustainable aviation fuel, with one engine running on 100% SAF. More signs to watch for in the aircraft sales market Canadian business jet manufacturer Bombardier will report its quarterly results on Nov. 2. France's Dassault Aviation reports twice yearly in even-numbered quarters. As far as reading tea leaves in what the news among the major airplane makers will mean for the preowned aircraft market, the stable backlogs and limits on production likely indicate that volume and pricing will remain around the same levels they have been for the past couple of quarters. What was sold and not built in 2023 will need to be delivered in 2024.RELATED STORIES:Analysis shows older jets feeling tightest pinch as business aircraft market shifts War, Recession andamp; the Aircraft Market - JETNET's latest assessment of the business aviation world Could 2023 produce the slowest market for preowned aircraft in a decade? A dive into the numbers shows the possibilityIncentives such as bonus depreciation could create a short-term run on inventory, as it usually does, near the end of the year. Also, one has to consider that if interest rates remain high and with Mid-East turmoil impacting energy markets, some might grow more cautious of short-term spending, which could leak into big-ticket items like jets, perhaps softening book-to-bill ratios slightly, potentially impacting the still-lofty price points of planes on the market, but that could also balance with its own, new supply-demand ripples. However, based on recent reports from JETNET and others, nobody is expecting any dramatic swings in one direction or another at least through the first quarter. However, as we have learned all too well in the past few years, all it takes is one news cycle to change everything.