GE Aerospace (NYSE:GE)

The provision for income taxes exhibits significant fluctuations over the five-year period. Initially, a substantial benefit was recognized, followed by a return to expense and subsequent increases. A detailed examination of the current and deferred components reveals the drivers behind these changes.

Current Income Tax Expense (Benefit)

A considerable benefit was recorded in 2021, amounting to US$277 million. This was followed by a dramatic shift to an expense of US$1,107 million in 2022, indicating a significant change in taxable income or applicable tax rates. The current expense remained positive and increased to US$540 million in 2023, then further to US$781 million in 2024, and reached US$1,308 million in 2025. This demonstrates a consistent upward trend in current tax expense over the latter three years of the period.

Deferred Income Tax Expense (Benefit)

The deferred tax component experienced even more pronounced volatility. A minor benefit of US$9 million was observed in 2021. In 2022, a substantial benefit of US$631 million was recorded, offsetting a portion of the current tax expense. However, this was followed by a significant shift to an expense of US$622 million in 2023. The deferred tax expense decreased to US$181 million in 2024 and further to US$97 million in 2025, suggesting a diminishing impact of temporary differences on the overall tax provision.

Total Provision for Income Taxes

The total provision for income taxes mirrored the combined effect of the current and deferred components. A benefit of US$286 million was recognized in 2021. This was followed by an expense of US$476 million in 2022, then a substantial expense of US$1,162 million in 2023. The total expense moderated slightly to US$962 million in 2024 and continued to increase to US$1,405 million in 2025. The overall trend indicates a move from a tax benefit position to a consistently increasing tax expense position over the analyzed period.

The large swings in both current and deferred tax components suggest potential changes in profitability, tax planning strategies, or alterations in applicable tax laws. The increasing trend in the total provision for income taxes from 2022 onwards likely correlates with improved financial performance and a reduced reliance on tax benefits.

The effective income tax rate exhibited considerable fluctuation over the five-year period. While the U.S. federal statutory income tax rate remained constant at 21.00%, the effective income tax rate demonstrated a non-linear pattern, beginning at 7.80% in 2021 and increasing to 14.10% in 2025.

Initial Period (2021-2022)

A substantial increase in the effective income tax rate is observed from 2021 to 2022, rising from 7.80% to 33.70%. This significant jump suggests a change in the composition of income, potentially including a reduced proportion of tax-advantaged income or the realization of previously unrealized losses.

Subsequent Period (2022-2025)

Following the peak in 2022, the effective income tax rate decreased to 11.40% in 2023 and continued to rise gradually to 12.60% in 2024 and 14.10% in 2025. This pattern indicates a stabilization, albeit at a level higher than the initial rate in 2021. The incremental increases from 2023 to 2025 could be attributed to shifts in the geographic distribution of earnings, changes in tax credits, or alterations in deferred tax asset valuations.

Discrepancy with Statutory Rate

Throughout the observed period, the effective income tax rate consistently differed from the U.S. federal statutory rate. The considerable variance in 2022, where the effective rate significantly exceeded the statutory rate, warrants further investigation into the underlying factors contributing to this difference. The convergence towards the statutory rate in later years suggests a lessening of these contributing factors.

The observed trends suggest that income tax expense is sensitive to factors beyond the standard corporate tax rate. Further analysis of the components of income before taxes, including geographic earnings mix, tax credits utilized, and deferred tax asset/liability balances, is recommended to fully understand the drivers of the effective income tax rate fluctuations.

The composition of deferred tax assets and liabilities exhibits notable shifts over the five-year period. Overall, a net deferred tax asset position is maintained, though its magnitude fluctuates. Significant changes are observed within the individual components contributing to both deferred tax assets and deferred tax liabilities.

Deferred Tax Assets - Key Components

Insurance company loss reserves consistently represent a substantial portion of deferred tax assets, increasing from US$1,700 million in 2021 to US$3,185 million in 2023 before decreasing to US$2,398 million in 2025. Progress collections, contract assets, and liabilities also contribute significantly, peaking at US$2,753 million in 2023 and declining to US$1,764 million in 2025. Accrued expenses and reserves demonstrate a consistent downward trend, decreasing from US$2,635 million in 2021 to US$1,278 million in 2025. Principal pension plans show a similar decreasing trend, falling from US$2,375 million to US$989 million over the period. Non-U.S. loss carryforwards increase from US$1,354 million in 2021 to US$2,133 million in 2025. Capital losses carryforward appear in 2024 and 2025, reaching US$881 million. A valuation allowance is introduced in 2024 and grows to US$3,338 million in 2025, significantly impacting the net deferred tax asset.

Deferred Tax Liabilities - Key Components

Deferred tax liabilities are primarily driven by negative adjustments. Investment in securities consistently represents a significant liability, decreasing in absolute value from US$1,775 million in 2021 to US$640 million in 2025. Other deferred tax liabilities also contribute substantially, decreasing from US$1,468 million in 2021 to US$194 million in 2025. Intangibles become a liability in 2024, increasing to US$1,097 million in 2025. Depreciation also becomes a liability in 2023, increasing to US$732 million in 2025.

Net Deferred Tax Asset (Liability)

The net deferred tax asset position begins at US$10,855 million in 2021, peaks at US$11,705 million in 2022, and then declines to US$7,459 million in 2025. This decline is largely attributable to the increasing valuation allowance against deferred tax assets and the growth in deferred tax liabilities. The introduction of the valuation allowance in 2024 has a substantial impact, reducing the reported deferred tax asset after the allowance from US$9,732 million to US$10,122 million in 2025.

Overall Trends

A general trend of decreasing deferred tax assets, particularly those related to reserves and pension plans, is observed. Simultaneously, deferred tax liabilities are increasing, driven by adjustments related to investments and intangibles. The increasing valuation allowance suggests a growing uncertainty regarding the realizability of certain deferred tax assets. The net effect is a reduction in the overall net deferred tax asset position.

The value of deferred income tax assets exhibited fluctuations over the five-year period. Initially, an increase was observed, followed by a substantial decline.

Overall Trend

The deferred income tax assets increased from US$10,855 million in 2021 to US$11,705 million in 2022, representing a growth of approximately 7.8%. However, this was followed by a decrease to US$10,575 million in 2023. A more significant reduction occurred in subsequent years, falling to US$7,111 million in 2024 and stabilizing slightly at US$7,459 million in 2025.

Magnitude of Change

The largest single-year decrease occurred between 2023 and 2024, with a reduction of US$3,464 million. The decrease from the peak in 2022 to the low in 2024 amounted to US$4,594 million, or approximately 39.2%.

Recent Stability

The difference between the 2024 and 2025 values is relatively small, at US$348 million, suggesting a potential stabilization of deferred income tax assets after the prior declines. However, the level remains considerably lower than in the earlier years of the period.

The observed pattern suggests potential changes in the company’s ability to utilize future tax deductions or credits, or alterations in applicable tax rates. Further investigation into the underlying causes of these fluctuations would be necessary to fully understand the implications.

The information presents a five-year trend of reported and adjusted financial statement items. The adjustments appear to relate to the removal of deferred tax assets and liabilities, resulting in lower reported asset and equity values when adjusted. A consistent pattern emerges where adjusted figures are lower than reported figures across total assets and shareholders’ equity.

Total Assets

Reported total assets demonstrate a decreasing trend from 2021 to 2024, declining from 198,874 to 123,140 US$ in millions. A slight increase is observed in 2025, reaching 130,169 US$ in millions. The adjusted total assets follow a similar pattern, decreasing from 188,019 to 116,029 US$ in millions between 2021 and 2024, with a subsequent increase to 122,710 US$ in millions in 2025. The difference between reported and adjusted total assets widens initially, then narrows slightly in the later years, suggesting a diminishing impact from the deferred tax adjustments.

Shareholders’ Equity

Reported shareholders’ equity exhibits a consistent decline over the period, moving from 40,310 US$ in millions in 2021 to 18,677 US$ in millions in 2025. Adjusted shareholders’ equity also decreases, from 29,455 US$ in millions to 11,218 US$ in millions over the same timeframe. The gap between reported and adjusted equity remains relatively stable, indicating a consistent impact from the deferred tax adjustments on equity.

Net Income (Loss)

Reported net income fluctuates significantly. A substantial loss is recorded in 2021 (-6,520 US$ in millions), followed by a small profit in 2022 (225 US$ in millions). Profits increase substantially in 2023 (9,481 US$ in millions) and remain positive through 2025 (8,704 US$ in millions). The adjusted net income shows a similar trend, but the magnitude of the 2021 loss is slightly larger (-6,529 US$ in millions) and the 2022 result is a larger loss (-406 US$ in millions). The adjustments generally result in a slightly lower net income figure each year, though the overall trend remains consistent between reported and adjusted values.

The consistent difference between reported and adjusted figures suggests the deferred tax adjustments are a significant and ongoing component of the company’s financial reporting. The decreasing trend in both reported and adjusted assets and equity warrants further investigation to understand the underlying drivers. The impact on net income, while present, is less pronounced than the impact on the balance sheet items.

The financial metrics demonstrate a notable divergence between reported and adjusted values following the removal of deferred tax impacts. This adjustment consistently results in altered profitability and return ratios, alongside shifts in asset utilization and financial leverage. Generally, the adjusted figures present a more pronounced picture of the underlying business performance when excluding the effects of deferred tax assets and liabilities.

Profitability

Reported net profit margin exhibits a substantial improvement over the period, moving from a negative value in 2021 to 20.57% in 2025. However, the adjusted net profit margin, while also increasing, remains lower than the reported margin across all years. The difference between reported and adjusted margins is most significant in 2021 and 2022, suggesting a considerable impact from deferred taxes during those periods. The adjusted margin consistently indicates a less favorable profitability position than the reported margin, though it still shows a positive trend.

Asset Utilization

Reported total asset turnover fluctuates, decreasing in 2024 before a slight recovery in 2025. The adjusted total asset turnover mirrors this trend, but consistently registers higher values than the reported ratio. This indicates that, excluding deferred tax assets, the company generates more revenue per dollar of total assets. The difference between the reported and adjusted ratios is relatively small, suggesting a moderate impact from deferred taxes on asset utilization.

Financial Leverage

Reported financial leverage steadily increases from 4.93 in 2021 to 6.97 in 2025. The adjusted financial leverage demonstrates a more substantial increase over the same period, reaching 10.94 in 2025. This suggests that deferred tax items are reducing the apparent level of financial leverage in the reported figures. The adjusted leverage ratios indicate a significantly higher degree of financial risk compared to the reported ratios.

Returns

Reported Return on Equity (ROE) shows a dramatic improvement, transitioning from a negative value in 2021 to 46.60% in 2025. The adjusted ROE exhibits an even more pronounced increase, reaching 78.45% in 2025. This substantial difference highlights the significant positive impact of deferred tax adjustments on equity returns. A similar pattern is observed in Return on Assets (ROA), where the adjusted ratio consistently exceeds the reported ratio, indicating a higher level of profitability relative to assets when deferred taxes are excluded. The adjusted ROA also demonstrates a consistent upward trend.

In summary, the removal of deferred tax effects leads to a more substantial depiction of financial leverage and returns, while also modestly impacting asset turnover. The adjustments consistently lower reported profitability, suggesting that deferred tax items have been favorably impacting reported net income in prior periods. The increasing divergence in ROE and ROA between reported and adjusted figures indicates a growing influence of deferred taxes on these key performance indicators.

The period between 2021 and 2025 demonstrates a significant recovery and subsequent stabilization in profitability metrics. Both reported and adjusted net income show a dramatic shift from substantial losses in 2021 to positive earnings in subsequent years. The adjusted net profit margin exhibits a similar trajectory, though with slight variations compared to the reported margin.

Reported Net Profit Margin

In 2021, the reported net profit margin was negative at -9.17%. A substantial improvement is observed in 2022, reaching 0.31%, followed by continued growth to 14.68% in 2023. Further increases are noted in 2024 (18.67%) and 2025 (20.57%), indicating a consistent upward trend in reported profitability. The rate of increase decelerates between 2023 and 2025.

Adjusted Net Profit Margin

The adjusted net profit margin mirrors the overall trend of recovery, beginning at -9.18% in 2021. It remains negative in 2022 at -0.55%, but shows a more pronounced increase to 15.65% in 2023 compared to the reported margin. The adjusted margin continues to rise, reaching 19.18% in 2024 and 20.80% in 2025. The adjusted margin consistently exceeds the reported margin from 2023 onwards, suggesting the impact of adjustments positively influences profitability.

Comparison of Reported and Adjusted Margins

While both margins demonstrate similar trends, the adjusted net profit margin consistently presents a more favorable picture. The difference between the reported and adjusted margins widens from 2023, indicating that adjustments are having a growing positive impact on the overall profitability assessment. This suggests that certain non-recurring or unusual items are being excluded in the adjusted figures, leading to a higher profitability representation.

Overall, the financial performance indicates a successful turnaround from significant losses to consistent profitability. The adjusted net profit margin provides a potentially more representative view of underlying business performance, particularly as adjustments become more substantial in later years.

The analysis reveals trends in both reported and adjusted total assets, alongside their corresponding turnover ratios, over a five-year period. A general decline in total assets is observed, with a subsequent impact on asset turnover.

Total Assets

Reported total assets decreased consistently from US$198,874 million in 2021 to US$123,140 million in 2024, before experiencing a modest increase to US$130,169 million in 2025. Adjusted total assets mirrored this trend, declining from US$188,019 million in 2021 to US$116,029 million in 2024, and then increasing to US$122,710 million in 2025. The adjusted figures are consistently lower than the reported figures, indicating the impact of adjustments made to the asset base.

Reported Total Asset Turnover

The reported total asset turnover ratio initially increased from 0.36 in 2021 to 0.40 in 2022 and 2023. However, it then decreased to 0.29 in 2024, followed by a slight recovery to 0.33 in 2025. This suggests a period of increasing efficiency in asset utilization, followed by a decline, and a partial rebound.

Adjusted Total Asset Turnover

The adjusted total asset turnover ratio exhibited a similar pattern to the reported ratio. It rose from 0.38 in 2021 to 0.42 in both 2022 and 2023, then fell to 0.30 in 2024, and recovered to 0.34 in 2025. The adjusted ratio consistently exceeds the reported ratio, suggesting that the asset adjustments result in a more favorable turnover metric. The fluctuations in the adjusted ratio closely track the changes in adjusted total assets, indicating a strong relationship between the asset base and the efficiency with which it is used.

The convergence of the reported and adjusted turnover ratios in 2024 and 2025 suggests that the impact of the asset adjustments may be lessening, or that the underlying operational factors affecting turnover are becoming more dominant. The overall trend indicates a cyclical pattern of asset utilization efficiency, potentially influenced by broader economic conditions or company-specific strategic shifts.

An examination of the financial information reveals increasing financial leverage, particularly when considering adjusted figures. Both reported and adjusted total assets decreased from 2021 to 2023, with a partial recovery in 2024 and 2025. Shareholders’ equity followed a similar declining trend across the period, though the rate of decline appeared to moderate in the later years. The most significant changes are observed in the leverage ratios, indicating a growing reliance on debt financing relative to equity.

Reported Financial Leverage

Reported financial leverage increased consistently from 4.93 in 2021 to 6.97 in 2025. This indicates a steady increase in the proportion of assets financed by debt or other non-equity sources, as measured by the reported figures. The increase, while consistent, appears to be accelerating in the later years of the period.

Adjusted Financial Leverage

Adjusted financial leverage demonstrates a more pronounced increase than its reported counterpart. Starting at 6.38 in 2021, it rose to 10.94 by 2025. This substantial increase suggests that when certain adjustments are made to the asset and equity base, the company’s reliance on financial leverage is considerably higher than indicated by the reported numbers. The adjusted leverage ratio consistently exceeds the reported ratio throughout the period, and the gap between the two widens over time.

Asset and Equity Trends

Both reported and adjusted total assets experienced a decline between 2021 and 2023. While both metrics show some recovery in 2024 and 2025, they do not return to their initial levels. This contraction in the asset base, coupled with the declining shareholders’ equity, contributes to the observed increases in financial leverage. The adjusted figures show a more significant reduction in both assets and equity, reinforcing the conclusion that the adjusted leverage ratio provides a more conservative, and potentially more accurate, view of the company’s financial risk.

The consistent upward trend in both reported and adjusted financial leverage warrants further investigation. Understanding the nature of the adjustments made to arrive at the adjusted figures is crucial for a complete assessment of the company’s financial position and risk profile. The increasing leverage could indicate heightened financial risk, potentially impacting future profitability and solvency.

The period between 2021 and 2025 demonstrates a significant evolution in reported and adjusted financial performance, particularly concerning return on equity. Initial years show substantial losses, followed by marked improvements and increasing returns. A clear divergence exists between reported and adjusted figures, suggesting the impact of specific accounting adjustments on the overall financial picture.

Net Income

Reported net income transitioned from a substantial loss of US$6,520 million in 2021 to a positive US$225 million in 2022. This positive trend continued, reaching US$9,481 million in 2023, and remained strong at US$6,556 million and US$8,704 million in 2024 and 2025 respectively. Adjusted net income mirrored this pattern, though with larger magnitude differences, starting at a loss of US$6,529 million in 2021 and culminating in US$8,801 million in 2025.

Shareholders’ Equity

Reported shareholders’ equity experienced a consistent decline from US$40,310 million in 2021 to US$18,677 million in 2025. Adjusted shareholders’ equity followed a similar downward trajectory, decreasing from US$29,455 million in 2021 to US$11,218 million in 2025. The rate of decline appears to decelerate in the later years of the period.

Reported Return on Equity (ROE)

Reported ROE began at -16.17% in 2021, reflecting the net loss. It improved to 0.62% in 2022, then increased substantially to 34.63% in 2023, and remained high at 33.90% in 2024, before reaching 46.60% in 2025. This indicates a growing ability to generate profit from shareholder investment.

Adjusted Return on Equity (ROE)

Adjusted ROE exhibited a similar progression, but with more pronounced changes. Starting at -22.17% in 2021, it moved to -1.65% in 2022, then surged to 60.13% in 2023. Further increases were observed in 2024 (55.08%) and 2025 (78.45%). The consistently higher adjusted ROE values compared to reported ROE suggest that the accounting adjustments significantly enhance the perceived profitability of shareholder equity. The substantial increase in adjusted ROE over the period indicates a considerable improvement in underlying business performance when considering these adjustments.

The divergence between reported and adjusted ROE widens over time, suggesting that the adjustments are becoming increasingly impactful. The consistent decline in both reported and adjusted shareholders’ equity, coupled with increasing net income, is the primary driver of the rising ROE figures. Further investigation into the nature of the adjustments would be necessary to fully understand their implications.

The period between 2021 and 2025 demonstrates a significant recovery and subsequent stabilization in profitability as measured by return on assets. Initial years show substantial losses, followed by marked improvement and a trend toward increasing returns. Analysis of both reported and adjusted figures reveals nuanced patterns in financial performance.

Reported Net Income and ROA

Reported net income transitioned from a substantial loss of US$6,520 million in 2021 to a profit of US$225 million in 2022, increasing significantly to US$9,481 million in 2023. While decreasing slightly to US$6,556 million in 2024, it remained positive and grew to US$8,704 million in 2025. Correspondingly, the reported return on assets moved from -3.28% in 2021 to 0.12% in 2022, then to 5.81% in 2023. A slight decrease to 5.32% occurred in 2024, followed by an increase to 6.69% in 2025, indicating a strengthening of profitability relative to asset base.

Adjusted Net Income and ROA

Adjusted net income mirrored the trend of reported net income, moving from a loss of US$6,529 million in 2021 to a loss of US$406 million in 2022, then to a profit of US$10,103 million in 2023. Similar to reported figures, adjusted net income decreased to US$6,737 million in 2024 before rising to US$8,801 million in 2025. The adjusted return on assets followed a similar trajectory, increasing from -3.47% in 2021 to -0.23% in 2022, then to 6.63% in 2023. It decreased slightly to 5.81% in 2024 and increased to 7.17% in 2025. The adjusted ROA consistently exceeded the reported ROA throughout the period.

Asset Trends

Reported total assets decreased consistently from US$198,874 million in 2021 to US$123,140 million in 2024, before increasing slightly to US$130,169 million in 2025. Adjusted total assets exhibited a similar pattern, declining from US$188,019 million in 2021 to US$116,029 million in 2024, and then increasing to US$122,710 million in 2025. The consistent decline in asset base, coupled with increasing net income, contributed to the observed improvement in both reported and adjusted ROA.

The difference between reported and adjusted figures suggests the presence of certain items impacting reported net income and assets that are excluded in the adjusted calculations. The adjusted ROA consistently presents a more favorable picture of profitability, indicating that these adjustments positively influence the assessment of financial performance. The stabilization of ROA in the later years of the period suggests a maturing of the recovery and a potential plateau in near-term growth.