GE Aerospace (NYSE:GE) has plenty of demand. Getting enough engines and parts out the door has been the harder part.
That helps explain why the company is willing to spend $11.75 billion on Consolidated Precision Products (CPP), one of the world’s largest makers of precision sand castings. The acquisition, GE Aerospace’s biggest since becoming a standalone company in 2024, brings a critical piece of its engine supply chain in-house at a time when castings remain an industry bottleneck.
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For investors, the deal is less about adding another business to GE’s portfolio and more about securing the capacity needed to serve demand already sitting on its books.
Bull Case
CPP is already deeply embedded in GE Aerospace’s engine business. The company supplies components for GE’s LEAP and GEnx commercial engines and makes parts for nearly every major current-generation commercial aircraft program. About 70% of CPP’s revenue comes from commercial and defense engines. That is significant because GE is trying to satisfy demand on several fronts at once. Aircraft manufacturers need new engines, while airlines need parts and repairs for aircraft already in service. Both depend on the same supply chain, and GE has a large backlog stretching into the next decade.
The pressure is unlikely to disappear soon. GE expects its demand for airfoils, including turbine blades and vanes, to increase by more than 30% by 2030 compared with 2026 levels. CEO Larry Culp said investment in casting capacity is needed to support simultaneous demand across commercial engines, aftermarket and defense. Owning CPP gives GE a more direct hand in addressing that constraint. The company said it plans to increase CPP’s output by improving factory yields and machine utilization while reducing scrap and rework. CPP itself is expected to generate roughly $2 billion in revenue in 2027.
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GE also sees benefits beyond simply producing more parts. Its enhanced airfoil technology is designed to reduce metal temperatures inside engines, which the company says can improve durability and efficiency. By bringing airfoil design and manufacturing closer together, GE expects to shorten development times and make it easier to ramp production of new parts.
Bear Case
Greater control over a critical supplier does not come cheaply. The $11.75 billion deal values CPP at roughly 26 times its expected 2027 core profit before the benefits GE expects from combining the businesses. Including those expected benefits brings the multiple down to about 18 times. The financing also deserves attention. GE plans to use $7 billion of cash for the acquisition and fund the remainder with new debt, and the transaction is expected to close in the second half of 2027.
There is another question that has yet to be answered. CPP supplies companies beyond GE, including components purchased by RTX’s Pratt & Whitney, which competes with GE. Vertical Research analyst Robert Stallard told Reuters that the transaction makes strategic sense given tight engine casting supply, but said it remains to be seen how the acquisition will affect CPP’s non-GE customers. GE shares were little changed following the announcement, according to Reuters, while shares of casting rival Howmet Aerospace fell about 8%.
Conclusion
For GE investors, the logic behind this deal is not difficult to see. The company has years of demand ahead of it, but that demand is only valuable if GE and its suppliers can produce enough engines and parts to meet it. CPP sits right inside one of the areas where the industry is still struggling with capacity.
The price is the part worth watching. GE is committing $11.75 billion, using $7 billion of its cash and taking on new debt for the rest, on the expectation that owning CPP will help it increase output and bring new engine technology into production faster. If GE can deliver the manufacturing improvements it has laid out, the deal directly addresses a bottleneck standing between the company and its backlog. Until then, investors have a strategically clear acquisition, but also an expensive one whose expected benefits still have to be delivered.
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This article is originally published at Insider Monkey.
