Julian Mitchell: Maybe just my question would be around free cash flow. Should we expect sort of second quarter to be around breakeven-ish and common with prior years? And then sort of 2 specific drivers I was curious about. One was that $500 million AD&A headwind. I saw it was a source in Q1. How do you see that playing out the balance of the year? And just sort of testing your conviction level in that wind down payments, $3 billion to $4 billion free cash tailwind you talked about back at Q1. Just sort of how you see that and the AD&A playing out from here over the balance of the year and what that Q2 free cash might be?
Carolina Happe: Julian, let me take that. So if we look at the second quarter, basically, we are expecting to build on the strong first quarter, so see the similar dynamics coming through in the second quarter. And that starts with our strong orders leading to high single-digit growth. If we look at our profit, EPS, we expect it to be $0.40 to $0.50. And again, sequential volume growth, especially from aerospace strength, but also the gas seasonal outages. We would expect price to continue to outpace inflation, continue to see productivity come through. But we do expect some mixed pressure that Larry was mentioning from the big ramps in LEAP and Haliade-X. So if you look at it little bit business by business, so for aerospace, that’s why we would expect the margin rate to be lower sequentially and contract because of that high equipment growth.
For renewables, as I mentioned, we expect losses to be similar in the second quarter to the first. And for Power, we expect revenue and profit to be slightly down year-over-year, really with the second half loaded outage and aero derivatives shipments. And that brings me then to the free cash flow. So we expect free cash flow to be around breakeven. And it’s a combination of the earnings growth and some positive working capital, but then offset by the AD&A and higher tax payments. So if you look at it sort of first half this year compared to first half last year, it’s about $1 billion of improvement in the first half. And you asked sort of sequentially quarter-by-quarter. I would say, from the free cash flow, you also have to remember the size of revenue in Q4 that we collected in Q1.
And now in Q2, we will be collecting on a lower revenue number from the first quarter. So that’s why there’s a bit of pressure there. You also asked about AD&A. So AD&A was slightly positive in the first quarter. But we expect that to be negative $0.5 billion for the full year, so basically shifting to the right. And when it comes to wind, you asked about the $3 billion to $4 billion of orders. I would say it’s still early in the year. And we have strong relationships with our customers, but those are large and complex orders. And exactly when they convert to orders, that can shift a bit through the quarters.
Larry Culp: Julian, I would just add that with respect to the orders and win in North America, I think we feel as optimistic as we did back in March in frequent contact with the administration. They’re well along in the work that they’re doing to release the final guidance. We expect to see that this quarter. And I think we said in March, every week matters here. So the sooner businesses, customers have certainty, the better. But we’re quite optimistic.
Operator: Our next question comes from Seth Seifman with JPMorgan.
Seth Seifman: So wanted to follow up on the commercial aftermarket and kind of the strength in the first quarter and the moderation that’s implied through the remainder of the year. It seems like channels have been running in kind of the 3.5 to 3.7 range the past 3 quarters. Seasonally, we probably see an uptick in the second quarter, which would imply another quarter of very healthy growth kind of above the guidance range for aftermarket for the year. And so is there anything that really gives you pause about the second half of the year? And how are you thinking about where — what the upside might be to that aftermarket forecast?
Larry Culp: Well, I think you’re right, Seth, in terms of just the strength in the momentum that we see here, right? I mean services for a full year we think will be up high teens to 20%. So it’s just — it couldn’t be more robust. And that’s pretty well balanced, both in terms of shop visits, spares and the like. And I’d say that we see that kind of broadly across the portfolio from a geographic perspective as well. We’re not unmindful that there is some discussion around how long the flying public will indeed fly at this pace. We’ll see how that plays out. But you’ve heard from a number of the airlines already this earnings cycle where the CEOs, I think, are uniformly bullish. Not only here, but in Europe. If any of that edge came off, as you know, we’re not necessarily tied to ticket prices or load factors.
We’re tied most directly to departures. That’s a good structural aspect of our business. But we do know we get into some tougher comps as we move into the second half of this year. So we still expect to have a robust top line, and that will bring with it the margin and cash flows that we’ve talked about already. But net-net, we feel very good about the prospects. Just on the margin, again, very pleased with the first quarter performance, but we do know that we’re going to see more mix pressure both given the equipment growth versus services and within equipment given the LEAP ramp in addition to some of the lagging inflationary pressures and the investments that we are and we want to make in the business. But net-net, this is going to be a very good year for GE Aerospace from a profit perspective with the dollars at the midpoint, up 15% year-over-year.
