GE Vernova (NYSE: GEV -0.36%) has taken the market by storm, with its stock skyrocketing 166% since its debut in spring. What once was a problem child of General Electric has become a beacon of growth and innovation. Let’s dive into why GE Vernova’s rise is a game-changer and what investors can expect moving forward.
GE Vernova: A Bright Future in the Energy Sector
Successful investments often stem from a major shift in a company’s narrative—and GE Vernova is a textbook example. As 2023 unfolded, its growth prospects became too enticing for the market to ignore, fueled by a strong focus on clean energy and infrastructure.
Segment Performance: Turning Challenges into Triumphs
Power Segment
GE Vernova’s power division, primarily driven by gas turbine equipment and services, has been its crown jewel. The transition to clean energy, while ongoing, has underscored the importance of reliable and cost-effective energy sources like natural gas. This segment posted $923 million in EBITDA in 2023, projected to soar to $1,457 million in 2024.
- Gas Turbine Orders Are Soaring
| Gas Turbine Orders | 2023 YTD | 2024 YTD |
|---|---|---|
| Heavy Duty (units) | 59 | 78 |
| HA Turbines (units) | 32 | 44 |
| Aeroderivatives (units) | 27 | 34 |
| Gas Turbines (Gigawatts) | 7.4 GW | 14.1 GW |
CFO Kenneth Parks emphasized this growth on the recent earnings call:
“Based upon the backlog, we’re funding capacity expansion from customer orders and related down payments to enable delivery of 70 to 80 heavy-duty gas turbines annually starting in 2026.”
Electrification Segment
AI’s explosion has ramped up power demand, giving GE Vernova’s electrification division a massive boost. Transmission, distribution, and storage solutions are thriving, with a $21.9 billion backlog in Q3 2023 compared to just $6 billion at the end of 2022.
Management forecasts high-teen revenue growth for 2024, paired with EBITDA margins reaching the upper end of their high-single-digit expectations.
Wind Segment
Renewables have been a mixed bag. Onshore wind is profitable, with margin expansion expected through 2025. Offshore wind, however, remains a challenge due to cost and logistical difficulties. Despite these hurdles, improvements in the wind segment’s overall profitability suggest better days ahead.
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Why GE Vernova Stands Out
The company’s success isn’t just about clean energy trends—it’s about execution and positioning.
- Strategic Focus on Natural Gas
GE Vernova has embraced natural gas as a bridge fuel for the clean energy transition, locking in long-term growth in its power segment. - Massive Backlogs Signal Robust Growth
A $21.9 billion backlog in electrification and a growing turbine base guarantee revenue and earnings momentum for years. - Cutting-Edge Technology and Innovation
From HA turbines to small modular reactors (SMRs), GE Vernova is at the forefront of energy innovation, even attracting investments from giants like Alphabet and Amazon.
Is GE Vernova a Stock to Buy?
At a current price of $334.12, GE Vernova trades at 53 times the high end of its 2025 free cash flow guidance. While the valuation is steep, the company’s multi-year outlook update on Dec. 10 could offer new insights.
Bottom Line: Investors should watch GE Vernova closely but might consider waiting for a pullback or the upcoming trading update before jumping in.
For those ready to dive deeper into energy stocks, now’s the time to explore what the industry has to offer.
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Disclaimer: Past performance does not guarantee future results. Always do your due diligence before investing.