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GEV Investor Day Recap: Strong guidance and capital return send shares higher

AInvestWednesday, Dec 11, 2024 4:00 pm ET
2min read

GE Vernova (GEV) hosted a highly impactful Investor Update event that highlighted its robust growth trajectory and provided shareholder-friendly initiatives, such as a $6 billion share repurchase program and the announcement of its first quarterly dividend of $0.25/share. These updates, coupled with optimistic forward guidance, have fueled significant investor enthusiasm, with shares soaring 145% since the spin-off from General Electric in April.

For FY24, GEV reaffirmed its revenue guidance toward the upper end of $34-$35 billion, aligning with analyst expectations of $35.05 billion. The company also raised its free cash flow (FCF) guidance to $2.0-$2.5 billion, a substantial improvement from the previous $1.3-$1.7 billion range. Adjusted EBITDA margins are expected to range from 5.5%-6%, slightly narrowing prior guidance but indicating operational stability.

GEV increased its FY25 revenue guidance to $36-$37 billion from mid-single-digit growth forecasts, reflecting strong demand in its Power and Electrification segments. Looking further ahead, the company anticipates revenue of $45 billion by 2028, supported by high-single-digit organic growth. Adjusted EBITDA margins are forecasted to expand dramatically to 14% by 2028, up from 5.5%-6% in FY24, driven by better pricing, cost efficiencies, and a leaner organizational structure.

Power and Electrification remain the key drivers of GEV's growth, supported by increasing demand for gas turbines, grid equipment, and electrification solutions. In Q3, Power orders surged 34% year-over-year to $5.2 billion, while Electrification orders grew 17% organically. These segments are also benefiting from the proliferation of AI data centers, the electrification of products, and investments in upgrading aging power grids.

While Power and Electrification thrive, GEV’s Wind business continues to face significant headwinds due to supply chain disruptions, inflationary pressures, and project delays, particularly in offshore wind. CEO Scott Strazik stated that the company is not taking new orders for offshore wind turbines and expects further losses in this segment in 2024. Political risks, including President-elect Trump’s criticism of the wind energy industry, add another layer of uncertainty.

To sustain its growth, GEV plans to invest $4 billion in capital expenditures (CAPEX) and $5 billion in research and development (R&D) through 2028. These investments aim to enhance capacity, drive innovation in low-carbon technologies, and improve productivity across its core businesses. The company’s disciplined capital allocation strategy underscores its conservative yet growth-focused approach.

Analysts responded favorably to GEV’s updated guidance, reiterating "Outperform" ratings with price targets in the $351-$376 range. They highlighted the company’s conservative management style and upside potential in Power and Electrification, driven by improved pricing and productivity. However, some noted that Wind’s challenges and the cautious guidance for 2028 could temper near-term optimism.

GEV’s Investor Update event reinforced its position as a major beneficiary of the AI and electrification booms. The company’s combination of robust guidance, disciplined investments, and shareholder returns boosted investor confidence. While the Wind segment remains a drag, the overall growth story remains compelling. The stock’s sharp rally reflects the market's bullish outlook on GEV’s long-term potential to deliver on its ambitious goals.

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