GE Vernova Earnings: Orders Remain Strong Ahead of Long-Term Guidance Update

Key Morningstar Metrics for GE Vernova

• Fair Value Estimate: $212.00
• Morningstar Rating: 2 stars
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: High

What We Thought of GE Vernova’s Earnings

GE Vernova’s GEV third-quarter earnings showed strong order growth for gas power and electrification, partially offset by additional costs associated with its offshore wind backlog.

Why it matters: We focus on order trends associated with GE Vernova’s long-cycle equipment rather than its near-term earnings.

• 2024 is poised to mark an inflection point in gas power orders, with HA-turbine orders reaching 21 units in the year to date, compared with eight in 2023. Management expects gas power orders to increase slightly year on year in 2025 as US hyperscaler energy demand comes to fruition.
• Electrification orders increased 17% year on year in the quarter, as demand for switchgear and transformers remains robust. Segment EBITDA margins reached 10.4% in the quarter, and we expect further expansion in 2025.

The bottom line: Robust orders give a strong line of sight to continued revenue growth and profit margin expansion. We’ve increased our fair value estimate to $212 per share from $203 after raising our gas power revenue assumptions in 2026-28, owing to pricing and volume tailwinds.

• We expect EBITDA margins to expand from under 6% in 2024 to over 13% in 2028 as GE Vernova realizes its higher-margin backlog.
• While we are positive about the company’s business outlook, we think the market’s current expectations are elevated, and investors should wait for a more attractive valuation before buying.

Coming up: The company is hosting an investor event on Dec. 10. Given end-market tailwinds in gas power and electrification, we expect management to raise its long-term margin targets.

• In addition, we expect further details on management’s capital allocation approach, including potentially initiating a dividend, given a growing cash balance ($7.4 billion as of quarter-end).