The writer, Al Root, gets it.
The stock is up $81.61 (+14.87%) at $630.60.
From Barron's, July 23:
GE Vernova delivered close-to-perfect, better-than-expected second-quarter earnings, and raised its full-year financial guidance.
Investors look pleased, with the stock up in early trading, adding to its strong run. GE Vernova shares gained 12.9% in early trading, jumping to $620.05 a share, while the S&P 500 and Dow Jones Industrial Average were up 0.4% and 0.5%, respectively.
Wednesday morning, the company reported earnings before interest, taxes, depreciation, and amortization, or Ebitda, of $800 million and earnings per share of $1.86 on sales of $9.1 billion. Wall Street was looking for Ebitda of $721 million and earnings of $1.51 a share on sales of $8.8 billion, according to FactSet.
A year ago, in the second quarter of 2024, GE Vernova reported Ebitda of $500 million and unadjusted earnings per share of $4.65 on sales of $8.2 billion. (The GE Aerospace spinoff affected earnings per share.)
That’s the earnings beat. There was a short-term guidance raise, too, and an acknowledgment that the long-term profit goals set for 2024 look too modest.
Now, management expects full-year results to come in at the high end of its previous range. In April, the company said it expected 2025 sales of $36 billion to $37 billion, with Ebitda margins in the “high-single digits.” Guidance implies Ebitda of roughly $2.9 billion to $3.3 billion. Wall Street currently projects 2025 Ebitda of $3.2 billion.
Second-quarter orders of $12.4 billion also eclipsed sales, a good sign for growth.
As for the long term, CEO Scott Strazik told Barron’s that his company would be revisiting its 2028 goals and updating guidance at the end of the year. In December, management’s goal was to produce an Ebitda profit margin of 14% by 2028. Second-quarter profit margins in the company’s gas and grid businesses were already 16.4% and 14.6%, respectively. Strazik added that new orders have better pricing and that the gas turbine business was already essentially sold out for 2028, with customers ordering for 2029.
All that is good news. The company’s wind business, however, remains a challenge. It lost $165 million in the quarter and is losing policy support.
The “One Big Beautiful Bill Act, passed July 4, phases out U.S. wind tax credits,” noted BofA Securities analyst Andrew Obin in a recent report, referring to Republicans’ massive tax and spending bill. “This is likely to drive an uptick in U.S. onshore wind orders in [the coming year] as developers rush to start construction before the deadline.” There is, however, a risk of lower U.S. onshore wind deliveries in 2027 and beyond. The wind situation, however, isn’t a surprise, and GE is working to lower its costs.
Whether a beat-and-raise quarter with a solid long-term outlook would be good enough for the stock was anyone’s guess heading into earnings. Coming into the week, shares had roughly tripled since the company’s April 2024 separation from GE Aerospace....
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