GE Vernova Is a Great Clean Energy Idea

Image: GE Vernova has performed well since it was spun out of GE.

By Brian Nelson, CFA

Clean energy giant GE Vernova (GEV) recently reported second quarter financial results with total revenue advancing 1% (up 2% organically) thanks to strong performance in services, which grew 7% (up 9% on an organic basis). Total orders came in at $11.8 billion in the quarter, exceeding revenue by 1.4x. Adjusted EBITDA came in at $0.5 billion, with an adjusted EBITDA margin of 6.4%, which was up 320 basis points on an organic basis. Management’s commentary was upbeat in the press release:

GE Vernova delivered another strong quarter with EBITDA margin expansion across all segments and substantial cash improvement. Global electrification and decarbonization trends continue to drive demand for our products and services, and we are delivering value for our stakeholders. Our lean operating model is focused on improving safety, quality, delivery and cost as we execute for our customers and innovate breakthrough energy transition technologies. Given our strong first half performance and momentum in our Power and Electrification segments, we are raising our full-year 2024 guidance.

During the second quarter, cash flow from operations came in at $1.0 billion, with positive free cash flow of $0.8 billion driven by improved working capital management and strong adjusted EBITDA. Looking to 2024, management expects revenue to be at the “higher end of $34-$35 billion and adjusted EBITDA margin of 5-7%, up from the higher end of mid-single digits.” What we liked the most was that GE Vernova now expects free cash flow during the year of $1.3-$1.7 billion, which is up from $0.7-$1.1 billion

GE Vernova spun off from GE earlier this year, and its “Power, Wind, and Electrification segments provide essential products and services to the electric power industry…Many of the world’s leading utilities, developers, governments, and large industrial electricity users rely on its installed base to generate, transfer, orchestrate, convert, and store electricity reliably and efficiently (GE Vernova completes spin-off and begins trading on the New York Stock Exchange, April 2).”

“With an installed base of over 7,000 gas turbines, the world’s largest, approximately 55,000 wind turbines, and leading edge electrification technology, GE Vernova helps generate approximately 30% of the world’s electricity (GE Vernova completes spin-off and begins trading on the New York Stock Exchange, April 2).” GE Vernova is one of our favorite clean energy ideas, and its financials speak to continued strength. The high end of our fair value estimate range stands at $243 per share.

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