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Updated: 11-Dec-24 14:41 ET
GE Vernova powers higher as set of bullish guidance reflects emerging AI-based growth catalyst (GEV)
In the wake of yesterday's Investor Update event, GE Vernova (GEV) is powering higher once again, continuing a spectacular move that has seen shares soar by 145% since last April's spin-off from General Electric. As part of that event, GEV provided a slate of forward guidance that painted a bullish picture for the company's expected sales and margins in both the near- and longer-term timeframes. Additionally, the company announced a $6.0 bln share repurchase program and initiated its first quarterly dividend of $0.25/share.

The strong outlook and shareholder-friendly capital allocation plans solidified the notion that GEV, which consists of General Electric's former power, wind, and energy segments, is poised to benefit from a rapidly growing need for more power due to the proliferation of AI data centers, the electrification of many products, and increasing investments in an aging power grid.
  • For FY24, GEV sees revenue trending towards the higher end of its prior guidance range of $34.0-$35.0 bln, with free cash flow also trending towards the upper end of its forecasted range of $1.3-$1.7 bln. The company also increased it free cash flow guidance to $2.0-$2.5 bln from $1.2-$1.8 bln. Fueling the brighter outlook is GEV's Power and Electrification businesses as demand for gas turbines and electrical grid equipment continues to strengthen. Rewinding to its Q3 earnings report on October 23, Power saw orders surge by 34% yr/yr to $5.2 bln, while orders for Electrification jumped by 17% organically.
  • Looking out to FY25, GEV raised its revenue guidance to $36-$37 bln from its former outlook of mid-single digit growth, which implied revenue of $35-$37 bln. Meanwhile, free cash flow is expected to increase to $2.0-$2.5 bln compared to its initial guidance of $1.2-$1.8 bln.
  • In our view, what really stands out within GEV's batch of guidance is its expectation for much stronger margins in the years ahead. Specifically, the company now sees EBITDA margins expanding to 14% by 2028, from 5.5-6.0% in FY24 and high-single digits in FY25. This expansion will be driven by better equipment pricing in Power and Electrification, a leaner organization, and healthy margins from services.
  • Still, GEV is not quite firing on all cylinders. The company's Wind business continues to struggle amid supply chain challenges, inflationary pressures, and delays in offshore projects in the U.S. and abroad. With President-elect Donald Trump also taking aim at the wind energy industry, the future doesn't look very bright, either. In fact, CEO Scott Strazik stated that the company isn't taking new orders for offshore wind turbines and is anticipating more losses for wind next year.

Overall, GEV's Investor Update event added more fuel to the fire for bulls as the company's strong guidance affirmed its place as a major beneficiary of the AI data center boom.

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