Shares of GE Vernova (GEV) surged over 5% on Thursday after several analysts raised their price targets following the company’s impressive third-quarter earnings report. The analysts were particularly impressed by the company’s strong revenue growth, improved profitability, and a positive outlook for the clean energy sector.
GE Vernova, which was spun off from General Electric in early 2023, reported revenue growth of 8% year-over-year to $8.913 billion, exceeding the consensus estimate of $8.783 billion. The company also reported a significant improvement in profitability, with a loss per share of $0.35, compared to a $0.62 loss a year ago, although this missed the EPS consensus of $0.32. Looking ahead, GE Vernova expects FY24 revenue to trend towards the higher end of $34 billion – $35 billion, exceeding the $34.93 billion estimate.
Several analysts pointed to these positive developments, along with the company’s strong position in the clean energy sector, as reasons for their bullish outlook. Morgan Stanley analyst Andrew S Percoco raised the price target to $301 from $256 with an Overweight rating, highlighting a potential pathway to 20% EBITDA margins for GEV later this decade. Percoco anticipates gas power margins to peak in the high teens, depending on pricing and disclosures at GEV’s upcoming investor day, which is scheduled for December 10th.
The analyst expects GEV to provide an adjusted EBITDA margin target of at least 13%-15% for 2028, with upside potential if previous gas turbine cycle margins of over 20% are realized. This bullish outlook was echoed by RBC Capital Market analyst Christopher Dendrinos, who raised the price target to $285 (from $262) while maintaining an Outperform rating.
Dendrinos acknowledges that the Wind sector continues to face challenges due to limited demand for orders and the ongoing reduction of the offshore backlog. However, the analyst expects improvements next year and believes that onshore underperformance will have minimal impact on 2026+ estimates. Strong order demand in Power and Electrification segments further bolsters the confidence in revenue and margin growth.
BMO Capital Markets analyst Ameet Thakkar maintained the Outperform rating and $288 price target, emphasizing the strong demand for electric solutions and GEV’s leading position in baseload generation and T&D infrastructure. With the upcoming election, the analyst expects GEV to see significant clean energy investment. The analyst updated the FY 2024 revenue estimate at $35.2 billion, slightly exceeding GEV’s guidance range of $34-$35 billion.
While optimistic, some analysts remain cautious, particularly regarding investor expectations for 2027/28. Oppenheimer analyst, while acknowledging progress in EBITDA margins for Power and Electrification, believes investor expectations for 2027/28 are significantly ahead of consensus and awaits updated margin targets at the December 10 Analyst Day.
Investors interested in gaining exposure to GEV can consider ETFs like Invesco S&P Spin-Off ETF (CSD) and ProShares S&P Kensho Cleantech ETF (CTEX). These ETFs provide diversified exposure to the clean energy sector and allow investors to participate in the growth of companies like GE Vernova.