GE Vernova Gives 2025 Guidance. What It Means for Its Stock.

“In the next 18 years, the global power generation is expected to double,” said Vernova’s chief commercial officer, Pablo Koziner.

That doubling works out to about 4% average annual growth. It’s the tailwind driving all three Vernova businesses—one dedicated to natural gas-fired turbines, one to wind power, and one to the electricity grid.

That forecast is already showing up in financial guidance. Vernova expects mid-single-digit sales growth in percentage terms in 2024.

For 2024, GE Vernova expects 2024 sales of $34 billion to $35 billion, up from 2023 sales of $33.2 billion. Adjusted earnings before interest, taxes, depreciation, and amortization, or Ebitda, margins should be “mid-single digits, toward the higher end of the range.” That implies Ebitda of about $2.2 billion.

For 2025, GE Vernova expects another year of mid-single-digit percentage sales growth and “high-single-digit” percentage Ebitda margins. That implies roughly $3.1 billion in Ebitda.

Free cash flow for 2025 is expected to come in at $1.2 billion to $1.8 billion, up from a range from $0.7 billion to $1.1 billion for 2024.

Eventually, GE Vernova sees Ebitda margins hitting 10%, which should drive Ebitda growth of roughly 15% a year on average for the coming five years.

Wall Street will now consider guidance, growth, and its own estimates, to comment on how Vernova should be valued as an independent company.

Jefferies analyst Sheila Kahyaoglu values GE Vernova at about 8.5 times her 2025 estimated Ebitda of $3.2 billion, or about $27 billion. That will work out to a market capitalization of about $31 billion, since GE Vernova will have about $4 billion in cash and no debt to start its life as an independent company. Consequently, Kahyaoglu sees a stand-alone price of about $112 per GE Vernova share. Investors are receiving one GE Vernova share for every four GE shares they own.

“The company’s longer-term 2028 targets look to imply $4.2 billion of Ebitda,” wrote Deutsche Bank analyst Scott Deuschle in a Wednesday report. The guidance boosted confidence in his “valuation framework that calls for $30 billion of [business value] for GE Vernova.”

That value is a little higher than Kahyaoglu’s $27 billion estimate and would work out to a market capitalization of about $34 billion accounting for Vernova’s cash balance.

Drilling down into each business. The gas-power business is expected to deliver 2024 Ebitda of about $1.7 billion. The power-grid business is expected to generate Ebitda of roughly $400 million. Wind power remains the drag, with management expecting, essentially, no 2024 Ebitda. Still, that’s better than the 2023 loss of about $1 billion. Profitability is expected in 2025.

Getting wind power’s profit margins to a respectable level will be management’s first challenge as an independent company. Cost-cutting and more efficient manufacturing is part of the plan. Vernova management added that margin improvement is built into the backlog—profit margins are better on orders that have come into the company recently.

“The energy transition is the next investment supercycle, and today we are excited to share GE Vernova’s value-creation strategy. With a vast installed base, growing recurring revenue from high-margin services, and a significant backlog,” said Vernova CEO Scott Strazik in a news release. “GE Vernova provides a unique scope and scale of solutions to serve the world’s most impactful electricity providers.”

GE stock was up 1.3% in midday trading at $159.90. The
S&P 500
and
Nasdaq Composite
were up 0.6% and 0.7%, respectively.

Coming into Wednesday trading, GE stock was up about 81% over the past 12 months. The S&P 500 and Nasdaq were up about 25% and 37%, respectively.

Write to Al Root at [email protected]