News

GE Vernova Strategic Plan in NYC

James L. Flint

• March 06, 2024

GE Vernova made a grand entrance in New York City for its coming-out party, offering a glimpse into the future of its gas power, wind turbine, and electricity-grid businesses. As GE prepares to split into two entities, one focusing on aircraft engines and the other on power generation, investors eagerly anticipate details on the company's strategy for leading the energy transition away from fossil fuels while maintaining profitability.

Financial Outlook

The day kicked off with a presentation of key figures, including reaffirmed financial guidance for 2024 and a sneak peek into projections for 2025. In 2024, GE Vernova foresees sales ranging between $34 billion to $35 billion, marking an increase from 2023's $33.2 billion. The company aims for adjusted Ebitda margins in the "mid-single digits towards the higher end," indicating Ebitda around $2.2 billion.

Looking ahead to 2025, Vernova anticipates "mid-single-digit" sales growth and "high-single-digit" Ebitda margins, translating to an estimated $3.1 billion Ebitda. Moreover, free cash flow is projected to fall between $1.2 billion and $1.8 billion, a rise from the expected range of $0.7 billion to $1.1 billion for 2023.

Vernova's Valuation as an Independent Company

Wall Street will now turn its attention to assessing how Vernova should be valued as an independent company. Jefferies analyst Sheila Kahyaoglu estimates that Vernova is worth approximately 8.5 times her 2025 estimated Ebitda of $3.2 billion, totaling around $27 billion. With about $4 billion in cash and no debt, Vernova's market capitalization is expected to reach $31 billion.

This valuation translates to roughly $28 per GE share, with investors receiving one Vernova share for every four GE shares held. Consequently, the stand-alone stock price is anticipated to be around $112.

Vernova's Value Creation Strategy

"The energy transition presents the next investment supercycle, and we are thrilled to unveil GE Vernova’s value creation strategy," stated Vernova CEO Scott Strazik in a recent news release. Strazik highlighted Vernova's vast installed base, growing recurring revenue from high-margin services, and substantial backlog as key components driving value creation for the company.

GE Stock Performance and Market Trends

General Electric stock observed a 0.3% increase during premarket trading on Wednesday. Additionally, S&P 500 and Nasdaq Composite futures rose by 0.4% and 0.7%, respectively. Over the past 12 months, GE stock has surged by approximately 81%. In comparison, the S&P 500 and Nasdaq Composite have seen gains of around 25% and 37%, respectively.