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GE Vernova Set to Supply Turbines for Australian Wind Farm: Buy Now?
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GE Vernova Inc. (GEV - Free Report) has recently inked a deal with Aula Energy and CS Energy to deliver 38 of its 6 megawatts (MW)–164-meter (m) workhorse turbines, which will be incorporated in Australia’s Boulder Creek Wind Farm. With this agreement, GEV’s 6 MW platform turbines in operation or under construction in Australia cumulatively amount to more than 250, reflecting the company’s solid footprint in the nation’s expanding wind energy industry.
Impressively, GE Vernova’s 6 MW turbine is the most widely deployed onshore wind turbine above 5 MW outside China. With the annual onshore wind energy generation capacity in Australia having roughly tripled within the last decade (as per a report by Statista), GEV’s growth prospects in this nation remain quite significant. The company boasts more than 3 gigawatts (GW) of wind turbines in operation or under construction across Australia.
This might encourage investors to add GEV stock to their portfolio. However, before making any hasty decision, let’s delve into the company’s year-to-date performance, growth prospects as well as risks (if any).
GEV Stock Outperforms Industry, Sector & S&P500
Shares of GE Vernova have surged an impressive 89.7% in the year-to-date period, outperforming the Zacks Alternative-Energy industry’s growth of 44.4% and the broader Zacks Oils-Energy sector’s return of 8.2%. It has also outpaced the S&P 500’s surge of 20.6%.
A similar stellar performance has been delivered by other industry players, such as Talen Energy Corporation (TLN - Free Report) , Constellation Energy Corporation (CEG - Free Report) and Verde Clean Fuels (VGAS - Free Report) , whose shares have surged 197.5%, 144.3% and 63.2%, respectively, year to date.
GEV YTD Performance
Image Source: Zacks Investment Research
What is Driving GEV Stock Up?
Increasing electricity demand worldwide, driven by rising data center growth as well as incremental electricity consumption, and the resultant growth in grid modernization efforts adopted by utilities have been playing the role of key growth catalysts for GEV, a renowned renewable energy equipment and services provider. The company’s proven prowess in the electric power industry can be gauged from the fact that as of June 2024, approximately 25% of the world’s electricity was generated using GE Vernova’s installed base of technologies.
Consequently, solid demand for its gas power and hydropower equipment as well as associated services has been on the rise. This, together with higher order growth in its grid solutions business, buoyed by strong demand for large-scale transmission-related equipment as renewable penetration in utilities continues to rise, has been boosting the company’s top-line growth prospects.
Evidently, in the second quarter of 2024, GEV’s orders of $11.8 billion exceeded revenues by 1.4X, whereas the top line improved 2% organically on a year-over-year basis. It ended the second quarter with a solid cash balance worth $5.8 billion. Such impressive operating results might have boosted investors’ confidence in this stock. This has been reflected in GEV’s solid share price return so far this year.
Will GEV Continue to Grow?
With rising renewable energy adoption worldwide, GEV predicts gas power generation to continue to grow at low single-digits. This should continue to boost demand for GEV’s gas equipment and services, thereby bolstering the revenue generation prospects for its Gas Power business.
Within its wind business segment, growth prospects for GEV in onshore wind remain solid, with its installed base being approximately 54,000 turbines around the globe.
GEV’s grid solution equipment and services should also continue to experience a robust growth trend in the coming years, with global electricity demand expected to rise at a faster rate over the next three years — an average of 3.4% annually through 2026 (as per the latest report published by the International Energy Agency).
A quick sneak peek at its near-term earnings and sales estimates mirrors solid growth prospects.
Upbeat Estimates for GEV
The Zacks Consensus Estimate for GEV’s 2024 and 2025 sales reflects an improvement of 5% and 6.4%, respectively, year over year.
The Zacks Consensus Estimate for 2024 and 2025 earnings per share has moved north 3.6% and 8.6%, respectively, over the past 60 days. The upward revision in earnings estimates indicates analysts’ increasing confidence in the stock.
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
Risks to Consider Before Choosing GEV
Despite the aforementioned growth opportunities, GEV faces certain challenges that one should consider before investing in this stock. To this end, it is imperative to mention that the offshore wind industry has been facing increased challenges lately, in the form of increased material cost and persistent supply-chain challenges. This, in turn, has led to several project cancellations in recent times.
As a manufacturer of wind turbines, GEV has thus been experiencing pressure in its Offshore Wind business related to its product and project costs. Changes in execution timelines or other adverse developments might have an adverse impact on GEV’s cash collection timelines and contract profitability, resulting in losses beyond current expectations.
Moreover, given the long-cycle nature of its power generation business, the company expects the impact of inflation to continue to be challenging for its business, which, in turn, might hurt the pricing of its products and services.
GEV Stock Trading at a Premium
In terms of valuation, GEV’s forward 12-month price-to-earnings (P/E) is 48.33X, a premium to its peer group’s average of 13.49X. This suggests that investors will be paying a higher price than the company's expected earnings growth compared to its peers.
Image Source: Zacks Investment Research
Final Thoughts
To conclude, investors interested in GEV Vernova should wait for a better entry point, considering its premium valuation and the challenges it is facing in the wind market. Also, GEV currently has a VGM Score of C, which is not a very favorable indicator of strong performance.
However, those who already own this Zacks Rank #3 (Hold) stock may stay invested as the company's upbeat estimates, solid share price returns year to date, as well as benefits of steadily growing renewable penetration across industries offer solid prospects.
Image: Bigstock
GE Vernova Set to Supply Turbines for Australian Wind Farm: Buy Now?
GE Vernova Inc. (GEV - Free Report) has recently inked a deal with Aula Energy and CS Energy to deliver 38 of its 6 megawatts (MW)–164-meter (m) workhorse turbines, which will be incorporated in Australia’s Boulder Creek Wind Farm. With this agreement, GEV’s 6 MW platform turbines in operation or under construction in Australia cumulatively amount to more than 250, reflecting the company’s solid footprint in the nation’s expanding wind energy industry.
Impressively, GE Vernova’s 6 MW turbine is the most widely deployed onshore wind turbine above 5 MW outside China. With the annual onshore wind energy generation capacity in Australia having roughly tripled within the last decade (as per a report by Statista), GEV’s growth prospects in this nation remain quite significant. The company boasts more than 3 gigawatts (GW) of wind turbines in operation or under construction across Australia.
This might encourage investors to add GEV stock to their portfolio. However, before making any hasty decision, let’s delve into the company’s year-to-date performance, growth prospects as well as risks (if any).
GEV Stock Outperforms Industry, Sector & S&P500
Shares of GE Vernova have surged an impressive 89.7% in the year-to-date period, outperforming the Zacks Alternative-Energy industry’s growth of 44.4% and the broader Zacks Oils-Energy sector’s return of 8.2%. It has also outpaced the S&P 500’s surge of 20.6%.
A similar stellar performance has been delivered by other industry players, such as Talen Energy Corporation (TLN - Free Report) , Constellation Energy Corporation (CEG - Free Report) and Verde Clean Fuels (VGAS - Free Report) , whose shares have surged 197.5%, 144.3% and 63.2%, respectively, year to date.
GEV YTD Performance
What is Driving GEV Stock Up?
Increasing electricity demand worldwide, driven by rising data center growth as well as incremental electricity consumption, and the resultant growth in grid modernization efforts adopted by utilities have been playing the role of key growth catalysts for GEV, a renowned renewable energy equipment and services provider. The company’s proven prowess in the electric power industry can be gauged from the fact that as of June 2024, approximately 25% of the world’s electricity was generated using GE Vernova’s installed base of technologies.
Consequently, solid demand for its gas power and hydropower equipment as well as associated services has been on the rise. This, together with higher order growth in its grid solutions business, buoyed by strong demand for large-scale transmission-related equipment as renewable penetration in utilities continues to rise, has been boosting the company’s top-line growth prospects.
Evidently, in the second quarter of 2024, GEV’s orders of $11.8 billion exceeded revenues by 1.4X, whereas the top line improved 2% organically on a year-over-year basis. It ended the second quarter with a solid cash balance worth $5.8 billion. Such impressive operating results might have boosted investors’ confidence in this stock. This has been reflected in GEV’s solid share price return so far this year.
Will GEV Continue to Grow?
With rising renewable energy adoption worldwide, GEV predicts gas power generation to continue to grow at low single-digits. This should continue to boost demand for GEV’s gas equipment and services, thereby bolstering the revenue generation prospects for its Gas Power business.
Within its wind business segment, growth prospects for GEV in onshore wind remain solid, with its installed base being approximately 54,000 turbines around the globe.
GEV’s grid solution equipment and services should also continue to experience a robust growth trend in the coming years, with global electricity demand expected to rise at a faster rate over the next three years — an average of 3.4% annually through 2026 (as per the latest report published by the International Energy Agency).
A quick sneak peek at its near-term earnings and sales estimates mirrors solid growth prospects.
Upbeat Estimates for GEV
The Zacks Consensus Estimate for GEV’s 2024 and 2025 sales reflects an improvement of 5% and 6.4%, respectively, year over year.
The Zacks Consensus Estimate for 2024 and 2025 earnings per share has moved north 3.6% and 8.6%, respectively, over the past 60 days. The upward revision in earnings estimates indicates analysts’ increasing confidence in the stock.
Risks to Consider Before Choosing GEV
Despite the aforementioned growth opportunities, GEV faces certain challenges that one should consider before investing in this stock. To this end, it is imperative to mention that the offshore wind industry has been facing increased challenges lately, in the form of increased material cost and persistent supply-chain challenges. This, in turn, has led to several project cancellations in recent times.
As a manufacturer of wind turbines, GEV has thus been experiencing pressure in its Offshore Wind business related to its product and project costs. Changes in execution timelines or other adverse developments might have an adverse impact on GEV’s cash collection timelines and contract profitability, resulting in losses beyond current expectations.
Moreover, given the long-cycle nature of its power generation business, the company expects the impact of inflation to continue to be challenging for its business, which, in turn, might hurt the pricing of its products and services.
GEV Stock Trading at a Premium
In terms of valuation, GEV’s forward 12-month price-to-earnings (P/E) is 48.33X, a premium to its peer group’s average of 13.49X. This suggests that investors will be paying a higher price than the company's expected earnings growth compared to its peers.
Final Thoughts
To conclude, investors interested in GEV Vernova should wait for a better entry point, considering its premium valuation and the challenges it is facing in the wind market. Also, GEV currently has a VGM Score of C, which is not a very favorable indicator of strong performance.
However, those who already own this Zacks Rank #3 (Hold) stock may stay invested as the company's upbeat estimates, solid share price returns year to date, as well as benefits of steadily growing renewable penetration across industries offer solid prospects.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.