This morning, GE Vernova (GEV), the power generation equipment division separated from General Electric last year, announced impressive earnings, causing its share price to increase by 14.8% before 11:30 a.m. Eastern Time.
According to analyst predictions, General Electric’s Vernova division was expected to make $1.50 per share with quarterly revenue of $8.8 billion. However, the company actually announced earnings of $1.88 per share and sales amounting to $9.1 billion instead.
GE Vernova Q2 earnings
Due to the complications stemming from the spin-off that took place last year, it’s challenging to directly compare Q2 results from this year with those of last year. However, a positive sign is that sales increased by 11%, indicating the business has performed well overall, despite a significant decrease in earnings of about 60% and a substantial drop in free cash flow surpassing 76%, leaving us with $194 million.
In the recent quarter, the company received $12.4 billion in fresh orders, which equates to a 1.4 book-to-bill ratio, indicating robust sales growth on the horizon. CEO Scott Strazik is optimistic, stating that the company can further speed up its growth and improve profit margins moving forward.
Is GE Vernova stock a buy?
Strazik provides forecasts for anticipated revenue, profit margin, and free cash flow for the year ahead. The projected revenue is estimated at around $37 billion in 2025, with adjusted EBITDA margins expected to be between 8% and 9%. Initially predicted free cash flow of $2 billion to $2.5 billion could now range from $3 billion to $3.5 billion according to management, representing a possible 30% improvement over the company’s trailing free cash flow figure of $2.7 billion.
Despite the optimistic outlook given by some, valuing the GE Vernova stock at nearly 50 times Free Cash Flow (FCF) at its lowest projection, and over 43 times even at its highest, appears quite high to me. This valuation becomes particularly challenging when considering a growth rate of just 30%. I must admit that I am not among those who would purchase GE Vernova stock at these price levels today.
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2025-07-23 19:35