Scott Strazik's GE Vernova Has a $176 Billion Backlog. So Why Did Wall Street Sell the Stock?

There's no denying GE Vernova's (NYSE: GEV) business is booming. Last quarter's revenue grew 22% year over year to $11.1 billion, versus estimates of only $10.8 billion. Its backlog grew by $13 billion as well, reaching $176 billion, prompting the company to raise its full-year guidance from a range of $45.5 billion to $46.5 billion to a revised range of $44.5 billion to $45.5 billion.

It's profitable, too, with per-share profits improving from $1.86 in Q2 of last year to an adjusted $2.47 per share this time around.

That's the apparent reason GEV stock tumbled to the tune of 9% following the release of this quarterly earnings report, by the way... analysts were expecting a per-share profit of $3.18.

What if, however, this post-earnings stumble is far more nuanced?

Vulnerable to anything less than perfection

GE Vernova is the power-production business that spun off from General Electric in 2024. Wind turbines, nuclear power tech, hydroelectric equipment, and power-grid solutions are all in its wheelhouse.

The company's hottest business right now, however, is natural gas power turbines. Originally intended for electric utility companies, this arm is experiencing a serious swell of demand from artificial intelligence data center owners increasingly taking power production into their own hands. For perspective, PwC expects the United States' data-center-driven demand for natural gas to more than quintuple between 2025 and 2035. And GE Vernova's growing backlog says as much.

Nevertheless, its stock tanked following the release of its second-quarter numbers. What gives? It didn't fall for any single big reason, but rather, for a handful of small ones.

Image source: Getty Images.

One of those reasons is, of course, the earnings miss paired with another shortfall. That's quarterly earnings before interest, taxes, depreciation, and amortization (EBITDA) of $1.25 billion, which came up short of analyst projections of $1.28 billion. Meanwhile, its wind-power division's negative EBITDA widened to a loss of $275 million on a 10% tumble in revenue and a 39% decline in orders, surprising shareholders, as did management's warning that tariffs would add roughly $100 million to $200 million to this year's costs.

Perhaps none of this was as problematic, however, as the ticker's valuation heading into the release of the Q2 report. At the time, shares were priced at roughly 35 times this year's projected earnings of $30.76. With such a steep valuation, anything less than rock-solid perfection left the stock vulnerable to selling from nervous investors who were already watching it struggle even before earnings were posted.

An opportunity, not an omen

Just don't read too much into the market's knee-jerk response. It's arguable that the stock was going to tumble no matter what GE Vernova reported, with profit-taking pressure still in place following its huge run-up earlier this year. The volatile market itself was -- and still is -- a contributing factor, too. Besides, most of the post-earnings pullback has since been reclaimed anyway.

More than anything, though, know that despite the stock's recent weakness, the analyst community still sports a 12-month consensus price target of $1,238.78, more than 20% above the stock's current price, with most of this crowd rating GEV as a strong buy. You could certainly do worse.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends GE Vernova. The Motley Fool has a disclosure policy.