Why Did GE Vernova Stock Drop Today?
Key Points
GE Vernova missed on earnings.
But it beat on sales, and even "missed" earnings grew 33% year over year.
GE Vernova generated massive free cash flow in Q2 as well.
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Shares of GE Vernova (NYSE: GEV) stock, the power generation equipment division spun off from General Electric in 2024, sank 6.2% through 11:22 a.m. ET Wednesday after reporting mixed Q2 earnings this morning.
Analysts forecast GE Vernova would earn $3.04 per share on $10.7 billion in Q2 sales. Instead, GE Vernova reported $2.47 per share in profit (a miss) on sales of $11.1 billion (a beat).
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GE Vernova Q2 earnings
Revenue grew 22% year over year, with 12% organic, contributing to the sales beat. Earnings grew even faster (just not fast enough to meet high expectations), rising 33% year over year. Best of all, cash flow soared Q2, rising many from just $367 million a year ago to $5.5 billion this time around. Minus capital spending, that still left positive free cash flow of $5.1 billion.
So why didn't this please investors?
Guidance doesn't seem to be a concern, with management raising guidance to a minimum of $45.5 billion in sales through the end of this year -- and possibly more. (Analysts only expected the first $45.5 billion). GE Vernova booked $24.2 billion in new orders in the quarter, twice as much as sales going out the door, and up 88% year over year, as business booms in power generation -- especially for data centers, which comprise more than 20% of total orders.
Backlogged orders to be completed rose $13 billion as a result, and total backlog now comes to $176 billion.
What's next for GE Vernova
All things considered, GE Vernova looks to be on a roll to me. The stock isn't super-cheap at 31.5 times trailing earnings, but at the rate sales, earnings, and especially free cash flow are growing, I think this stock is worth the price.
Should you buy stock in GE Vernova right now?
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Rich Smith 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.
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