Why Shares in GE Vernova Popped Today
Key Points
The first-ever non-US repower contract provides confidence that GE Vernova can capitalize on a growth opportunity.
The power and electrification segments are significant beneficiaries of the drive to invest in power to support AI-led data center demand.
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Shares in GE Vernova (NYSE: GEV) rose by more than 6% as of 2 p.m. today. The move comes after investors welcomed the first-ever wind repower upgrade contract outside of the U.S.. The deal isn't major, just 25 repower upgrade kits for GE Vernova turbines and a five-year service agreement for the Taiwan Power Company, but it is symbolic of management's efforts to turn the wind power business into profit.
GE Vernova's remarkable turnaround
Long-time investors who remember the dark days of the former General Electric will recall that the gas turbine business was the most problematic part of the business, with electrification (grid equipment) a slow grower. Less than a decade ago, the market was sounding the death knell for gas turbines in favor of the inexorable rise of renewable energy (which included GE's wind power business).
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Since then, there has been a remarkable turnaround, as cost, logistics, and supply chain issues have slowed the adoption of wind power. Meanwhile, the growing demand for power to support AI data centers has led to a complete reversal of roles.
As such, GE Vernova's power segment generated $1.9 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA) in the first nine months, with electrification contributing $929 million and wind incurring a loss of $372 million.
Image source: Getty Images.
Where next for GE Vernova's wind power business
Moreover, with total organic orders down 10% in the first nine months compared to the same period last year (equipment orders were down 21%), it's imperative that GE Vernova starts winning orders, as announced with the Taiwan Power Company today. With 57,000 wind turbines installed worldwide, GE Vernova certainly has an opportunity to pursue, and today's deal is a step in the right direction.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Ge Vernova. The Motley Fool has a disclosure policy.
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