Goldman Sachs' first verdict on GE Vernova: 'uniquely positioned'
Investment giant says newly spun-off business well placed to benefit from energy transition
Goldman Sachs said GE Vernova is “uniquely positioned” to benefit from the energy transition and has significant potential to increase profits in wind power, as the investment giant started coverage of the newly spun-off global energy business.
GE Vernova, referred to by the investment bank as GEV, encompasses the former GE’s interests in power, renewables and grids.
Goldman Sachs said in a note: “Over the long-term, we are optimistic on GEV’s position in helping the world electrify and decarbonise given GEV’s assets serve a [more than] $250bn market with a current backlog [exceeding] $100bn.”
The analysts continued: “We have been encouraged by the progress this management team has made over the last two-plus years to make GEV a structurally more profitable enterprise and think there is still meaningful under-earning potential in the coming years.
“We think the largest opportunity will come from the growth in Wind as well as improved profitability in the Electrification business”, said Goldman Sachs, adding “we believe GEV is uniquely positioned to benefit as the energy transition unfolds”. The company has a “path” to an Ebitda earnings figure of around $4bn by 2026, it said.
The final two years of GE Vernova’s time as part of the wider GE business saw a major turnaround effort in wind power, which Goldman Sachs noted had been achieved ahead of schedule for onshore.
“Offshore Wind is still a work-in-progress but the company is getting through unprofitable backlog faster-than-expected and there is line of sight to breakeven profitability by 2026,” it said.
The investment giant reckons onshore wind contains “meaningful” potential to mine additional profits growth, not least thanks to the impact of the Inflation Reduction Act on orders in the US, where GE Vernova has a dominant position.
“We believe consensus is under-estimating not just 2025 Onshore Wind organic growth but also profitability as Onshore Wind should exit 2024 with at least low-teens margins.”
GE Vernova’s shares were trading at around $135 in early trading in New York today (Thursday).
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