GE Vernova has a 'superior top and bottom-line growth profile' - Barclays

GE Vernova (GEV) is poised for "superior top- and bottom-line growth," according to Barclays analysts in a note Monday. The bank initiated coverage of the stock with an Overweight rating and $250 price target.

Analysts attribute this outlook to strong pricing, productivity efforts, and volume leverage, which they believe will lead to robust earnings and free cash flow (FCF) growth.

Additionally, they anticipate the potential for significant buybacks and rapid dividend increases in the near future.

"We think that GEV will outgrow the MI sector by ~70bps in terms of organic sales over 2025-2026, or ~180bps if we exclude the offshore wind business," says Barclays.

Analysts believe that excluding GE Vernova's loss-making offshore wind business, which is depleting its backlog, the company could surpass the sector by 180 bps, driven by its Power, Electrification, and Onshore Wind divisions.

Barclays expects this high-growth profile to lead to a valuation multiple upside and positive revisions in consensus estimates, noting that their 2025 EBITDA estimate is about 5% above market expectations.

Analysts also highlight GE Vernova's strategic exposure to electric utility capital expenditures (capex), which they consider one of the most attractive markets within the MI sector.

GE Vernova's focus on electric utility investments is seen as a competitive advantage, with over 85% of its sales tied to this sector. In comparison, its closest competitor, Hubbell (HUBB), has around 60% exposure. Barclays notes that utility spending in the U.S. and Europe is expected to grow at a high-single-digit percentage annually, far outpacing broader industrial capex growth.

With these factors in mind, Barclays views GE Vernova as well-positioned for strong growth, particularly given the tightening peak capacity in the electric utility market, which differentiates it from other industrial sectors.

Source: Investing.com