GE Vernova Stock Soared on Earnings Beat. Wall Street Loves the Power Firm.

Coming into the week, GE Vernova shares had roughly tripled since the company’s April 2024 separation from GE Aerospace. (Courtesy GE Vernova)

GE Vernova delivered close-to-perfect, better-than-expected second-quarter earnings, and raised its full-year financial guidance.

Shares gained 15% on Wednesday, closing at $629.03, while the S&P 500 and Dow Jones Industrial Average added 0.8% and 1.1%, respectively. Shares traded as high as $633.72, a record.

Wednesday morning, the company reported earnings before interest, taxes, depreciation, and amortization, or Ebitda, of $800 million and earnings per share of $1.86 on sales of $9.1 billion. Wall Street was looking for Ebitda of $721 million and earnings of $1.51 a share on sales of $8.8 billion, according to FactSet.

In the second quarter of 2024, GE Vernova reported Ebitda of $500 million and unadjusted earnings per share of $4.65 on sales of $8.2 billion. (The GE Aerospace spinoff affected earnings per share.)

That’s the earnings beat. There was a short-term guidance increase, too, and an acknowledgment that the long-term profit goals set in 2024 look too modest.

Now, management expects full-year results to come in at the high end of the range it had predicted earlier. In April, the company said it expected 2025 sales of $36 billion to $37 billion, with Ebitda margins in the “high-single digits.” Guidance implies Ebitda of roughly $2.9 billion to $3.3 billion. Wall Street currently projects 2025 Ebitda of $3.2 billion.

Second-quarter orders of $12.4 billion also eclipsed sales, a good sign for growth.

Jefferies analyst Julien Dumoulin-Smith called performance in the gas power division “robust.”

As for the long term, CEO Scott Strazik told Barron’s that his company would be revisiting its 2028 goals and updating guidance at the end of the year. In December, management’s goal was to produce an Ebitda profit margin of 14% by 2028. Second-quarter profit margins in the company’s gas and grid businesses were already 16.4% and 14.6%, respectively. Strazik added that new orders have better pricing and that the gas turbine business was already essentially sold out for 2028, with customers ordering for 2029.

All that is good news. The company’s wind business, however, remains a challenge. It lost $165 million in the quarter and is losing policy support.

The “One Big Beautiful Bill Act, passed July 4, phases out U.S. wind tax credits,” noted BofA Securities analyst Andrew Obin in a recent report, referring to Republicans’ tax and spending bill. “This is likely to drive an uptick in U.S. onshore wind orders in [the coming year] as developers rush to start construction before the deadline.” There is, however, a risk of lower U.S. onshore wind deliveries in 2027 and beyond. The wind situation, however, isn’t a surprise, and GE is working to lower its costs.

Whether a beat-and-raise quarter with a solid long-term outlook would be good enough for the stock was anyone’s guess heading into earnings. Coming into the week, shares had roughly tripled since the company’s April 2024 separation from GE Aerospace.

GE Vernova remains a Wall Street darling and investor, and a key way to play the growing demand for electricity in the U.S.

“Wall Street has fallen in love with GE Vernova because of its ability to be a titan of the next generation of energy and the AI-boosted infrastructure spending boom,” says Zack’s stock strategist Ben Rains.

Power-hungry artificial-intelligence computing run by the likes of Alphabet , Amazon.com, Microsoft , and Meta Platforms is transforming U.S. electricity demand. After growing at an average annual 0.5% from 2014 to 2024, U.S. electricity demand should grow at 2.5% a year on average from 2024 to 2035, according to Obin. That two-percentage-point increase amounts to 800 gigawatts of needed power-generating capacity, and Vernova makes the hardware and software required to generate more electrons.

The long-term outlook couldn’t be much brighter.

Dumoulin-Smith rates shares Hold and has a $565 price target for the stock. Overall, 75% of analysts covering shares rate them Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target, however, is about $538 a share, below current levels. Wall Street has had trouble keeping up. Investors can expect price targets to move higher in the coming days.

Options markets implied that GE Vernova shares would move about 5% up or down following earnings. They moved an average of about 3% over the past four quarterly reports, rising three times and falling once.

Write to Al Root at allen.root@dowjones.com