Al Root

Investors often focus on quarterly earnings releases and skip the details available in lengthy financial statements filed with the Securities and Exchange Commission.

They risk missing out on useful tidbits if they do that.

On Thursday, GE Vernova filed its annual report and form 10-K, arriving just a couple of weeks after earnings. Quarterly results were fine as the company delivered expected earnings before interest, taxes, depreciation, and amortization, or Ebitda, orders exceeded sales, and GE Vernova maintained its 2025 outlook. Shares gained 2.7%.

That earnings update might have been enough for investors, who can think about other things until first quarter results are due in April. The annual report, however, has a few interesting tidbits, starting with the CEO letter.

This is GE Vernova's first annual report since it was spun out of GE Aerospace on Apr. 2, 2024. So it's CEO Scott Strazik's letter, too.

"After decades of modest growth in developed economies, electricity has become a dominant force for prosperity, and increasingly an enabler of national security," wrote Strazik. "The energy system is shifting towards electricity while the growth of AI is tied to both the health and security of our economies as well as national interests."

All that means growth for GE Vernova. American electricity generation hasn't grown all that much in roughly two decades. Looking ahead, annual electricity demand growth should average 2% to 3%, according to the company. "We are in the early stages of the next supercycle: global investment into the electric power system," added Strazik.

As expectations for growth have risen, so has GE Vernova's multiple. At the time of the spinoff, shares traded for about 25 times estimated 2026 earnings. Now they trade for about 35 times.

Multiple expansion is good for any stock. Shares have risen 200% from levels around the spinoff. That's remarkable considering GE Vernova was supposed to be the relatively weak performer in the GE breakup. It was spun off with no debt and with GE Aerospace keeping no stake -- which can create an overhang.

Things just weren't that dire, though. "If you pull up historical [analyst] valuations for Vernova as part of GE, what you come up with is the business was valued at about $80 billion," says BofA Securities analyst Andrew Obin. Then things got really bad for GE, with the total company market value -- including GE Aerospace and GE HealthCare Technologies -- bottoming out at less than $100 billion in 2018.

"Today, the market cap is $100 billion," adds Obin, pointing out that all that has really happened is investors went back to old valuations and assigned a little more value to the grid technology business. He sees more room for GE Vernova stock to run. Obin rates the shares a Buy and has a $485 price target for the stock.

Further down in the report, below the letter, are the notes to the financial statements. Investors might want to check in on the pension plan. GE Vernova has about $17 billion in pension liabilities and about $15 billion in assets set aside to meet its obligations. That nearly $2 billion gap is worth watching, but it is relatively small and manageable for a company the size of Vernova.

The added details from the annual report could be helping the stock in Thursday trading. GE Vernova shares were up 3.2% around midday at just under $380 a piece, while the S&P 500 was up about 0.2% and the Dow Jones Industrial Average was off about 0.3%.

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

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February 06, 2025 13:23 ET (18:23 GMT)

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