This story was originally published on Utility Dive. To receive daily news and insights, subscribe to our free daily Utility Dive newsletter. GE Vernova plans to close its acquisition of Prolec GE early next month, improving its competitive position in fast-growing international markets for low-voltage electrical distribution equipment and boosting its long-term financial outlook, the company said Wednesday. The pending acquisition was one of several pieces of good news GE Vernova shared in its fourth-qua ...

Supply Chain Challenges - The gas turbine industry is experiencing significant supply chain challenges, with backlogs extending years into the future and utilities struggling to secure dispatchable capacity [1] - Rotor forgings and hot-section blades are identified as primary bottlenecks, constrained by limited suppliers and complex manufacturing processes [1] - Some large frame turbines have been shipped without rotors or blades, with installation occurring later to maintain construction schedules [1] Vendor Qualification Issues - Qualifying new vendors is a lengthy process, heavily dependent on the original equipment manufacturer (OEM), supplier, and specific component [2] - Large forgings present particular challenges due to a limited number of global suppliers, many of whom serve multiple OEMs [2] - The qualification process for advanced machines requiring single-crystal blades or exotic materials is even more complex [2] Demand Drivers - Current demand for gas turbines is driven by multiple factors, including near-term needs from data centers and limited dispatchable power options due to increasing non-dispatchable resources on the grid [3] - New coal generation is no longer a viable option for most utilities, while natural gas supplies are more abundant, providing stability for gas-fired generation investment [3] - Data centers are driving acute short-term demand for dispatchable power, competing directly with utilities for small- and mid-sized turbines in the 30 MW to 100 MW range [3]

Core Viewpoint - Investors are shifting focus from technology to industrial sectors, leading to record levels in the industrial space [1] Industrial Sector Insights - The industrial sector is experiencing a positive shift, driven by stabilizing tariff policies, potential Federal Reserve interest rate cuts, and a hope for recovery in the ISM index, which has been in contraction for three years [3][4] - Recent performance in the industrial sector has been bolstered by companies linked to AI, with strong backlogs indicating continued demand [5][6] Company-Specific Highlights - Eaton is identified as a top pick for 2026, with approximately 20% exposure to data centers, reflecting strong growth potential [6] - GE Vernova is also favored, with significant order bookings extending into 2029 and beyond, providing visibility into future earnings growth [7][10] - The upside potential for GE Vernova is projected to be in the high single digits to low double digits through 2028, making it an attractive investment [8] Earnings and Valuation Considerations - The stock performance of GE Vernova has been influenced by robust gas turbine demand and visibility into gas power services, which are expected to drive earnings growth into the 2030s [10] - The recurring revenue from long-term service agreements associated with gas turbines enhances the investment case for GE Vernova [11][12] Underappreciated Companies - Dober Corporation, Illinois Toolworks, and Ingersoll Rand are highlighted as underappreciated companies with significant upside potential, potentially exceeding 20% in earnings and multiple rerating if a short cycle recovery occurs [13]

Core Insights - GE Vernova anticipates significant revenue growth in its electrification segment, projecting a 25% increase in 2025 and around 20% in 2026, driven by an electrification "supercycle" that will enhance electricity's share in final energy consumption [4][3]. Group 1: Revenue and Growth Projections - Expected revenue in 2028 is projected to be $52 billion, excluding the 50% Prolec GE acquisition [4]. - The electrification segment is expected to see a revenue growth of 25% in 2025 [3]. Group 2: Gas Turbine Orders and Production - GE Vernova's gas turbine backlog is expected to reach 80 GW by the end of 2025, with strong demand reflected in 18 GW of turbine orders booked in the current quarter [8][10]. - The company aims for an annualized turbine production of 20 GW by mid-2026, with potential to increase to 24 GW by mid-2028 [9]. Group 3: Market Demand and Acquisitions - The current quarter is anticipated to be the largest for electrical equipment orders directed to hyperscaler tech companies, with orders coming from Europe, North America, the Middle East, and Australia [5][6]. - The pending acquisition of Prolec GE for $5.3 billion is expected to enhance GE Vernova's market presence in lower-voltage electrical equipment across various geographies, with the deal on track to close in mid-2026 [7].

Core Viewpoint - GE Vernova's stock price reached an all-time high due to an optimistic revenue outlook for 2026 and an increased stock buyback plan of $4 billion, driven by rising electricity demand from AI and data-intensive industries [2][12]. Group 1: Revenue and Growth Projections - GE Vernova expects organic revenue growth of 16% to 18% in its power business and 20% in its electrification business by 2026 [14]. - The company anticipates revenue to reach between $41 billion and $42 billion in 2026, reflecting low double-digit year-over-year growth [18]. - Revenue is projected to reach $52 billion by 2028, significantly up from the expected $36 billion to $37 billion in 2025 [16]. Group 2: Stock Performance and Market Sentiment - Since its spin-off from General Electric in March 2024, GE Vernova's stock has risen over 430%, with a year-to-date increase of more than 115% [16][12]. - At least six brokerages have raised their target prices for the stock, with JPMorgan setting a market-high target of $1,000, indicating nearly a 60% upside from a previous closing price of $625.30 [17][20]. Group 3: Operational and Financial Strength - The company has sold out all its gas turbine capacity through 2028, with expected visibility of orders extending to 2030 [2]. - GE Vernova's free cash flow is projected to reach $4.5 billion to $5 billion next year, up from an expected $3.5 billion to $4 billion in 2025 [14]. - Cumulative free cash flow from 2025 to 2028 is expected to total $22 billion, even after investing nearly $10 billion in capital expenditures and R&D [7]. Group 4: Market Demand and Competitive Position - The demand for advanced energy infrastructure is being driven by structural tailwinds such as AI-related electricity consumption, electrification initiatives, and global decarbonization efforts [16]. - The company is expected to benefit from a sustained energy investment cycle, with gas power driving revenue and profit growth [18][19]. - Strong demand for heavy gas turbines is particularly noted in North America and the Middle East, with significant growth in electrification orders driven by modernization efforts in Europe and rising demand in North America, the Middle East, and Asia [9][19].

Financial Targets and Shareholder Returns - The company revised its financial targets upwards, projecting 2025 revenue guidance to trend higher and even looking towards 2028 [1] - Margins are projected to be 20%, an increase from the prior target of 14%, exceeding Wall Street consensus [1] - The company announced a larger dividend and increased its share buyback program to $10 billion from $6 billion [1] Market Position and Contracts - The company signed 18 gigawatts of gas turbine contracts so far this quarter, indicating strong demand [2] - Shares of the company have been performing well, reflecting its emergence as a key player in the energy equipment market, particularly for data centers [2] - The CEO stated that the company is well positioned with a large install base and advanced solutions to serve the growing long cycle market [2]

Core Viewpoint - Ananym Capital has acquired a significant stake in Siemens Energy and is advocating for the company to concentrate on its gas turbine and power generation business while spinning off its less profitable wind power segment [1][2]. Group 1: Investment Strategy - Ananym Capital expresses skepticism regarding the profitability of Siemens Energy's wind power segment, contrasting it with the promising outlook for the gas turbine business, driven by increased demand for reliable baseload generation capacity from data centers [2]. - The activist investor believes that Siemens Energy's true value will remain hidden as long as the gas and wind businesses are combined, suggesting a separation could unlock greater value [3]. Group 2: Background of Activist Investor - Charlie Penner, the founder of Ananym Capital, previously led a campaign against ExxonMobil, advocating for increased investment in renewable energy sources like wind and solar [4]. - The activist investor's past actions highlight a shift in focus, as Penner now emphasizes the potential of gas turbines over wind energy, indicating a strategic pivot in investment priorities within the energy sector [4][6].

Industry Advancement - China has launched a power plant utilizing an advanced gas turbine that was manufactured locally for the first time [1]

Core Insights - GE Vernova reported a Q3 2025 revenue of $10 billion, reflecting a 10% year-over-year increase [1] - Total orders reached $14.7 billion, marking a significant 55% year-over-year growth, primarily driven by the power and electrification segments [2] - The gas turbine backlog increased to 62 GW, up 7 GW from Q2 2025, which includes 29 GW in order backlog and 33 GW in slot reservations [3] Electrification Segment - The electrification segment experienced a remarkable 102% growth, making it the fastest-growing segment for GE Vernova [4] - GE Vernova plans to acquire the remaining 50% of Prolec GE for $5.3 billion, which is expected to close by mid-2026, enhancing its capabilities in the North American market [4][5] - Prolec's data center sales grew from 10% of total sales in 2024 to nearly 20% in 2025, indicating a strategic shift towards integrated solutions for new customer types, such as data centers [6] Revenue Growth and Projections - Revenue in the electrification segment surged by 32% year-over-year, with equipment orders more than doubling [7] - GE Vernova anticipates 25% organic revenue growth for the year, an increase from previous forecasts of around 20%, with a target of 10% annual growth through 2030 [7] - Key growth drivers include data centers, widespread electrification, increased grid flexibility needs, utility-led transmission investments, and heightened national security interests [8] Data Center Impact - Hyperscale data centers have contributed $900 million in orders since January, positioning the segment to potentially double the total orders of $600 million from 2024 [9]

Core Insights - GE Vernova Inc. anticipates a growing demand for its natural gas turbines from major tech companies constructing data centers, indicating a shift in customer base from traditional utilities to hyperscalers [1][2][3] Group 1: Market Trends - Currently, 90% of GE Vernova's turbine orders are from traditional customers, but this shifts to about one-third for paid reservations from hyperscalers, highlighting a significant market transition [2] - The increasing electricity demand driven by data centers for AI and new factories is benefiting GE Vernova, as the electrification of the economy accelerates [3] Group 2: Financial Performance - Orders in GE Vernova's power business rose by 50% year-over-year to $7.8 billion, while orders in the electrification business surged by 102% to $5.1 billion [5] - The company's gas power backlog and reservations increased to 62 gigawatts from 55 gigawatts, with prices for gas turbines rising and margins improving [5] Group 3: Future Outlook - GE Vernova's turbines are sold out through 2028, with the company now primarily taking orders for 2029, indicating strong future demand [4] - The company has agreed to acquire a 50% stake in transformer-maker Prolec GE for approximately $5.3 billion, further expanding its market position [4]