Key Points
Orders soared for GE Vernova in the second quarter.
The wind business plunged, though, highlighting how strong power and electrification are.
The diversified model should give investors even more confidence in the future.
When the former General Electric conglomerate completed the spin-off of its energy business as GE Vernova (NYSE: GEV) in April 2024, its wind component accounted for nearly one-third of revenue. That business has continued to decline since then, but GE Vernova shareholders probably don't mind too much.
Wind orders decreased another 40% year over year in Q2, and the stock has dropped about 15% since that report on July 22. Some of that selling may have been profit-taking, as the stock is still up 40% this year. But I wouldn't sell GE Vernova stock based on that report, or even after that big gain. In fact, the company is very well positioned with its diversified business.
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Investors can look at the wind business as a bonus now. That's because the company's power and electrification segments are booming. Despite the sharp drop in wind business orders, GE Vernova reported 88% organic order growth overall in the second quarter.
That's why the stock price drop presents an opportunity. GE Vernova is poised to generate significant value. Management took on a manageable amount of debt earlier this year to acquire the remaining 50% stake of ProlecGE, formerly a joint venture with a Mexican industrial group. That company is a major producer of power transformers and electrical equipment essential for the generation, transmission, and distribution of electric power.
Demand is clearly accelerating and driving margin expansion at GE Vernova. While some investors took profits recently, I would instead take a long-term approach and remain a buyer of GE Vernova stock.
Howard Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends GE Vernova. The Motley Fool has a disclosure policy.