General Electric’s power-generation spinoff, GE Vernova (ticker: GEV), commenced trading last Wednesday, ahead of its scheduled spinoff on April 2. Pre-spinoff trading often offers insights into the valuation of the newly spun-off company.
Vernova debuted at $115 per share, in line with expectations, and climbed to $136.75 by the end of the week. Wells Fargo analyst Matthew Akers raised his price target for GE stock from $177 to $200 per share, with $34 allocated for Vernova. Given the 1-for-4 distribution ratio, Akers estimated Vernova’s target price at $136 per share, placing it at the upper end of market valuations.
At $136 per share, Vernova trades at 12 times projected 2025 earnings before interest, taxes, depreciation, and amortization (EBITDA), slightly higher than the average multiples for comparable peers like Siemens Energy, Hubbell, Vestas Wind Systems, and Schneider Electric. However, individual multiples vary widely, with Schneider trading at 15 times 2025 estimated EBITDA and Siemens at four times.
Vernova comprises a wind business, which is currently unprofitable, and a gas-powered turbine unit, which is more stable. The company’s profitability is expected to improve, complicating the selection of an appropriate multiple based on 2024 or 2025 estimates. With Vernova valued at $34 per share, GE Aerospace—the remaining business post-spinoff—is trading at approximately $141 per share. This suggests a multiple of 26 times Akers’ standalone 2025 estimated earnings of $5.50 per share for GE Aerospace, surpassing the S&P 500 index’s multiple of 19 times.
Last Week Highlights:
Markets:
- Volatility and Earnings Season: Volatility in the markets decreased following the previous week’s surge. The earnings season was drawing to a close.
- Bitcoin Surge: Bitcoin made a significant run, surpassing $70,000.
- Yen-Dollar Exchange Rate: The Japanese yen hit a 34-year low against the dollar, prompting discussions about potential intervention.
- Stock Market Performance: The stock market concluded a strong quarter, with record highs reached by the Dow Jones Industrial Average and S&P 500. The Dow rose by 5.6%, the S&P 500 by 10.2%, and the Nasdaq Composite by 9.1%.
- February Inflation Data: February’s inflation increased by 0.3%, according to data released on Good Friday.
Companies:
- Boeing Leadership Changes: Boeing CEO David Calhoun announced he would step down at the end of the year, along with the decision of the chairman not to seek re-election. The company’s commercial plane chief also retired, following safety concerns. Former Qualcomm CEO Steve Mollenkopf was appointed as chairman.
- Retirement Crisis Warning: BlackRock’s Larry Fink warned about an impending retirement crisis.
- Baltimore Bridge Collapse: A container ship collided with a bridge in Baltimore, resulting in its collapse.
- FTX Founder’s Sentencing: FTX founder Sam Bankman-Fried was sentenced to 25 years in prison for fraud related to the collapse of the crypto company.
Deals:
- WeWork Bid: Adam Neumann, co-founder and former CEO of WeWork, submitted a bid of over $500 million for the bankrupt workspace company.
- Trump Media & Technology Group IPO: Digital World Acquisitions Corp. successfully launched Donald Trump’s Trump Media & Technology Group as a public company, with a valuation of $6.8 billion and the ticker symbol DJT. The stock debuted at $50 and closed at $62 on Thursday.
- 3M’s Healthcare Unit Spinoff: 3M’s healthcare unit, Solventum, began trading at $80 a share ahead of its spinoff on Monday.
- GE Vernova Spinoff: General Electric’s GE Vernova power-generation unit started trading at $115 per share ahead of its spinoff on Tuesday.
Next Week’s Highlights:
Monday 4/1:
- ISM Manufacturing and Services PMIs: The Institute for Supply Management will release both its Manufacturing and Services Purchasing Managers’ Indexes for March. The consensus estimate for the Manufacturing PMI is 48.5, showing a slight increase from February. The Services PMI is expected to remain stable at 52.5. The services sector has been outpacing the manufacturing sector for about three years since the economy fully reopened post-pandemic.
Tuesday 4/2:
- Job Openings and Labor Turnover Survey (JOLTS): The Bureau of Labor Statistics will release the JOLTS report, which is expected to show 8.7 million job openings on the last business day of February, indicating a slight decrease of 163,000 from January. Currently, there are 1.4 job openings for every unemployed person, down from a peak of two in March 2022.
Friday 4/5:
- Jobs Report for March: The BLS will release the jobs report for March, with economists forecasting a 180,000 increase in nonfarm payrolls, following a gain of 275,000 in February. The unemployment rate is expected to remain unchanged at 3.9%. This marks the first time in over two consecutive years that the unemployment rate has remained below 4%, a milestone not seen since the late 1960s.