GE Vernova enters coverage at Watchlist, with shares at $926.73.

Q: The backlog just hit a record. Why not a Buy?

A: The backlog is not in dispute. It reached $176 billion in the second quarter, up 37% year over year and split evenly between equipment and services. Orders rose 88% organically to $24.2 billion, a book-to-bill above 2.0 times. Contracted gas turbine capacity moved from 100 to 116 gigawatts in a single quarter, and management expects at least 125 by year end. Roughly half of the backlog is long-dated services on an installed base of about 7,000 turbines, which is the highest-quality earnings stream in the group. The objection is price. Shares trade near 61 times consensus 2026 earnings and roughly 40 times guided 2026 EBITDA.

Q: What does that multiple assume?

A: That the 2028 plan arrives on schedule. Management has targeted $52 billion of revenue at a 20% adjusted EBITDA margin for that year. This year’s guidance is 12% to 14%. Six hundred basis points of margin expansion therefore sits inside the current price rather than above it, leaving a buyer today to carry the execution risk without being paid for it.

Q: Free cash flow guidance was nearly doubled, to $11.5-12.5 billion. Is that not evidence of execution?

A: Less than it appears. Trailing twelve-month operating cash flow was $14.1 billion. The working capital contribution over the same period was $14.2 billion. After working capital, the business generated approximately nothing in cash. The source is customer down payments on turbine slot reservations, which took current contract liabilities from $19.6 billion to $39.9 billion year over year. That money is real, and it funds the buyback at no cost. It is also a balance sheet liability arriving in the cash flow statement, and it stops compounding when order growth flattens.

Q: What did the quarter itself show?

A: Revenue of $11.1 billion beat expectations. Power margin expanded 320 basis points organically and Electrification expanded 700. Adjusted earnings of $2.47 still missed the $3.04 consensus by 19%, and margin guidance was left untouched while revenue guidance was raised. Wind continues to lose money, with orders down 40%.

Q: What would change the rating?

A: A 2026 EBITDA margin guided above 14%, Wind reaching sustained breakeven, or a share price between $800 and $860. Scenario work puts probability-weighted fair value at $914, marginally below the market.

Full valuation detail, the risk table and the scorecard sit in the complete GE Vernova (GEV) report on our Reports page.