GE Vernova (GEV) is expected to deliver significant growth and margin expansion, driven by strong demand, pricing power, and operational improvements across its electrification and power segments, RBC Capital Markets said in a note Monday.

"The macro backdrop for [GE Vernova] has improved considerably since its March analyst day, and we believe [management] is positioned to provide a much stronger LT outlook at the upcoming December analyst event," RBC said.

GE Vernova's electrification growth may be "underappreciated," and while the December investor day could confirm long-term prospects, there are concerns about overly high expectations, RBC said.

The company is scaling the power transmission segment, doubling capacity with 75% of this expansion achieved organically through improved asset management. Meanwhile, the gas power segment continues to face tight supply for heavy-duty turbines, even after about 36% capacity increase earlier this year.

This strong demand and constrained supply have enabled the firm to push pricing across all segments, while ongoing productivity improvements further bolster margins. RBC expects these trends to lead to revenues of about $48 billion and Earnings Before Interest, Taxes, Depreciation, and Amortization margins of 14.1% by 2028.

RBC forecasts 2024 electrification revenues to grow by about 16% to $8.7 billion, outpacing the consensus estimate of $8.3 billion. It anticipates electrification revenues to grow at a 13% compound annual growth rate from 2024 to 2028, with segment margins reaching 15.4% by the end of the period.

These dynamics underscore GE Vernova's ability to sustain long-term growth while delivering meaningful margin expansion, according to the note.

RBC has an outperform rating on GE Vernova and raised its price target to $376 from $285.

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