Wind Energy’s Biggest Players Face an Uncertain Future

As many countries worldwide begin a widespread energy transition from traditional fossil fuels to sustainable sources, companies that position themselves as market leaders face virtually limitless growth opportunities. BlackRock (BLK), a leader in sustainable investing and ESG and the world’s largest asset management firm, has suggested the cost of a global energy transition may require annual spending of around $4 trillion to reach UN Climate milestones. Wind energy has emerged as one of the most powerful and promising renewable energy sources, replacing a significant market share of carbon-based energy in the United States and Europe.

Vestas Wind Systems A/S (VWDRY), Siemens Energy AG (SMNEY), and GE Vernova (GEV) are some of the leading producers in the wind energy market, commanding multinational businesses and providing turbines on an industrial scale. However, these companies have faced tumultuous stock performances throughout 2024, which may indicate contrasting company health and broader market shifts within the renewable energy industry.

Volatile 2024 Stock Performances

With 181 Gigawatts of installed capacity, Vestas Wind Systems A/S has established itself as the world’s largest and most successful wind turbine manufacturer. Providing enough energy to power roughly 150 million households, the Danish company has long commanded large contracts from many European countries to lead its energy transitions. However, a challenging year and poor earnings reports have fueled a free fall, with Vestas’ stock down 49.41% Year-to-Date as of November 29. Meanwhile, Siemens and GE Vernova have seen their stocks soar 316.96% and 154.57%, respectively, a shocking rally upending the wind energy market.

Stock Prices Explained

Vestas has traditionally dominated the wind energy market and has structured its business into two segments. Most of the company’s revenue comes from manufacturing its turbines, though a highly profitable turbine servicing division has maintained solid and consistent margins. However, cost inflation, market competition, and supply chain interruptions have led to poor earnings reports and inconsistent revenue predictions. 2024 earnings reports show earnings-per-share misses of $0.18 in Q1, $0.44 in Q2, and $0.25 in Q3, with missed revenue targets in the first and second quarters. These lower-than-expected earnings have depleted the company’s reserves, resulting in a $439 million loss of cash year-on-year.

While Siemens AG and GE Vernova are less prominent wind turbine manufacturers, the companies offer a more diversified product portfolio. Siemens AG saw 2024 orders rise by 42.3%, driven primarily by its Grid Technologies and Gas Services. GE Vernova also delivered a strong 2024 Q3, with solid revenue growth and a 34% increase in power orders. While wind orders decreased by 19%, onshore wind delivered its most profitable quarter in years. However, electrification driven by Grid Solutions saw the company’s most significant growth, increasing revenues by 22%.

TipRanks Insights

TipRanks’ Stock Comparison tool provides an investing framework to better understand the stock market dynamics for these companies. We can see an analysts’ consensus suggesting GE Vernova remains a strong buy, indicating the year’s abnormal growth is likely to continue. Siemens Energy is considered a moderate buy, with analysts split on whether 2024’s growth has largely stalled. An article linked to Vestas Wind System’s stock suggests that as of November 28, JP Morgan (JPM) reaffirms its hold position. While a Price/Earnings ratio over 280 traditionally indicates an overpriced stock, JP Morgan likely sees an upcoming earnings bounce that will stabilize the stock’s price. With many tools and insights, the Stock Comparison tool is a handy way to analyze the sentiments of top market experts.

Conclusion

The Wind Energy industry has faced a poor 2024, led by order cancellations and a higher-than-expected supply chain cost. However, wind’s inherent intermittency has led to the growth of the natural gas sector, which has the flexibility to provide backup power at all times. Natural gas now makes up over 43% of United States electricity generation, up from 12% in 1990. Siemens Energy AG and GE Vernova have aggressively pursued both ends of the market, generating substantial growth through their gas generator sector. Vestas Wind Systems, a company exclusively dedicated to wind, has not hedged its losses through another energy source and faced poor earnings reports throughout 2024.