FTAI & GEV Updates
FTAI Aviation (FTAI)
FTAI Aviation (FTAI) was hit by a short seller report last week (as I discussed in a Special Bulletin) and had a nice bounce-back rally the next day. It helped that Morgan Stanley (MS) put out a report defending the company after speaking with management and that FTAI management also refuted the short-seller’s allegations, many of which relate to engine depreciation methods used by FTAI.
Unfortunately, this week FTAI has come under pressure again after management disclosed that it may need to delay its annual 10-K filing in order to give the Audit Committee and recently hired independent advisors time to tighten things up. At this point, we don’t know if there are any actions FTAI actually needs to take with respect to its accounting & depreciation methods, but it doesn’t take a lot of consideration to understand why the company wants to make sure everything is as tight as can be before the 10-K comes out.
This thing is likely to go one of two ways. The bad way is that the filing is delayed AND something material is discovered that gives legitimacy to the short report and all the law firms trying to get class action lawsuits going. That would likely hurt the stock quite a bit.
The good way is that the filing is delayed, but nothing material is discovered. The stock should rally if this is the case.
There is a third scenario, which is that the filing is not delayed and nothing material is discovered. This would likely be quite good for FTAI stock.
At this point we just don’t know, so FTAI remains at hold half. I’m very doubtful that there is a material issue here. But I’m not a forensic accountant and my grasp on the intricacies of industry standards for jet engine depreciation methods is pretty loose. I have to go with the odds, which suggest FTAI will clear its name and the stock will bounce back in time. HOLD HALF
GE Vernova (GEV) Reports Q4
GE Vernova (GEV) reported Q4 2024 results before the bell today that were slightly below expectations on revenue but beat on order volume. Management also had a number of bullish comments related to the future and reiterated guidance for 2025. On the bullish side of things, management said gas equipment backlog should grow considerably this year, that the company has seen an increase in the Power and Electrification segment pipeline in recent weeks, that it’s seeing more interest in its small modular reactor (SMR) nuclear business and could have 5 GW of nuclear up-rates and restarts in the country this decade, and that it’s looking into ways to “premium slots” within the Electrification segment (i.e., ways to increase pricing). The bottom line is the company is doing well and should continue to see revenue growth accelerate into the high single digits by 2026 (5.8% growth expected this year, 8.7% in 2026) with margin expansion (EPS expected to grow by 56% this year to $6.87). The only kink in the works is the Wind business. GEV is pausing offshore wind after it wraps up a couple of current projects and is taking a cautiously optimistic view of the onshore wind market. The market likes the result and shares of GEV are hitting a new record high. We’re up about 25%. BUY HALF
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