Yahoo Finance Vertiv (VRT) Rides on AI-Driven Order Growth: Is the Stock a Buy?
Vertiv VRT shares have surged 98.5% year to date, outperforming the broader Zacks Computer & Technology sector’s return of 10.2% and the Zacks Computers - IT Services industry’s growth of 5.9%.
Vertiv offers cooling and power management infrastructure technologies primarily addressing data center providers. It is riding on strong AI-driven order growth. The growing focus on thermal management by data center providers bodes well for Vertiv.
In the first quarter of 2024, orders jumped 60% year over year while backlog surged roughly 33% to $6.3 billion. Most of these orders will be delivered beyond 2024.
Vertiv: Strong Order Growth Drives 2024 View
The company now expects second-quarter 2024 order growth to be strong on a year-over-year basis. Solid AI-related demand is expected to provide a tailwind to 2025 order and sales growth.
For the second quarter of 2024, Vertiv expects revenues between $1.9 billion and $1.95 billion, indicating an organic growth rate of 11-13% year over year. Non-GAAP earnings are expected between 53 cents and 57 cents per share.
Vertiv Holdings Co. Stock Price and Consensus
Vertiv Holdings Co. price-consensus-chart | Vertiv Holdings Co. Quote
The Zacks Consensus Estimate for second-quarter revenues is pegged at $1.94 billion, indicating year-over-year growth of 12.1%. The consensus mark for earnings is pegged at 59 cents per share, unchanged over the past 30 days and indicating 28.26% year-over-year growth.
For 2024, Vertiv expects revenues between $7.54 billion and $7.69 billion, indicating an organic growth rate of 11-13% year over year. Non-GAAP earnings are expected between 53 cents and 57 cents per share.
The Zacks Consensus Estimate for 2024 revenues is pegged at $7.72 billion, indicating year-over-year growth of 12.46%. The consensus mark for earnings is pegged at $2.42 per share unchanged over the past 30 days and indicating 36.72% year-over-year growth.
For 2025, the consensus mark for revenues is currently pegged at $8.61 billion, suggesting 11.61% growth. The Zacks Consensus Estimate for 2025 earnings is pegged at $3.13 per share, up a couple of cents over the past 30 days.
Vertiv Expands Capacity to Support Growth
Vertiv is expanding capacity across liquid cooling, thermal, UPS, switchgear, busbar and modular solutions to accommodate AI-driven demand growth. It currently has 22 manufacturing plants globally.
Since the acquisition of the E&I Engineering business in Nov 2021, it has expanded capacity by more than 100% for switchgear, busway and modular solutions. The acquisition of E&I expanded the Vertiv portfolio to include medium-voltage switchgear, low-voltage switchgear and busway offerings.
Next-generation chips that form the backbone for rapid adoption of AI liquid cooling are a must. VRT has started production of CoolTera CDU in two of its global manufacturing facilities rapidly accelerating capacity to support liquid cooling demand.
VRT expects to hit the high end of its capital expenditure $75 million to $200 million range in 2024, within the 2.5%-3% range of sales.
Conclusion
Vertiv’s growing dominance in the thermal management space for data centers is a key catalyst. It has a strong balance sheet and now expects net leverage to decline to two times or lower in the third quarter. Vertiv expects 2024 free cash flow between $800 million and $850 million for 2024, which makes the stock an attractive pick.
This Zacks Rank #2 (Buy) stock has a Growth Style Score of A and Momentum Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks Proprietary methodology. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Vertiv Holdings Co. (VRT) : Free Stock Analysis Report
