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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. The company expects second-quarter 2024 order growth to be strong on a year-over-year basis.
Vertiv expects second-quarter 2024 non-GAAP earnings between 53 cents and 57 cents per share.
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.
Vertiv’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, delivering an earnings surprise of 24.18%, on average.
Vertiv’s second-quarter 2024 results are expected to have benefited from growing demand for its cooling and power management infrastructure solution. It has been riding on strong AI-driven order growth. The growing focus on thermal management by data center providers bodes well for VRT.
In the first quarter of 2024, orders jumped 60% year over year, while backlog surged roughly 33% to $6.3 billion. The trend is expected to have continued in the going-to-be-reported quarter.
Expanding capacity has been a driving factor. Since the acquisition of the E&I Engineering business in November 2021, VRT 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.
Vertiv Shares Outperform Sector, Peers
Vertiv shares have surged 71.9% year to date, outperforming the broader Zacks Computer & Technology sector’s return of 20.8% and the Zacks IT Services industry’s peers like Dell Technologies (DELL - Free Report) , Infosys (INFY - Free Report) and Nutanix (NTNX - Free Report) .
DELL, INFY and NTNX have returned 63.8%, 21% and 0.4%, respectively, over the same timeframe.
Year-to-Date Performance
Image Source: Zacks Investment Research
However, Vertiv stock is not so cheap as the Value Style Score of C suggests a stretched valuation at this moment.
In terms of the forward 12-month P/E ratio, VRT is trading at 29.08X, higher than its median of 23.84X and the Zacks Computer & Technology sector’s 27.43X.
VRT is also trading at a significant premium to its Zacks IT Services industry peer, Dell Technologies, which is trading at a forward 12-month P/E ratio of 14.44X.
Vertiv Stock Overvalued
Image Source: Zacks Investment Research
Expanding Capacity to Support Clientele 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.
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’s $75 million to $200 million range in 2024, within the 2.5%-3% range of sales.
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, indicating a solid liquidity position.
Estimate Revisions Witnessing Upward Movement
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 $7.73 billion, indicating year-over-year growth of 12.57%. The consensus mark for earnings is pegged at $2.44 per share, up by a couple of cents over the past 30 days and indicating 37.85% year-over-year growth.
For 2025, the consensus mark for revenues is currently pegged at $8.67 billion, suggesting 12.26% growth. The Zacks Consensus Estimate for 2025 earnings is pegged at $3.17 per share, up 1.3% over the past 30 days.
Conclusion
Vertiv’s growing dominance in the thermal management space for data centers is a key catalyst.
Image: Bigstock
Is Vertiv (VRT) Stock a Smart Buy Before Q2 Earnings Report?
Vertiv (VRT - Free Report) is set to report its second-quarter 2024 results on Jul 24.
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. The company expects second-quarter 2024 order growth to be strong on a year-over-year basis.
Vertiv expects second-quarter 2024 non-GAAP earnings between 53 cents and 57 cents per share.
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.
Vertiv’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, delivering an earnings surprise of 24.18%, on average.
Vertiv Holdings Co. Price and EPS Surprise
Vertiv Holdings Co. price-eps-surprise | Vertiv Holdings Co. Quote
Factors to Note
Vertiv’s second-quarter 2024 results are expected to have benefited from growing demand for its cooling and power management infrastructure solution. It has been riding on strong AI-driven order growth. The growing focus on thermal management by data center providers bodes well for VRT.
In the first quarter of 2024, orders jumped 60% year over year, while backlog surged roughly 33% to $6.3 billion. The trend is expected to have continued in the going-to-be-reported quarter.
Expanding capacity has been a driving factor. Since the acquisition of the E&I Engineering business in November 2021, VRT 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.
Vertiv Shares Outperform Sector, Peers
Vertiv shares have surged 71.9% year to date, outperforming the broader Zacks Computer & Technology sector’s return of 20.8% and the Zacks IT Services industry’s peers like Dell Technologies (DELL - Free Report) , Infosys (INFY - Free Report) and Nutanix (NTNX - Free Report) .
DELL, INFY and NTNX have returned 63.8%, 21% and 0.4%, respectively, over the same timeframe.
Year-to-Date Performance
However, Vertiv stock is not so cheap as the Value Style Score of C suggests a stretched valuation at this moment.
In terms of the forward 12-month P/E ratio, VRT is trading at 29.08X, higher than its median of 23.84X and the Zacks Computer & Technology sector’s 27.43X.
VRT is also trading at a significant premium to its Zacks IT Services industry peer, Dell Technologies, which is trading at a forward 12-month P/E ratio of 14.44X.
Vertiv Stock Overvalued
Expanding Capacity to Support Clientele 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.
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’s $75 million to $200 million range in 2024, within the 2.5%-3% range of sales.
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, indicating a solid liquidity position.
Estimate Revisions Witnessing Upward Movement
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 $7.73 billion, indicating year-over-year growth of 12.57%. The consensus mark for earnings is pegged at $2.44 per share, up by a couple of cents over the past 30 days and indicating 37.85% year-over-year growth.
For 2025, the consensus mark for revenues is currently pegged at $8.67 billion, suggesting 12.26% growth. The Zacks Consensus Estimate for 2025 earnings is pegged at $3.17 per share, up 1.3% over the past 30 days.
Conclusion
Vertiv’s growing dominance in the thermal management space for data centers is a key catalyst.
Vertiv has a Zacks Rank #2 (Buy) and a Growth Style 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.