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Vertiv Rises 62% Year to Date: Should Investors Buy VRT Stock?
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Vertiv (VRT - Free Report) shares have surged 62.4% year to date (YTD), outperforming the broader Zacks Computer & Technology sector’s return of 22.1% and the Zacks IT Services industry’s gain of 2.4%.
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.
This has helped VRT outperform its industry peers over the same timeframe, including ServiceNow (NOW - Free Report) , Infosys and Cerence (CRNC - Free Report) . INFY and NOW shares have gained 22.8% and 18.8%, respectively, while CRNC shares have declined a massive 81.8% on a year-to-date basis.
VRT has been benefiting from strong order growth and backlog. Vertiv hit a backlog of $7 billion, which increased 47% year over year and 11% sequentially at the end of the second quarter of 2024.
The quarterly results reflected continued order momentum. Organic orders (excluding foreign exchange) surged 57% year over year, and the book-to-bill ratio was 1.4 times in the second quarter.
YTD Performance
Image Source: Zacks Investment Research
Vertiv now expects third-quarter 2024 order growth at low double-digits (10%-15% range) despite tough comparisons. On a trailing 12-month basis, the order growth rate is expected between 30% and 35%. Solid AI-related demand is expected to provide a tailwind to 2025 order and sales growth.
Vertiv’s Strong Order Growth Drives 2024 View
For the third quarter of 2024, Vertiv expects revenues between $1.94 billion and $1.99 billion, indicating an organic growth rate of 12-16% year over year. Non-GAAP earnings are expected between 65 cents and 69 cents per share.
The Zacks Consensus Estimate for third-quarter revenues is pegged at $1.98 billion, indicating year-over-year growth of 13.53%. The consensus mark for earnings is pegged at 70 cents per share, up 7.7% over the past 30 days and indicating 34.62% year-over-year growth.
For 2024, Vertiv expects revenues between $7.59 billion and $7.74 billion, indicating an organic growth rate of 12-14% year over year. Non-GAAP earnings are expected between $2.47 per share and $2.53 per share.
The Zacks Consensus Estimate for 2024 revenues is pegged at $7.74 billion, indicating year-over-year growth of 12.77%. The consensus mark for earnings is pegged at $2.58 per share up 6.2% over the past 30 days and indicating 45.76% year-over-year growth.
Vertiv 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. It recently launched the Vertiv MegaMod CoolChip, a liquid cooling-equipped prefabricated modular (PFM) data center solution that is engineered to enable efficient and reliable AI computing.
Expanding partner base that includes the likes of Ballard Power Systems (BLDP - Free Report) and ZincFive is expected to drive top-line growth.
Ballard Power and Vertiv are collaborating on developing backup power applications for data centers and critical infrastructures, scalable from 200kW to multiple MWs. The company has integrated Ballard fuel cell power modules with Vertiv Liebert EXL S1 uninterruptible power system (UPS) within a successfully demonstrated proof of concept at Vertiv's facility in Ohio.
Vertiv has added the ZincFive BC Series UPS battery cabinets to its portfolio of battery systems available for data center backup power.
Vertiv’s Strong Liquidity Makes the Stock Attractive
Vertiv’s improving liquidity makes the stock attractive. Net leverage was 1.8 times at the end of the second quarter, which was within VRT’s stated leverage target range of 1 time to 2 times. Liquidity strengthened to $1.2 billion.
VRT repriced the existing seven-year term loan worth $2.1 billion that reduced interest expense by 61 basis points, and resulted in interest savings of roughly $13 million per year.
Vertiv expects 2024 free cash flow between $850 million and $900 million for 2024, reflecting improvement in adjusted profits.
Vertiv Shares Overvalued
VRT stock is not so cheap, as the Value Score of D suggests a stretched valuation at this moment.
In terms of the trailing 12-month Price/Book ratio, VRT is trading at 19.03X, higher than its median of 11.93X and the Zacks Computer & Technology sector’s 9.67X.
Price/Book Ratio (TTM)
Image Source: Zacks Investment Research
Conclusion
Vertiv’s growing dominance in the thermal management space for data centers is a key catalyst. A strong liquidity position will help it to sustain its aggressive expansion strategy.
Vertiv currently sports a Zacks Rank #1 (Strong Buy) and has 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 stocks here.
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Vertiv Rises 62% Year to Date: Should Investors Buy VRT Stock?
Vertiv (VRT - Free Report) shares have surged 62.4% year to date (YTD), outperforming the broader Zacks Computer & Technology sector’s return of 22.1% and the Zacks IT Services industry’s gain of 2.4%.
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.
This has helped VRT outperform its industry peers over the same timeframe, including ServiceNow (NOW - Free Report) , Infosys and Cerence (CRNC - Free Report) . INFY and NOW shares have gained 22.8% and 18.8%, respectively, while CRNC shares have declined a massive 81.8% on a year-to-date basis.
VRT has been benefiting from strong order growth and backlog. Vertiv hit a backlog of $7 billion, which increased 47% year over year and 11% sequentially at the end of the second quarter of 2024.
The quarterly results reflected continued order momentum. Organic orders (excluding foreign exchange) surged 57% year over year, and the book-to-bill ratio was 1.4 times in the second quarter.
YTD Performance
Image Source: Zacks Investment Research
Vertiv now expects third-quarter 2024 order growth at low double-digits (10%-15% range) despite tough comparisons. On a trailing 12-month basis, the order growth rate is expected between 30% and 35%. Solid AI-related demand is expected to provide a tailwind to 2025 order and sales growth.
Vertiv’s Strong Order Growth Drives 2024 View
For the third quarter of 2024, Vertiv expects revenues between $1.94 billion and $1.99 billion, indicating an organic growth rate of 12-16% year over year. Non-GAAP earnings are expected between 65 cents and 69 cents per share.
The Zacks Consensus Estimate for third-quarter revenues is pegged at $1.98 billion, indicating year-over-year growth of 13.53%. The consensus mark for earnings is pegged at 70 cents per share, up 7.7% over the past 30 days and indicating 34.62% year-over-year growth.
For 2024, Vertiv expects revenues between $7.59 billion and $7.74 billion, indicating an organic growth rate of 12-14% year over year. Non-GAAP earnings are expected between $2.47 per share and $2.53 per share.
The Zacks Consensus Estimate for 2024 revenues is pegged at $7.74 billion, indicating year-over-year growth of 12.77%. The consensus mark for earnings is pegged at $2.58 per share up 6.2% over the past 30 days and indicating 45.76% year-over-year growth.
Vertiv Holdings Co. Price and Consensus
Vertiv Holdings Co. price-consensus-chart | Vertiv Holdings Co. Quote
Vertiv 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. It recently launched the Vertiv MegaMod CoolChip, a liquid cooling-equipped prefabricated modular (PFM) data center solution that is engineered to enable efficient and reliable AI computing.
Expanding partner base that includes the likes of Ballard Power Systems (BLDP - Free Report) and ZincFive is expected to drive top-line growth.
Ballard Power and Vertiv are collaborating on developing backup power applications for data centers and critical infrastructures, scalable from 200kW to multiple MWs. The company has integrated Ballard fuel cell power modules with Vertiv Liebert EXL S1 uninterruptible power system (UPS) within a successfully demonstrated proof of concept at Vertiv's facility in Ohio.
Vertiv has added the ZincFive BC Series UPS battery cabinets to its portfolio of battery systems available for data center backup power.
Vertiv’s Strong Liquidity Makes the Stock Attractive
Vertiv’s improving liquidity makes the stock attractive. Net leverage was 1.8 times at the end of the second quarter, which was within VRT’s stated leverage target range of 1 time to 2 times. Liquidity strengthened to $1.2 billion.
VRT repriced the existing seven-year term loan worth $2.1 billion that reduced interest expense by 61 basis points, and resulted in interest savings of roughly $13 million per year.
Vertiv expects 2024 free cash flow between $850 million and $900 million for 2024, reflecting improvement in adjusted profits.
Vertiv Shares Overvalued
VRT stock is not so cheap, as the Value Score of D suggests a stretched valuation at this moment.
In terms of the trailing 12-month Price/Book ratio, VRT is trading at 19.03X, higher than its median of 11.93X and the Zacks Computer & Technology sector’s 9.67X.
Price/Book Ratio (TTM)
Image Source: Zacks Investment Research
Conclusion
Vertiv’s growing dominance in the thermal management space for data centers is a key catalyst. A strong liquidity position will help it to sustain its aggressive expansion strategy.
Vertiv currently sports a Zacks Rank #1 (Strong Buy) and has 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 stocks here.