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Data centers are a booming business in 2024, as hyperscalers rush to support the soaring infrastructure demands of artificial intelligence (AI) and cloud computing. From REITs to utility stocks, it seems nearly every industry is engaged in the data center supply chain - but one company that's right at the core of the megatrend is Vertiv Holdings (VRT).
Valued at nearly $40 billion, Vertiv is involved in the designing, manufacturing, and servicing of critical digital infrastructure for data centers, commercial and industrial environments, and communication systems. Its portfolio includes thermal management systems, critical power systems and switches, racks and enclosures, monitoring and management devices, and related services. Headquartered in Columbus, Ohio, Vertiv operates in the U.S. and internationally.
VRT stock is up 125% YTD, and has surged 169.4% over the past 52 weeks. The shares set a new all-time high of $109.38 as recently as today's session.
Vertiv Reports a Beat-and-Raise Quarter
Vertiv Holdings reported its second-quarter results in late July, with revenue of $1.95 billion surpassing the estimate of $1.94 million from analysts. Adjusted earnings for the quarter came to $0.67 per share, again beating Wall Street’s estimate.
Operating profit for Q2 was $336 million, up 63% YoY, while operating margin rose to 19.6%, an increase of 510 basis points YoY. Organic orders were up 57% year over year, while product revenue increased 14.3% to $1.56 billion. The company ended the quarter with a cash balance of $579.7 million and a free cash flow of $333.4 million.
Management raised its full-year revenue guidance by $50 million at the midpoint, and now anticipates between $7.59 billion and $7.74 billion, with an organic sales increase of 12-14%. Vertiv also hiked its free cash flow guidance for the full year by $50 million to $875 million, and increased its adjusted operating profit guidance to reflect an expected 36% annual increase from 2023 levels.
Vertiv is a Unanimous ‘Strong Buy’
With 12 analysts in coverage, VRT has 12 “Strong Buy” recommendations. The latest bullish endorsement came from Jefferies, which initiated coverage of VRT with a “Buy” rating on Monday.
“Growing demand for processing power related to AI / high-performance computing is driving higher heat density per rack, with liquid cooling as the method of choice for operators as it is ~25x effective than its air-cooled counterpart,” wrote analysts Saree Boroditsky and Jonathan Peterson, who like Vertiv for “its earlier client engagement on custom-designed architectures, ability to deliver products at scale globally, strong service network, and continued investment in R&D.”
The brokerage firm set a price target of $125 for VRT, marking a new Street-high forecast. Based on the stock's Wednesday's close, that's about 15.6% north of current prices.
On the date of publication, Ruchi Gupta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
