Vertiv Holdings is Thursday's pick for IBD 50 Stocks To Watch, as the provider of electrical equipment hovers around a chart entry. VRT stock is getting charged up near an all-time high.
Vertiv recently threw up a sell signal when shares made a double-digit tumble over two days in the wake of the company's third-quarter earnings report on Oct. 25.
Shares initially broke out the prior day, then reversed sharply and ended the Oct. 25 session 4% lower as sales were about a half-percent below expectations. Jittery investors cast shares down nearly 7% the next day as well.
Deutsche Bank analyst Nicole DeBlase said in a note to clients after earnings that investor expectations were "quite elevated." As for the stock's tumble, DeBlase added there might have been a "lack of clarity" around the company's revenue growth.
TD Cowen analyst Lance Vitanza said in his note to clients that investors seem to have mistaken management commentary as some concern about the first half of fiscal 2024.
"We view this is not what management sought to convey, and we find its expectations for strength throughout FY24 well-founded," he said.
Triple-Digit Jump In Earnings
On the positive side, though, Vertiv reported a 126% jump in earnings to 52 cents a share, beating estimates for 44 cents. It also predicted a 2023 full-year earnings gain of more than 200%, to a midpoint of $1.71 a share. That came in well ahead of the $1.61 projection from VRT stock analysts polled by FactSet. Sales forecasts were ahead of views as well.
Up until its earnings report, Vertiv shares hovered in a buy zone before plunging. Its entry was 40.41 out of a flat base. After a two-week downtrend, the stock is moving back toward the buy zone that extends up to 42.43.
The possible formation of a handle provides an alternative entry of 43.13. That offers another buy zone that extends to 45.29.
In her note, DeBlase said VRT stock "continues to be one of our favorite ideas" in its group.
"Our model forecasts 20%-plus average annual EPS growth through 2025, the highest within our coverage universe by far," she said.
Added Vitanza: "Vertiv did not introduce guidance for FY24, but commentary was clearly favorable, in our opinion, such that we believe a careful reading of the earnings call transcript (let alone the company's press release and slide deck) will lead to better market appreciation for the operating opportunity at hand."
VRT Stock: Maximizing Data Flow
Based in Westerville, Ohio, the company provides electrical gear designed to maximize data flow. It produces battery monitoring equipment, electrical switching gear, energy management capability and power systems, as well as maintenance services. The company has 24 manufacturing and assembly locations worldwide, and regional offices in China, India, Italy and the Philippines.
Shares of Vertiv made a big move on Aug. 2, when it reported a 360% gain in second-quarter earnings. Sales jumped 24%.
VRT stock skyrocketed more than 29% in volume that was 500% above normal. The stock jumped from the mid-20s to the mid-30s and essentially vaulted to a new price echelon. It continues to climb.
Analysts have since upped their estimates on full-year earnings to $1.71 a share. They see fourth-quarter earnings at 50 cents a share, which represents a year-over-year gain of 79%.
For fiscal 2024, the FactSet consensus calls for earnings to climb 19% to $2.10 a share. Analysts see revenue growing more than 8% to $7.4 billion.
High Relative Strength Rating
VRT stock currently holds a best-possible Relative Strength Rating of 99 from IBD. That rating compares Vertiv's stock performance with the rest of the market over the last 12 months.
The company gets an overall Composite Rating of 95 from IBD, while its Earnings Per Share Rating stands at 81.
Vertiv ranks third in Electrical Power/Equipment group, one of 197 groups IBD tracks. That group ranks 81st.
Shares edged down in late-afternoon trading Thursday.
