Vertiv: Orders Jump In Q1, Solid Non-GAAP Beat And Raise For This AI Play

seekingalpha04-24

S&P 500 companies mentioning AI on earnings calls reach a new high as worker productivity is top of mind.Vertiv Holdings reported strong Q1 earnings, beating operating earnings estimates and ...

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class=\"meta\">\n\n\n2024-04-24 22:15 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4685648-vertiv-orders-jump-in-q1-solid-non-gaap-beat-and-raise-for-this-ai-play><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>S&P 500 companies mentioning AI on earnings calls reach a new high as worker productivity is top of mind.Vertiv Holdings reported strong Q1 earnings, beating operating earnings estimates and ...</p>\n\n<a href=\"https://seekingalpha.com/article/4685648-vertiv-orders-jump-in-q1-solid-non-gaap-beat-and-raise-for-this-ai-play\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU1244550494.USD","symbol_name":"FRANKLIN GLOBAL MULTI-ASSET INCOME \"A\" (USDHEDGED) 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presses on. The percentage of S&P 500 companies mentioning AI on earnings calls has recently notched a fresh high. It comes as the population of workers in prime-working years is on the decline, according to UN Population Prospects, as reported by Evercore ISI Research. While there has been a mixed response to first-quarter reports from semiconductor companies like Taiwan Semiconductor (TSM) and ASML Holding (ASML), shares of Texas Instruments (TXN) traded up after its earnings report. Elsewhere, in the mid-cap space, among the biggest AI-related winners over the past 18 months has been Vertiv Holdings Co (NYSE:VRT). I reiterate a hold rating on this high-momentum data center play. After a strong set of Q1 numbers, shares traded to fresh all-time highs. AI Remains All The Wall Street Rage As Worker Productivity Is In Focus  Kevin Gordon According to Bank of America Global Research, Vertiv is an electrical product manufacturer focused on data centers (70% of revenue) and telecom (20%) end markets. In 2022, Vertiv generated $5.7bn in revenue. Key product offerings include power & thermal management, IT management, and related services. Vertiv issued a solid report on Wednesday, April 24. Q1 non-GAAP EPS verified at $0.43, topping the Wall Street consensus forecast of $0.36. GAAP EPS of $0.28 missed by two cents while revenue of $1.64 billion, up 8% from year-ago levels, also beating estimates. Q1 2024 operating profit was up 42% versus Q1 2023 while the company bought back $600 million of stock, 2.3% of total shares, suggesting that the management team sees continued strong performance ahead. Orders grew at a high 60% clip on a year-on-year basis, while organic revenue and margin guidance were increased by the management team; 11% to 13% of organic sales growth is the firm's new baseline. It was an earnings \"triple play,\" with both the top and bottom lines beating street expectations, while guidance was increased across the board. Vertiv's CEO was particularly sanguine in the press release on the long-term outlook: We are seeing order patterns with longer lead times based on customer build schedules, largely in 2025 & beyond, suggesting AI is starting to scale. Though still in its early stages, AI is quickly becoming a pervasive theme across our end markets.\" VRT's Big Q1 Vertiv IR Full Year 2024 Financial Guidance Vertiv IR Looking closer at the quarter, demand for its products and services rose, resulting in a 33% jump in Vertiv's backlog. Orders for 2025 are now seen increasing as new data center build out remains a cyclical, and potentially secular tailwind. With big margins and impressive free cash flow trends as AI gains corporate adoption, Vertiv is among the poster children of AI beneficiaries. On valuation, analysts at BofA see earnings rising at a 20%-plus clip over the next few years. Operating per-share profits are expected to hit $3 next year. The current Seeking Alpha consensus estimate, which does not consider the strong Q1 figures, is still about on par with what BofA projects. Revenue is forecast to rise at a steady 10% to 12% pace through 2026. Dividends, meanwhile, are expected to inch up modestly, but this is obviously not a yield story. Now trading about 25 times forward EBITDA estimates, shares do not come cheap, but free cash flow is rising. Vertiv: Earnings, Valuation, Dividend Yield, Free Cash Flow Yield Forecasts BofA Global Research I was too conservative on my valuation mosaic previously. Given the mid-20% EPS growth rate and a sector median 1.65 forward PEG ratio, then the appropriate P/E today would be near 40. Assuming $2.50 of non-GAAP EPS over the 12 months ahead, then shares should be near $100. That is up from an $80 PEG-based target in my analysis late last year. Of course, I am still mindful that VRT's 5-year average forward operating earnings multiple is just 21.7, but I must concede that the AI revolution makes the look-back P/E much less important. VRT: Appropriately Priced Given Growth Trends, Which Are Verifying Well Seeking Alpha Compared to peers, VRT sports a lofty valuation premium, but with EPS growth verifying to the upside, that is largely deserved in my view today. What's more, bottom-line increases are likely to be stout over the quarters to come while profitability trends are impressive - so much so that the management team can reward shareholders with buybacks. With market-leading share-price momentum and a steady diet of sell side EPS upgrades, there are fundamental tailwinds on this AI darling. Competitor Analysis Seeking Alpha Looking ahead, corporate event data provided by Wall Street Horizon show a projected Q2 2024 earnings date of Wednesday, July 31 BMO. Following this morning's Q1 report, no other volatility catalysts are seen on the calendar. Corporate Event Risk Calendar Wall Street Horizon The Technical Take VRT hasn't let folks back in. Notice in the chart below that even with the RSI reaching the most oversold levels since late last year, the decline was just a handful of weeks' worth of price action. The stock did, however, return to its rising 50-day moving average (the graph is a 2-bar daily look, so the 100-period MA is about the same as a 50-day moving average). Shares are about $40 above the rising 200-day moving average with no upside resistance in play. From a technician's point of view, nothing is more bullish than when price reaches a new peak - there is no overhead supply to bring about selling pressure. Considering that VRT has a history of tagging the 50dma, that is a good spot to enter a long position. I see support in the low to mid-$70s, too, but with a congestion zone between $77 and $87 from March and April, the stock may not return to the low $70s unless there's a strong downtrend in place. Overall, the momentum and trend are firmly in the bulls' camp, with the rising 50dma offering a guide during pullbacks. VRT: Shares Surge To All-Time Highs Following Impressive Q1 Results, 50dma Support Stockcharts.com The Bottom Line  With above-peer earnings growth and a deserved valuation premium, I see Vertiv Holdings Co stock fair value potentially near the $100 mark given the robustness and apparent durability of the AI revolution. With the shares close to those levels now, I reiterate a Hold rating.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2429454662"}