09. Vertiv Holdings Co (NYSE:VRT)
Upside Potential: 19.10%
Latest Average Share Price Target: $102.13
Vertiv Holdings Co (NYSE:VRT) is a key player in the data center industry, providing critical digital infrastructure technologies and services globally. The company’s comprehensive offerings, including AC and DC power management products, thermal management solutions, and integrated rack systems, are fundamental to the operation of data centers, which serve industries like e-commerce, online banking, and cloud services. Vertiv Holdings Co (NYSE:VRT) broad product portfolio, along with its lifecycle management services and a global presence, position it as a strong contender in the expanding data center market, making it a compelling choice for investors looking to gain exposure to this sector.
In its second-quarter earnings report for 2024, Vertiv Holdings Co (NYSE:VRT) exceeded market expectations, reporting an EPS of $0.67, surpassing the anticipated $0.646. The company demonstrated solid financial growth, with organic sales increasing by 14%, driven by strong performance in the Americas, which saw a 17% rise. Vertiv’s success in securing large-scale orders contributed to a book-to-bill ratio of 1.4x, indicating sustained demand and a robust pipeline. The company’s adjusted operating profit reached $382 million, a significant improvement from the prior year, with operating margins expanding by 510 basis points to 19.6%. This performance underscores Vertiv Holdings Co (NYSE:VRT) effective cost management, improved operational efficiency, and strong execution of its growth strategy.
Vertiv Holdings Co (NYSE:VRT) financial health is further highlighted by its adjusted free cash flow of $333 million in Q2, showcasing its ability to convert profitability into cash flow. The company’s net leverage ratio of 1.8x is well within its targeted range, demonstrating a strong balance sheet and financial flexibility. Vertiv’s leadership has raised its full-year guidance across all key financial metrics, expecting organic growth of 13% and adjusted operating profit of $1.435 billion for the year, with continued margin expansion. With its expanding market share in the rapidly growing data center industry, and a strong emphasis on R&D and capacity expansion, Vertiv Holdings Co (NYSE:VRT) is well-positioned for sustained long-term growth, making it a top data center stock to consider.
Baron Small Cap Fund stated the following regarding Vertiv Holdings Co (NYSE:VRT) in its Q2 2024 investor letter:
“Vertiv Holdings Co (NYSE:VRT) a leading provider of critical digital infrastructure for data centers, contributed during the quarter. As an industry leader in data center cooling and power management, Vertiv is poised to benefit from AI-driven growth in data center spend. The NVIDIA partner network, strong industry relationships, and broad product portfolio that Vertiv maintains enables its participation in the creation of the technology roadmap for the future of the data center. In addition, Vertiv is investing in its capacity to serve this growing end market more effectively. The company also has an extensive global service network to aid customers as they grow. We believe the company has durable competitive advantages and a flexible balance sheet to benefit from the expected significant capital investment in data centers for years to come. Vertiv reported very strong results for the March quarter, with orders up 60%, which highlighted the strong demand it is seeing for its products. We sold some of our position into strength after the runup from the positive report, but still hold a major position in the Fund as we see considerable upside in the shares over time.”
