3. Vertiv Holdings Co (NYSE:VRT)
Number of Hedge Fund Investors: 85
Talking about Vertiv Holdings Co (NYSE:VRT), Cramer recommended investors to hold the stock.
“I would hold on to that stock. I would not sell that stock.”
Vertiv Holdings Co (NYSE:VRT) shares jumped in April after the company increased its guidance, citing AI-related data center growth. For the full-year 2024, Vertiv Holdings Co (NYSE:VRT) expects its revenue to come in the range of $7.54 billion and $7.69 billion, compared to the previous estimate of $7.52 billion to $7.66 billion.
Vertiv Holdings Co (NYSE:VRT) is a market leader in the data center power and cooling market, which has nowhere to go but up from here since companies are hungry for data center solutions as they begin to deploy AI software. During the first quarter the company saw a 60% increase in organic orders. For full year, the company plans to increase its CapEx to $200 million, which is high, but still in the company’s CapEX margin range between 2.5% to 3%. Vertiv also upped its revenue guidance. Here’s what the management said during the latest earnings call:
“We are expecting organic sales growth of approximately 12% with Americas up mid-teens, APAC high single digits and EMEA low double digits. We anticipate an $18 million year-over-year foreign exchange headwind in the second quarter as the U.S. dollar has strengthened against most foreign currencies over the last several months. We expect second quarter adjusted operating profit between $315 million and $335 million and adjusted operating margin of 16.9%, up 240 basis points at the midpoint with expected benefits from price/cost partially offset by continued growth investments.
Based upon a favorable start to the year and visibility into a strong sales pipeline for the rest of the year, we are increasing estimates for organic sales growth from 10% at the midpoint to approximately 12% with higher expectations across all 3 regions. In addition, we are increasing the midpoint of adjusted operating profit guidance from $1.3 billion in our prior guidance to $1.35 billion primarily driven by contribution margin on incremental sales. And as a result, we are increasing midpoint guidance for adjusted operating margin to 17.7% with the primary driver there being fixed cost leverage.”
Vertiv Holdings Co (NYSE:VRT) earnings are expected to grow 35% this year, while the Wall Street expects a 28% growth next year. Based on these growth estimates, Vertiv’s forward P/E ratio of 37.45 looks attractive.
ClearBridge Growth Strategy stated the following regarding Vertiv Holdings Co (NYSE:VRT) in its Q2 2024 investor letter:
“The benchmark change to the Russell Midcap Growth Index has also had a meaningful impact on the Strategy’s sector allocations, increasing our communication services overweight, reducing our health care overweight and shifting our previous market weight in IT to a meaningful overweight. These allocations are a byproduct of our bottom-up, active stock selection and may shift over time based on where we are finding the best risk/reward in our target universe.
That said, we continue to look to diversify the portfolio, seeking to add new ideas in sectors such as industrials, where we have historically had less exposure. In the second quarter, we added three new holdings in the sector: electrical product manufacturer Vertiv Holdings Co (NYSE:VRT), building products supplier Builders FirstSource and environmental waste management provider Clean Harbors. The largest new addition of the three, Vertiv, has key offerings in power and thermal management designed to power, cool, deploy, secure and maintain electronics that process, store and transmit data. The company generates the majority of its revenue from the data center end market, which we believe should benefit from continued spending growth supported in part by the rise in power requirements of next-generation AI graphic processing units (GPUs). The company is nicely profitable today though we see room for further margin expansion ahead.”
