Vertiv VRT shares have surged 12.5% in a month, outperforming the broader Zacks Computer & Technology sector’s return of 3.6% and the Zacks IT Services industry’s rise of 2.5%.

Vertiv, a cooling and power management infrastructure provider, predominantly serves data center providers and has been capitalizing on robust AI-driven order growth. The growing focus on thermal management by data center operators aligns well with Vertiv’s strengths, and the company is poised to meet the increasing demand with advanced, efficient solutions.

This has helped VRT outperform its industry peers over the same timeframe, including ServiceNow NOW and Cerence CRNC. CRNC shares have lost 7.4%, while NOW shares have gained 7.4% in a month.

Monthly Performance

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Vertiv’s Strong Order Growth Drives 2024 View

VRT has been benefiting from strong order growth and backlog. At the end of the third quarter of 2024, Vertiv hit a backlog of $7.4 billion, which increased 47% year over year and 5% sequentially. The quarterly results reflected continued order momentum. Organic orders (excluding foreign exchange) surged 19.2% year over year in the third quarter.

For the fourth quarter of 2024, Vertiv expects revenues between $2.12 billion and $2.17 billion, indicating an organic growth rate of 11-15% year over year. Non-GAAP earnings are expected between 80 cents and 84 cents per share.

The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $2.15 billion, indicating year-over-year growth of 15.1%. The consensus mark for earnings is pegged at 83 cents per share, up 7.8% over the past 30 days and indicating 48.2% year-over-year growth.

For 2024, Vertiv expects revenues between $7.78 billion and $7.83 billion, indicating an organic growth rate of 13-15% year over year. Non-GAAP earnings are expected between $2.66 and $2.70 per share.

The Zacks Consensus Estimate for 2024 revenues is pegged at $7.82 billion, indicating year-over-year growth of 13.95%. The consensus mark for earnings is pegged at $2.69 per share, up 4.3% over the past 30 days and indicating 51.98% year-over-year growth.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Vertiv’s Expanding Capacity to Support Clientele Growth

Vertiv is expanding capacity across liquid cooling, thermal, UPS, switchgear, busbar and modular solutions to accommodate AI-driven demand growth. It currently has 23 manufacturing plants globally.

Vertiv has expanded its North American manufacturing operations with a 215,000 square feet (about 20,000 square meters) facility in Pelzer, SC, which supports production of integrated modular solutions, modular power systems, and other integrated systems using Vertiv’s portfolio of power cooling and IT infrastructure technologies for data centers.

Vertiv has expanded its liquid cooling portfolio with the CoolPhase CDU liquid-to-refrigerant coolant distribution unit and the CoolChip Fluid Network in-rack manifold.

These solutions expand VRT’s infrastructure offerings for data centers. These modular, cost-effective systems can be easily deployed in data centers that were not originally configured for liquid cooling. Hence, data centers can support high-density computing for AI alongside traditional air-cooled racks.

Vertiv recently launched a 7MW reference architecture for the NVIDIA GB200 NVL72 platform, co-developed with NVIDIA, to support AI infrastructure. The solutions accelerate the deployment of NVIDIA’s AI data center platform with up to 132kW per rack and optimize the power, cooling, performance and scalability of AI-driven data centers.

A rich partner base that includes the likes of Ballard Power Systems BLDP and ZincFive is expected to drive top-line growth.

Ballard Power and Vertiv are collaborating on developing backup power applications for data centers and critical infrastructures, scalable from 200kW to multiple MWs. The company has integrated Ballard fuel cell power modules with Vertiv Liebert EXL S1 uninterruptible power system (UPS) within a successfully demonstrated proof of concept at Vertiv’s facility in Ohio.

Vertiv has added the ZincFive BC Series UPS battery cabinets to its portfolio of battery systems that are available for data center backup power.

VRT Shares Trade at a Premium

VRT stock is not so cheap, as its Value Score of F suggests a stretched valuation at this moment.

In terms of the trailing 12-month Price/Book ratio, VRT is trading at 26.02, higher than its median of 19.57 and the broader Zacks Computer & Technology sector’s 10.69.

Price/Book Ratio (TTM)

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Conclusion

We believe Vertiv’s growing dominance in the thermal management space for data centers is a major growth driver. An improving liquidity position helps VRT sustain its aggressive expansion strategy.

VRT currently sports a Zacks Rank #1 (Strong Buy) and has a Growth Style Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks Proprietary methodology. You can see the complete list of today’s Zacks #1 Rank stocks here.

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