Core Viewpoint - Vertiv (VRT) shares have declined 24% year to date, underperforming the broader Zacks Computer and Technology sector and the Zacks Computers - IT Services industry, both of which have seen a 6% decline [1][2]. Company Performance - VRT shares are currently considered overvalued with a Value Score of C, trading at a 12-month price/book ratio of 13.51, which is higher than its median of 11.22 and the sector's 9.83 [5]. - Technically, Vertiv shares are trading below the 50-day and 200-day moving averages, indicating a bearish trend [8]. Growth Prospects - Vertiv's extensive product portfolio, including thermal systems, liquid cooling, UPS, switchgear, busbar, and modular solutions, is enhancing its growth prospects. The backlog at the end of 2024 was $7.18 billion, reflecting a 30% increase over 2023 [12]. - The company has seen organic orders grow approximately 30% in the trailing 12 months, with a book-to-bill ratio of 1.2 times for 2024 [12]. - Strong capital expenditure plans by hyperscalers for data center capacity expansion are favorable for Vertiv, supported by a rich partner base including companies like NVIDIA and Intel [14]. Acquisitions and Innovations - Vertiv has been proactive in acquisitions, recently acquiring centrifugal chiller technologies from BiXin Energy Technology, which enhances its solutions for high-performance computing and AI [15]. Financial Outlook - For 2025, Vertiv expects organic sales growth between 15% and 17%, with net sales projected to be between $9.13 billion and $9.28 billion, indicating a year-over-year growth of 15.07% [16][17]. - Adjusted operating profit for 2025 is expected to be between $1.91 billion and $1.96 billion, with an adjusted operating margin anticipated to be 20.8-21.2% [17]. - Adjusted earnings for 2025 are expected to be between $3.50 and $3.60 per share, with a consensus estimate of $3.59 per share, indicating a year-over-year growth of 25.96% [18]. Quarterly Estimates - For Q1 2025, adjusted earnings are expected to be between 57 cents and 63 cents per share, with a consensus estimate of 62 cents per share, reflecting a year-over-year growth of 44.2% [19]. - Net sales for Q1 2025 are projected to be between $1.9 billion and $1.95 billion, indicating a year-over-year growth of 16.9% [19]. Conclusion - Vertiv is benefiting from a strong portfolio and a rich partner base, driving order growth. The solid top-line growth potential justifies a premium valuation, with a Zacks Rank 2 (Buy) and a Growth Score of A, indicating a strong investment opportunity [21].

Group 1: Stock Performance - Shares of AI-related companies such as Taiwan Semiconductor Manufacturing (TSMC), Arista Networks, and Vertiv Holdings experienced significant declines, with TSMC down 4.19%, Arista down 7.57%, and Vertiv down 10.26% as of 3:52 p.m. ET [1] - Nvidia, a key player in the AI sector, also saw a decline of approximately 9.8% during the same period, impacting related stocks [1] Group 2: Economic Factors - The decline in stock prices is attributed to broader economic factors, including the imminent tariffs on Canada, Mexico, and China, which were confirmed by President Donald Trump [2][3] - Concerns over stagflation, characterized by slowing economic growth and rising prices, were heightened by the ISM Manufacturing Survey, which reported a manufacturing index of 50.3, lower than January's 50.9 and below economists' expectations of 50.8 [4][5] Group 3: Industry-Specific Concerns - The manufacturing employment index fell to 47.6 from 50.3, indicating potential job losses in the sector, which could further exacerbate fears of stagflation [5][6] - Renewed concerns over the sustainability of Nvidia's growth were noted, particularly in light of reports that China has been circumventing U.S. export controls to procure Nvidia chips [7][8] Group 4: TSMC's Investment and Market Sentiment - TSMC announced a $100 billion investment in the U.S., which, while potentially positive, raised concerns about the necessity of such capacity and the lack of subsidies associated with the investment [10][11] - The announcement was perceived as a strategy to mitigate tariff threats on Taiwan, where TSMC's production is primarily based [10] Group 5: Geopolitical Context - The semiconductor industry is heavily influenced by geopolitical factors, with the potential for stricter export controls on semiconductors looming [9][13] - The importance of securing AI supremacy is emphasized, suggesting that companies delivering value in this space may see growth in the medium term despite current market volatility [14]

Order Backlog and Demand - Vertiv's estimated combined order backlog was $7.2 billion as of December 31, 2024, up from $5.5 billion in 2023, indicating strong demand for its products and services [79]. - The majority of the order backlog is expected to be delivered within one year, but customers have the right to reduce or defer orders, impacting revenue realization [79]. Market and Competitive Landscape - The company relies on the growth of data centers and communication networks, with any decrease in demand potentially leading to reduced product offerings [76]. - Long sales cycles and unpredictable customer orders may cause significant revenue fluctuations from quarter to quarter, impacting future operational results [78]. - The company faces competitive pressures from large-scale global competitors, including Schneider Electric and Eaton Corporation, which may affect pricing and market share [89]. Operational Risks - Vertiv's operations are subject to various risks related to supply chain management, including volatility in raw material prices and potential shortages [90]. - The company faces significant risks related to cybersecurity incidents, which could harm business operations, reduce revenue, and increase expenses [95]. - The implementation of new information systems and enhancements may be costly and disruptive, potentially impacting forecasting, order processing, and overall business operations [99]. - The company faces significant risks related to fluctuations in foreign currency exchange rates, which could adversely impact revenue growth if the U.S. dollar strengthens against primary foreign currencies [139]. - The company’s manufacturing facilities are subject to various risks, including natural disasters and political unrest, which could disrupt production and lead to loss of sales [115]. - Operations in emerging markets present specific risks, including political instability and inadequate infrastructure, which could negatively impact business performance [108]. Financial Performance and Debt - The company reported approximately $2,097.0 million of senior secured indebtedness under the Term Loan Facility and $850.0 million of Senior Secured Notes due 2028 [143]. - The company has the ability to draw upon an undrawn portion of its $800.0 million ABL Revolving Credit Facility, subject to customary borrowing base and other conditions [145]. - The company may incur additional debt in the future, which could intensify existing risks and affect its ability to meet debt obligations [145]. - The company reported a principal amount of $2,097.0 million on the Term Loan, due 2027, with a borrowing rate of 6.19% as of December 31, 2024, compared to $2,118.1 million at a rate of 7.97% in 2023 [254]. - Cash and cash equivalents increased to $1,227.6 million in 2024 from $780.4 million in 2023 [254]. Compliance and Regulatory Risks - Contracts with governmental customers may impose additional risks and pressures, including audits and potential penalties, which could limit revenue [83]. - Changes in domestic or global tax provisions, including the implementation of the OECD's global minimum tax framework, could significantly impact the company's effective tax rate and financial performance [103]. - The company is subject to anti-corruption laws, and failure to comply could disrupt business operations and lead to significant penalties [120]. - Non-compliance with evolving data privacy laws like GDPR and CPRA may result in substantial fines and reputational damage, impacting financial results [119]. - Future legislation on cybersecurity, data privacy, and critical infrastructure could impose additional costs and disrupt customer markets, adversely affecting business operations [118]. - Environmental regulations may require costly compliance measures, impacting operational costs and financial condition [130]. - Increasing scrutiny on ESG-related matters could damage the company's reputation and adversely impact financial results if expectations are not met [134]. Strategic Initiatives and Challenges - The company has undertaken rationalization and restructuring initiatives to reduce costs and improve efficiency, but there is no assurance that expected benefits will be fully realized [101]. - The company must anticipate technology shifts, such as the growth in artificial intelligence, to remain competitive and meet evolving customer needs [93]. - The company’s business plan is dependent on access to funding through capital markets, and volatility in these markets could adversely impact its financial results [151]. - The company must attract and retain key employees to successfully implement its business plans, which may be challenging in a competitive market [158]. Intellectual Property and Legal Risks - The company relies on a substantial portfolio of intellectual property rights, and failure to protect these rights could negatively impact business performance [126]. - The company faces risks related to third-party claims of intellectual property infringement, which could lead to costly legal battles and operational disruptions [128]. - Legal claims and proceedings may result in significant costs and adversely affect business operations and financial condition [125]. Economic and Geopolitical Factors - Global macroeconomic conditions, including inflation and supply chain constraints, could adversely impact the company’s demand and financial performance [157]. - Geopolitical tensions, such as the conflict in the Middle East and the invasion of Ukraine, may lead to increased inflation and market disruptions, negatively impacting financial conditions and operating results [117]. Financial Controls and Reporting - The company has had material weaknesses in internal control over financial reporting in the past, which could affect its ability to accurately report financial information [141]. - The company incurs significant costs related to compliance with public company regulations, which may divert management attention from operational matters [163].

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Group 1 - Vertiv Holdings (NYSE: VRT) experienced solid growth across all three regions as demand for its power and thermal management solutions remains healthy [1] - The growth trend is expected to continue into 2025, indicating a positive outlook for the company [1] Group 2 - The analysis reflects a focus on companies with strong foundations, particularly in the technology, industrial, and conglomerate sectors [1] - The approach combines financial analysis with narrative writing to provide insights into company performance and market understanding [1]

4th Quarter 2024 Results February 12, 2025 Cautionary Statement Regarding Forward-Looking Statements This presentation, and other statements that Vertiv may make in connection therewith, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to Vertiv's future financial or business performance, strategies or expectations, and as such are not historical facts. This includes, without limitation, statements regarding Vertiv's financial pos ...

Financial Data and Key Metrics Changes - Adjusted earnings per share (EPS) for Q4 2024 was $0.99, a 77% increase compared to the prior year [16][45] - Q4 organic sales growth was 27%, with sales growth over 20% in both Americas and APAC, and over 30% in EMEA [17][45] - Adjusted operating profit reached $504 million, a 53% increase year-over-year, with an adjusted operating margin of 21.5%, up 380 basis points from the previous year [18][48] - Adjusted free cash flow generation was $362 million in Q4 and over $1.1 billion for the year, with net leverage reduced to 1x [19][59] Business Line Data and Key Metrics Changes - Americas organic sales increased by 25%, driven by strong growth in colocation and hyperscale markets [50] - APAC sales grew 27% organically, with notable strength in China, which grew in the upper teens [51][52] - EMEA organic sales increased by 33%, driven by strong demand from colocation and hyperscale customers [54] Market Data and Key Metrics Changes - Trailing twelve-month orders remained strong at approximately 30%, with Americas trailing twelve-month organic orders up over 50% [21] - Southeast Asia, Australia, New Zealand, and India saw significant increases in trailing twelve-month orders, while EMEA experienced a shift in project activity to 2025 [22] Company Strategy and Development Direction - The company is focused on maintaining a strong position in the data center infrastructure market, emphasizing the importance of R&D and customer relationships [12][14] - Plans to increase R&D spending by $50 million to enhance technology and new products [20] - The company aims to achieve investment-grade ratings and has a robust capital deployment strategy, including share repurchases and dividends [41][42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to continue outperforming in sales, earnings, and cash flow, citing a strong market for data centers driven by AI adoption [12][13] - The company anticipates adjusted EPS for 2025 to be between $3.55 and $3.6, with projected sales of approximately $9.2 billion [20][65] - Management acknowledged potential challenges in EMEA but remains optimistic about future order growth and market conditions [22][84] Other Important Information - The company has expanded its supply chain resilience and manufacturing footprint in the U.S. to mitigate tariff impacts [27][28] - A small acquisition was announced to enhance high-efficiency chiller technology, supporting high-density compute applications [40] Q&A Session Summary Question: Can you provide more color on the European weaknesses and expectations for improved orders in 2025? - Management is encouraged by the pipelines in EMEA and expects a pickup in orders as AI adoption increases, despite current regulatory challenges [82][84] Question: How does Vertiv Holdings Co view its long-term opportunities with the acceleration of AI adoption? - The company is agnostic to whether AI applications are inference or training and believes that both will drive demand for their infrastructure solutions [91][92] Question: Can you explain the revenue overdrive in Q4 and how it relates to first-quarter seasonality? - Management indicated that Q1 should be viewed in absolute terms, with strong guidance despite Q4's exceptional performance [101][102] Question: What is the outlook for capital deployments and buybacks? - The company remains focused on M&A opportunities and will be opportunistic with buybacks as the right moments arise [123][124] Question: Can you clarify the tariff exposure and the company's strategy to mitigate impacts? - Management stated that they do not disclose specific product sourcing but feel prepared to minimize tariff impacts through strategic planning [129][130] Question: How is the total available market evolving for Vertiv Holdings Co? - The company believes it is capturing a higher dollar value per megawatt due to integrated solutions and modularization trends [132][133]

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Vertiv Holdings Co. (VRT) came out with quarterly earnings of $0.99 per share, beating the Zacks Consensus Estimate of $0.84 per share. This compares to earnings of $0.56 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 17.86%. A quarter ago, it was expected that this company would post earnings of $0.71 per share when it actually produced earnings of $0.76, delivering a surprise of 7.04%.Over the last four quarters, the compan ...

Financial Performance - Fourth quarter diluted EPS of $0.38 and adjusted diluted EPS of $0.99, up 77% from fourth quarter 2023[5] - Net sales of $2,346 million, 26% higher than fourth quarter 2023; operating profit of $457 million, up 60% from fourth quarter 2023[5] - Adjusted operating margin expanded 380 basis points to 21.5% in the fourth quarter 2024 compared to fourth quarter 2023[3] - Operating profit for the year ended December 31, 2024, was $1,367.4 million, a significant increase from $872.2 million in 2023[23] - Net income for the year was $495.8 million, compared to $460.2 million in the previous year, reflecting a 7.9% growth[23] - The diluted EPS for the year ended December 31, 2024, was $1.28, compared to $0.60 in 2023, indicating a significant increase[49] - Adjusted operating profit for the year ended December 31, 2024, was $1,551.6 million, up from $1,053.5 million in 2023, reflecting a 47.3% increase[43] Sales Growth - Strong fourth quarter trailing twelve-month (TTM) organic orders up ~30% compared to prior year TTM period; Americas TTM organic orders up ~50%+[5] - Net sales for Q4 2024 reached $2,346.4 million, a 25.7% increase from $1,865.4 million in Q4 2023[23] - Product sales increased to $1,914.3 million, up 29.5% from $1,477.9 million year-over-year[23] - Service sales rose to $432.1 million, a 11.5% increase compared to $387.5 million in the same quarter last year[23] - For the year ended December 31, 2024, total net sales reached $8,011.8 million, up 16.7% from $6,863.2 million in 2023[36] - The Americas segment achieved net sales of $1,255.9 million in Q4 2024, a 23.2% increase from $1,019.6 million in Q4 2023[31] - Organic net sales growth for the EMEA region was 32.8% in Q4 2024, with net sales of $546.5 million compared to $415.4 million in Q4 2023[31] - The Americas segment generated net sales of $684.3 million, with an organic growth of 17.8%[39] - The Asia Pacific segment reported net sales of $208.1 million, achieving an organic growth of 13.6%[39] - The Europe, Middle East & Africa segment had net sales of $309.8 million, with an organic growth of 20.8%[39] Cash Flow and Liquidity - Operating cash flow of $425 million and adjusted free cash flow of $362 million in fourth quarter 2024, both showing increases from fourth quarter 2023[6] - Cash and cash equivalents increased to $1,227.6 million from $780.4 million year-over-year, representing a 57.2% increase[25] - Liquidity remained strong at $2.0 billion with net leverage of ~1.0x at the end of fourth quarter 2024[7] - The company generated $425.2 million in net cash from operating activities in Q4 2024, compared to $356.2 million in Q4 2023[27] - Adjusted free cash flow for the year ended December 31, 2024, was $1,135.2 million, compared to $778.3 million in 2023, marking a 45.9% increase[42] Guidance and Forecast - Expect full year 2025 diluted EPS of $2.93 to $3.03 and adjusted diluted EPS of $3.50 to $3.60, a 25% increase at the midpoint compared to full year 2024[5] - Full year 2025 net sales expected to be $9,125 to $9,275 million, ~$75 million higher than previous guidance despite an FX headwind of ~$125 million[5] - First quarter 2025 net sales guidance of $1,900 million to $1,950 million with organic net sales growth of 17% to 21%[9] - For the first quarter of 2025, the company provided guidance for a GAAP operating profit of $280.0 million and a net income of $148.0 million, leading to a diluted EPS of $0.38[53] - The full year 2025 guidance includes a GAAP operating profit of $1,754.0 million and a net income of $1,169.0 million, with a projected diluted EPS of $2.98[54] - The non-GAAP adjusted figures for 2025 are projected to be an operating profit of $1,935.0 million and a net income of $1,390.0 million, resulting in a diluted EPS of $3.55[54] - The guidance for 2025 does not account for potential impacts from recent policy changes or considerations by the new U.S. Administration[54] Capital Expenditures - Capital expenditure forecast for 2025 is ~$275 million, ~3.0% of sales, to support industry growth[8] - Capital expenditures for the year ended December 31, 2024, totaled $167.0 million, compared to $127.9 million in 2023[42] Non-GAAP Measures - The company emphasized the importance of non-GAAP financial measures to provide a clearer view of operational performance, excluding non-recurring items[30] - The company indicated that reconciling certain forward-looking GAAP measures to non-GAAP measures for FY 2025 is not feasible without unreasonable effort due to high variability and complexity[55]