Vertiv (VRT) Rides on AI-Driven Order Growth: Is the Stock a Buy?

Core Insights - Vertiv experienced a significant increase in orders, with a 60% year-over-year jump in the first quarter of 2024 and a backlog growth of approximately 33% to $6.3 billion, most of which will be delivered beyond 2024 [1] - The company anticipates second-quarter 2024 revenues between $1.9 billion and $1.95 billion, reflecting an organic growth rate of 11-13% year-over-year, with expected non-GAAP earnings between 53 cents and 57 cents per share [2][14] - The Zacks Consensus Estimate for 2024 revenues is projected at $7.72 billion, indicating a year-over-year growth of 12.46%, with earnings expected at $2.42 per share, representing a 36.72% increase [3] Revenue and Earnings Projections - For the second quarter of 2024, the Zacks Consensus Estimate for revenues is pegged at $1.94 billion, indicating a year-over-year growth of 12.1%, with earnings expected at 59 cents per share, showing a 28.26% year-over-year growth [6] - The consensus mark for 2025 revenues is currently at $8.61 billion, suggesting an 11.61% growth, with earnings estimated at $3.13 per share, reflecting a slight increase over the past 30 days [7] Market Position and Demand Drivers - Vertiv specializes in cooling and power management infrastructure technologies, primarily serving data center providers, and is benefiting from strong AI-driven order growth [4] - The company is expanding its capacity across various solutions, including liquid cooling and thermal management, to meet the increasing demand driven by AI [8] - The production of next-generation chips for AI liquid cooling is underway, with Vertiv accelerating capacity through the production of CoolTera CDU in two global manufacturing facilities [9] Financial Health and Growth Strategy - Vertiv expects strong order growth in the second quarter of 2024, supported by solid AI-related demand, which is anticipated to positively impact order and sales growth in 2025 [5] - The company has expanded its capacity by over 100% for switchgear, busway, and modular solutions since acquiring the E&I Engineering business in November 2021 [15] - Vertiv's expected free cash flow for 2024 is between $800 million and $850 million, and it anticipates net leverage to decline to two times or lower by the third quarter [17]