Pre-Q3 Earnings Report: Is Vertiv Stock a Portfolio Must-Have?

Vertiv VRT is set to report its third-quarter 2024 results on Oct. 23.For the third quarter of 2024, Vertiv expects revenues between $1.94 billion and $1.99 billion, indicating an organic growth rate of 12-16% year over year. Vertiv expects third-quarter 2024 non-GAAP earnings between 65 cents and 69 cents per share.The Zacks Consensus Estimate for third-quarter revenues is pegged at $1.98 billion, indicating year-over-year growth of 13.71%. The consensus mark for earnings is pegged at 71 cents per share, up by a penny over the past 30 days and indicating 36.54% year-over-year growth.Vertiv’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, delivering an earnings surprise of 12.92%, on average. Vertiv Holdings Co. Price and EPS Surprise Vertiv Holdings Co. price-eps-surprise | Vertiv Holdings Co. QuoteStay up-to-date with all quarterly releases: See Zacks Earnings Calendar.Let’s see how things are shaping up prior to this announcement.Factors to NoteVertiv’s third-quarter 2024 results are expected to have benefited from growing demand for its cooling and power management infrastructure solution. It has been riding on strong AI-driven order growth. The growing focus on thermal management by data center providers bodes well for VRT.Vertiv hit a backlog of $7 billion, which increased 47% year over year and 11% sequentially in the second quarter of 2024. Organic orders surged 57% year over year, and the book-to-bill ratio was 1.4 times.This has helped VRT outperform its industry peers over the same timeframe, including ServiceNow NOW and Infosys INFY. While Vertiv shares have surged 133.7% year to date, INFY and NOW shares have gained 22.4% and 30.4%, respectively.Year-to-Date Performance Image Source: Zacks Investment ResearchVertiv now expects third-quarter 2024 order growth at low double-digits (10-15% range) despite tough comparisons. On a trailing 12-month basis, the order growth rate is expected between 30% and 35%. Solid AI-related demand is expected to provide a tailwind to 2025 order and sales growth.Vertiv Expanding Capacity to Support Clientele GrowthVertiv is expanding capacity across liquid cooling, thermal, UPS, switchgear, busbar, and modular solutions to accommodate AI-driven demand growth.Liquid cooling is a must for next-generation chips that form the backbone for the rapid adoption of AI. It recently launched the MegaMod CoolChip, a liquid cooling-equipped prefabricated modular data center solution that is engineered to enable efficient and reliable AI computing.Vertiv is expanding its North American manufacturing operations with a new facility in Pelzer, SC. The facility adds 215,000 square feet (about 20,000 square meters) of manufacturing space.The facility will produce a variety of infrastructure solutions, including integrated modular solutions, modular power systems, and other integrated systems using Vertiv’s portfolio of power, cooling, and IT infrastructure technologies for 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. Vertiv has added the ZincFive BC Series UPS battery cabinets to its portfolio of battery systems available for data center backup power.Vertiv Shares Trade at PremiumHowever, Vertiv stock is not so cheap, as the Value Score of D suggests a stretched valuation at this moment.In terms of the forward 12-month Price/Earnings (P/E) ratio, VRT is trading at 35.12X, higher than its median of 27.81X and the sector’s 26.89X.Price/Earnings (P/E) Ratio Image Source: Zacks Investment ResearchImproved Liquidity Aids VRT’s ProspectsVertiv’s focus on reducing debt is commendable. Net leverage was 1.8 times at the end of the second quarter, which was within VRT’s stated leverage target range of 1 time to 2 times.It repriced the existing seven-year term loan worth $2.1 billion that reduced interest expense by 61 basis points and resulted in interest savings of roughly $13 million per year.Vertiv now expects 2024 free cash flow between $850 million and $900 million for 2024, reflecting improving profits.ConclusionVertiv’s growing dominance in the thermal management space for data centers is a key catalyst. Despite a stretched valuation, VRT’s expanding capacity is a key driver for growth-oriented investors.Vertiv has a Zacks Rank #2 (Buy) and 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 (Strong Buy) stocks here.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report American Noble Gas Inc. (INFY): Free Stock Analysis Report Ballard Power Systems, Inc. (BLDP): Free Stock Analysis Report ServiceNow, Inc. (NOW): Free Stock Analysis Report Vertiv Holdings Co. 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