Back to top

Image: Bigstock

Can VRT's Q3 Earnings Beat & Raised 2024 View Push the Stock Higher?

Read MoreHide Full Article

Vertiv Holdings (VRT - Free Report) reported third-quarter 2024 non-GAAP earnings of 76 cents per share, beating the Zacks Consensus Estimate by 7.04%. The figure jumped 46.2% year over year.

VRT’s earnings beat the Zacks Consensus Estimate in the trailing four quarter, which is commendable.

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

Net sales increased 19% year over year to $2.07 billion, surpassing the Zacks Consensus Estimate by 4.64%. Net sales on an organic basis increased 19.2% year over year.

VRT Prospects Ride on Strong Backlog

VRT shares have outperformed the Zacks Computer & Technology sector year to date (YTD). While Vertiv shares have appreciated 125.6%, the broader sector has returned 25.3% in the said period.

Organic orders (excluding foreign exchange) rose 19.2% year over year, and the book-to-bill ratio was 1.1X in the third quarter. The backlog at the end of the third quarter was $7.4 billion.

These factors have helped VRT outperform its Zacks Computers – IT Services industry and peers, including CoStar Group (CSGP - Free Report) , CyberArk Software (CYBR - Free Report) and Accenture (ACN - Free Report) .

Over the same timeframe, CyberArk and Accenture shares have returned 32.1% and 5.2%, respectively, while CoStar Group shares have fallen 16.9%. The industry has appreciated 9.7% YTD.

VRT’s Top-Line Details

Product revenues (which accounted for 77.9% of total revenues) increased 19.7% year over year to $1.62 billion. Service revenues (22.1% of total revenues) increased 16% year over year to $457.9 million.

Americas revenues increased 19.5% year over year (20.5% organic) to $1.198 billion and accounted for 57.8% of total revenues. Product revenues increased 20.1% year over year (21.5% organic) to $957 million. Service & spares revenues increased 17.2% (16.8% organic) to $241.6 million in the reported quarter.

Asia and Pacific (APAC) revenues increased 11.3% year over year (10.4% organic) to $432.4 million and accounted for 20.9% of total revenues. Product revenues increased 9.9% year over year (9% organic) to $313.9 million. Service & spares revenues increased 14.9% (15% organic) to $118.5 million in the reported quarter.

Europe, Middle East, and Africa (EMEA) revenues increased 26.1% year over year (25.2% organic) to $442.5 million and accounted for 21.3% of total revenues. Product revenues increased 29.2% year over year (27.1% organic) to $344.7 million. Service & spares revenues increased 16.4% (19.3% organic) to $97.8 million in the third quarter of 2024.

VRT’s Operating Details

Selling, general and administrative (SG&A) expenses increased 2.3% year over year to $334.6 million. As a percentage of sales, SG&A expenses decreased 260 basis points (bps) year over year to 16.1%.

Adjusted operating profit jumped 40.7% year over year to $416.9 million. The third-quarter non-GAAP operating margin was 20.1%, up 310 bps year over year.

Americas’ adjusted operating profit surged 46.9% year over year to $303.4 million. EMEA’s adjusted operating profit soared 49.2% to $114.4 million.

However, APAC’s adjusted operating profit declined 11.3% year over year to $44.1 million.

VRT’s Balance Sheet Remains Strong

As of Sept. 30, 2024, cash, cash equivalents and marketable securities totaled $908.7 million, compared with $579.7 million as of June 30, 2024.

Long-term debt at the end of the third quarter was $2.93 billion, down from $2.94 billion reported in the previous quarter.

Cash flow from operating activities was $375.1 million for the reported quarter, down from $378.4 million in the prior quarter. Free cash flow was $335.9 million for the third quarter.

VRT Raises 2024 Guidance

For 2024, revenues are expected between $7.78 billion and $7.83 billion. Organic net sales growth is expected between 13% and 15%.

The Zacks Consensus Estimate for revenues is pegged at $7.69 billion, indicating 12.12% growth over 2023.

Vertiv expects adjusted operating profit between $1.4875 billion and $1.495 billion. Operating margin is expected to be 18.9-19.1%.

VRT expects 2024 non-GAAP earnings between $2.66 per share and $2.70 per share. The Zacks Consensus Estimate for non-GAAP earnings is pegged at $2.58 per share, suggesting year-over-year growth of 45.76%.

The free cash flow for 2024 is expected between $975 million and $1.0325 billion.

For fourth-quarter 2024, revenues are expected between $2.115 billion and $2.165 billion. Organic net sales are expected to increase 11-15%.

The Zacks Consensus Estimate for revenues is pegged at $1.98 billion, indicating 13.71% year-over-year growth.

Vertiv expects adjusted operating profit between $427 million and $447 million. Operating margin is expected to be 20.2-20.6%.

VRT expects fourth-quarter 2024 non-GAAP earnings between 80 cents and 84 cents per share. The Zacks Consensus Estimate for non-GAAP earnings is pegged at 71 cents per share, suggesting year-over-year growth of 36.54%.

Conclusion

Vertiv raised its 2024 guidance with strong orders, a record high backlog and solid operational execution support. This is expected to keep the momentum alive in VRT shares.

Currently, Vertiv carries a Zacks Rank #2 (Buy), which implies that investors should accumulate the stock post-third-quarter earnings. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Published in