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Vertiv Holdings

VRT

Wall street consensus:

### Consensus Report Summary on Vertiv Holdings (VRT)

#### Overview
Vertiv Holdings shows a notably robust performance driven by strong orders and a significant backlog, positioning it for sustained growth into the upcoming year and beyond. Goldman Sachs & Co. LLC presents an optimistic view, outlining the company's solid fourth-quarter earnings, with a particularly notable performance exceeding consensus estimates. The upward revision of future guidance underscores a healthy outlook leveraged on solid order growth and backlog.

#### Performance Assessment
- **Financial Metrics**: Vertiv's fourth-quarter revenue of $1.87 billion and adjusted EPS of $0.56 surpassed FactSet consensus estimates, indicating robust financial health. The updated future guidance for 2024, with targeted revenue of $7.6 billion and adjusted EPS in the range of $2.20-$2.26, affirms a strong growth trajectory.
- **Order Growth and Backlog**: The company's order growth year-over-year stands at 23%, with a backlog reaching a historic high of approximately $5.5 billion. This points to strong demand and a solid pipeline for future revenue, positioning Vertiv favorably in the market.
- **Pricing and Margin**: The emphasis on solid pricing practices contributing to revenue growth and margin expansion is viewed positively. Vertiv's strategic pricing is crucial for its financial performance amidst competitive pressures.
- **AI-Driven Demand**: Engagement in AI-related projects and capacity expansion to meet this demand reflects positively on Vertiv's growth prospects. The focus on AI infrastructure suggests strategic positioning to capture market opportunities in a high-growth domain.

#### Key Topics Insights
1. **Growth Indicators**: The strong order book and backlog are highlighted as primary indicators of Vertiv's growth potential. Investors are advised to monitor these closely as they provide a foundation for future revenue streams.
2. **Profitability Concerns**: Pricing strategy and its impact on margin expansion remain critical in the competitive landscape. Efforts to enhance profitability through pricing and operational efficiencies will be key areas of focus.
3. **Market Opportunities in AI**: Vertiv's alignment with AI demand and capacity expansion underlines a proactive approach to capturing growth in emerging technology sectors. This strategy supports long-term sustainability and growth.
4. **Market Positioning**: The company's ability to navigate competitive pressures and maintain or grow its market share will be crucial for long-term viability. Attention to market position and responses to competitive dynamics will be essential in assessing Vertiv's future success.

#### Consensus Outlook
Goldman Sachs’ raised 12-month price target to $73 reflects a strong vote of confidence in Vertiv's strategic direction and operational strategies. The comprehensive analysis underscores the potential for sustained growth, driven by strategic pricing, a solid order book, and innovative focus areas such as AI-driven demand. Key risks include fluctuations in revenue growth, margin pressures, and leverage levels, which merit close monitoring moving forward. The consensus is bullish on Vertiv's growth prospects, emphasizing its strong market position as a solid investment opportunity.

Ticker:

​Recent Conference Call

Vertiv Holdings Co's Earnings Call for the Fourth Quarter of 2023. Here's a summary:

1. **Insightful Quote from David M. Cote, Executive Chairman:**
- "Well, 2023 was a great year for Vertiv and our shareowners. We created tremendous value. Our stock price increased 252% in 2023, putting us well ahead of the #1 performer in all of the S&P 500, and it's up very well again so far this year."

2. **Key Quarterly Business Trends:**
- **Strong Sales Growth and Operational Execution:** Organic net sales increased by 12%, driven mainly by growth in the Americas. Orders grew by 23% year-on-year and 18% sequentially across all regions, with a robust book-to-bill ratio of 1.3x.
- **Significant Investment in High-Density Liquid Cooling:** Vertiv has completed the acquisition of CoolTera, enhancing its portfolio in high-density and liquid cooling. They are scaling up production significantly to meet rising demand.
- **Consistent Performance Across Regions:** Americas led with 22% sales growth. APAC sales increased by 3%, but China's performance was flat. EMEA experienced strong orders growth, predicting low double-digit organic growth in 2024.

3. **Critical Questions from Analysts:**
- **Analysts inquired about the slowdown in savings for 2024 compared to 2023, the impact of pricing strategies, and the future outlook for North American revenue.**
- **Questions were raised regarding the book-to-bill ratio and how much of the backlog supports sales in 2024 and 2025.**
- **Analysts asked about Vertiv's capacity utilization by region and the potential bottlenecks in growth due to capacity constraints or customer readiness.**

4. **Outlook and Guidance:**
- Vertiv expects continued growth in orders and revenues for 2024. Organic net sales growth is projected at 9% to 11%, with an adjusted operating profit of $1.3 billion. Adjusted operating margin is anticipated to surpass the midterm target of 16%. The adjusted free cash flow is projected between $800 million and $850 million.

Key Questions to follow

Based on the summary of the Goldman Sachs & Co. LLC sell-side research report on Vertiv Holdings and considering the thematic investment tags, here are three insightful questions that could guide further analysis on Vertiv Holdings' (VRT) potential for future growth:

1. **Mergers & Acquisitions Synergy and Growth**: Given the emphasis on 'M&A' and 'Investing' within the thematic tags, how might Vertiv Holdings leverage its strong order book and backlog, which reached a record high of approximately $5.5 billion, to identify and execute strategic mergers and acquisitions? Could targeted acquisitions in the AI infrastructure space or complementary technological areas further bolster Vertiv's capacity expansion efforts and enhance its market positioning against competitive pressures?

2. **Asset Utilization and Revenue Growth**: As Vertiv continues to expand its capabilities to meet AI-driven demand, how effectively is the company utilizing its assets, particularly in high-growth areas? Are there any indications that Vertiv's current investments in capacity expansion and its pricing strategy are leading to not just margin expansion but also optimal asset utilization, ensuring that the increased backlog translates into sustained revenue growth and profitability?

3. **Alternative Investment Considerations Amidst Market Position and Competitive Pressures**: Reflecting on 'Alternative' and 'Thematic' investment avenues, how can investors view Vertiv's efforts in AI and related technological advancements as an alternative investment within the tech sector, particularly in terms of potential for high growth and diversification benefits? Moreover, how does Vertiv plan to address competitive pressures and maintain its market share, especially when faced with fluctuations in revenue growth and margin pressures? How could these strategies influence the company's attractiveness as a thematic and alternative investment in the technology sector, specifically in infrastructure supporting AI and other emerging technologies?

These questions aim to deepen the understanding of Vertiv Holdings' strategic directions, operational efficiency, and investment potential, especially in the context of leveraging M&A opportunities, asset utilization, and positioning within the competitive landscape of AI infrastructure and technology services.

AI Q&A
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