Vertiv helps the computing power needed to drive the modern economy (data centers, AI, and more) run as smoothly as possible around the clock.
Vertiv is a picks-and-shovels AI and data center company working with Nvidia to help solve critical, behind-the-scenes challenges facing the rapid expansion of AI and its sustained growth.
Vertiv posted another beat-and-raise quarter on October 23, driven by "robust underlying demand" for its critical digital infrastructure products and services across its entire "AI-enabling portfolio of power, thermal, IT systems, infrastructure solutions and services."
Vertiv operates in the background of big tech and AI, supporting the constant expansion and the day-to-day operations of data centers, communication networks, and beyond. Vertiv's hardware, software, analytics, and ongoing services portfolio is focused on power, cooling, and IT infrastructure.
Vertiv's business has never been more critical and in demand. The enormous expansion of data centers requires massive amounts of high-performance computing power that operates at peak performance 24/7.
Vertiv has partnered with the current titan of AI, Nvidia (NVDA), to help solve future data center efficiency and cooling challenges.
The picks-and-shovels AI and data center company posted a beat-and-raise third quarter on October 23. "Robust underlying demand for our critical digital infrastructure products and services" fueled its most recent quarter, according to Vertiv CEO Giordano Albertazzi.
Vertiv grew its revenue by 19% in the third quarter and its adjusted earnings by 46%. The company's organic orders climbed ~37% over the trailing 12 months. Vertiv was "very encouraged by the acceleration of liquid cooling revenue" last quarter as more of its long-term pipelines grow.
Vertiv is bullish about its outlook across its entire portfolio, fueled by the rapid acceleration of AI spending. Nvidia, Meta, Alphabet, and tons of other companies are going all in on AI and Vertiv is prepared to ride that mega-trend for as long as it lasts.
Vertiv's earnings estimates climbed since its Q3 release, extending its impressive run of upward revisions over the last two years.
VRT's improving bottom-line outlook helps it earn a Zacks Rank #1 (Strong Buy) and it has topped our EPS estimates for seven quarters running.
Vertiv is projected to grow its adjusted earnings per share (EPS) by 52% in FY24 and 30% in FY25 to climb from $1.77 a share in 2023 to $3.50 per share next year. Vertiv's strong earnings growth outlook comes on top of its 230% expansion last year.
On the revenue front, Vertiv is projected to boost its sales by 14% in 2024, adding roughly $1 billion to the top-line. VRT is expected to follow up its 2024 growth with 16% stronger sales next year to pull in $9.08 billion vs. $6.86 in 2023.
Vertiv stock has soared over 940% in the last five years to crush Tech's 135%, Meta's (META) 190%, and Alphabet's (GOOGL) 160%. VRT shares have jumped 630% in the past two years and 120% YTD—blowing away Meta's 60% 2024 run and Alphabet's 22%.
Vertiv stock has easily surpassed its highly-ranked Computers – IT Services industry over the past year, up 170% vs. 22%. Vertiv has pulled back slightly from its October records and trades 17% below its average Zacks price target.
VRT's recent pullback has cooled off the stock, taking Vertiv from heavily overbought RSI levels (a widely-tracked technical indicator focused on momentum) to below neutral.
VRT is trading slightly below its 21-day moving average. Any pullback to Vertiv's 50-day might offer traders a nice near-term entry point. That said, long-term investors shouldn't attempt to time stocks exactly since it can leave them on the sidelines as they march higher and higher.
On the valuation front, VRT trades at a 20% discount to its highs at 31.7X forward 12-month earnings.
Vertiv stock offers 14% value compared to its highly-ranked Computers - IT Services industry despite its huge outperformance. Vertiv has climbed 300% in the past three years to blow away its industry's 5% decline.
Vertiv's proven behind-the-scenes portfolio benefits directly from the rapid expansion of data centers, AI, and other growth-focused technology investments like cryptocurrencies and bitcoin.
Given this simple backdrop, it is no wonder that all 12 brokerage recommendations Zacks has for Vertiv are "Strong Buys."
The Container Store Group, Inc. stock has plummeted over 85% in 2024 alongside its tumbling earnings outlook.
The Container Store Group's recent drop is part of a massive decline over the last roughly 10 years that was only interrupted a few times.
The Container Store Group is a retail giant focused on containers, as its name suggests. The company is focused on what it calls organizing solutions, custom spaces, and in-home services, aiming to "transform lives through the power of organization."
The Container Store Group's revenue has dropped off a cliff in the last few years after climbing between FY14 to FY22, capped off by strong covid-based growth. TCS's revenue is projected to drop -10% in its FY24 and another -3% next year.
The company in early October received a financial lifeline from Bed Bath & Beyond owner Beyond. TCS said on Oct. 15 that it entered into agreement with Beyond, Inc. to invest $40 million in The Container Store Group, Inc. through a preferred equity transaction.
The deal came roughly five months after The Container Store said it was launching a strategic review of its business. The Container Store Group said in August it would stop providing financial guidance as it evaluated strategic alternatives amid a challenging environment.
The company reported an adjusted Q2 FY24 loss of -$3.23 a share on October 29, falling well shy of our Zacks estimate. The Container Store Group's earnings outlook has dropped since its recent release, helping it land a Zacks Rank #5 (Strong Sell).
The Container Store Group is projected to post an adjusted loss of -$6.36 per share in its FY24 and -$7.90 in its FY25. TCS stock has lost most of its value over the past decade.
It is likely wise for investors to stay away from The Container Store Group stock until it proves a viable turnaround is possible in the near future.
The U.S. construction is trying to stage a steady comeback as price pressure and borrowing rates continue to ease. September saw a modest rise in construction spending. However, it hit a four-month high, indicating that the sector is recovering from its earlier lows.
Residential construction, which had largely been responsible for driving construction spending in the past, saw an uptick in September, fueling overall spending on construction. Homebuilder confidence is also rising fast, with building permits and housing starts jumping in a sign that the homebuilding market can once again boost the construction sector.
Given this situation, investing in homebuilder stocks like KB Home, Toll Brothers Inc. and Taylor Morrison Home Corp. would be a wise decision. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Commerce Department said on Friday that construction spending rose 0.1% month over month in September to $12.5 trillion, the highest level since May. This exceeded economists' expectations of construction spending to remain flat in September.
Year over year, construction spending jumped 4.6%. In the first nine months of the year, construction spending totaled $1.6 trillion, up 7.3% from the year-ago figure of $1.5 trillion. Also, the Commerce Department upwardly revised the September figure to 0.1% from a 0.1% decline.
Construction spending indicates the amount of money the government and private enterprises allocate to various projects, including housing and infrastructure like highways. Increased spending on construction means a rise in overall economic activity.
Spending on residential construction projects jumped 0.2% to $913.6 billion. Non-residential construction rose 0.1% to $740 billion. Public construction spending rose 0.5% to $141 billion.
The Housing Market Index (HMI) from the National Association of Home Builders (NAHB) and Wells Fargo shows that confidence among U.S. homebuilders for new single-family homes rose to 41 in September, up from 39 in the previous month.
The boost in sentiment is attributed to a drop in mortgage rates, which have reached their lowest point since February. The 30-year fixed mortgage rate is now 6.7%, compared with 7.18% a year earlier. Although mortgage rates peaked at 7.76% in October 2023, they have since decreased significantly.
Declining mortgage rates are making homebuilders spend more on construction activity. Housing starts for privately owned homes rose 9.6% in August, reaching an annualized rate of 1.356 million, surpassing the expected increase of 2.9%. Also, residential building permits, which serve as a gauge for construction activity, increased by 4.9% in August compared with the previous month, reaching an annualized rate of 1.475 million units.
The Federal Reserve cut interest rates by 50 basis points in September, easing price pressure and borrowing rates. Market participants are now hopeful about a 25-basis point rate cut in November, which would further help the homebuilding and overall construction sector.
KB Home
KB Home is a well-known homebuilder in the United States and one of the largest in the state. KBH's Homebuilding operations include building and designing homes that cater to first-time, move-up and active adult homebuyers on acquired or developed lands. KB Home also builds attached and detached single-family homes, townhomes and condominiums.
KB Home's expected earnings growth rate for the next year is 20.1%. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the past 90 days. KBH presently carries a Zacks Rank #2.
Toll Brothers
Toll Brothers builds single-family detached and attached home communities, master-planned luxury residential resort-style golf communities, and urban low, mid, and high-rise communities, principally on the land it develops and improves. TOL operates in Arizona, California, Florida, Delaware, Maryland, Pennsylvania and South Carolina. Toll Brothers offers homes under two segments, namely Traditional Home Building Product and City Living.
Toll Brothers' expected earnings growth rate for the current year is 17.6%. The Zacks Consensus Estimate for current-year earnings has improved 3.6% over the past 90 days. Toll Brothers presently has a Zacks Rank #2.
Taylor Morrison Home
Taylor Morrison Home is a homebuilder and land developer engaged in building single-family detached and attached homes for first-time buyers, move-up families, and luxury and active adult customers. TMHC operates under the Taylor Morrison brand, Monarch brand and Darling Homes brand. Taylor Morrison Home operates in Arizona, California, Colorado, Florida and Texas.
Taylor Morrison Home's expected earnings growth rate for next year is 11%. The Zacks Consensus Estimate for current-year earnings has improved 4.5% over the past 90 days. THMC currently sports a Zacks Rank #1.
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