What happened
Shares in data center equipment maker Vertiv (VRT 3.48%) rose a whopping 30% in the week to midday Thursday. The move comes after a blockbuster second-quarter earnings report and a significant hike in full-year guidance.
It's been a strong year for the company, with the ongoing demand for data center equipment driven by both the cloud/hyper scale (companies like Microsoft's Azure, Amazon Web Services, and Google Cloud) and the colocation (data center providers) markets. A surge of interest in artificial intelligence (AI) has bolstered the outlook for the industry in general.
Vertiv's management, guided by Executive Chairman Dave Cote (a highly respected industrial figure), has raised full-year earnings guidance twice this year, from $1.17-$1.27 in February to $1.22-$1.32 in April, and now to $1.54-$1.64.
So what
Not only do the results confirm the strength of Vertiv's end markets, but they also highlight the turnaround in its operational fortunes. Having been late to raise prices and getting caught out by surging cost inflation, management initiated price increases to improve cash flow.
As you can see below, the price increases (accompanied by strong volume growth) have resulted in excellent growth in profit and margin.
Data source: Vertiv presentations.
Now what
Investors will hope Vertiv can meet its full-year earnings guidance and will be looking to see if AI-related applications will boost sales into 2024 as management believes it will.
