Nvidia partner Vertiv's (NYSE: VRT) stock rose by as much as 21% in early morning trading as the company's first-quarter earnings report confirmed that there's nothing wrong with demand for data center equipment. The stock was up 10.5% around 12:30 p.m. ET. The report contained plenty of positives, and Vertiv continues to offer investors an excellent way to get exposure to AI-led demand for data center capacity.
Vertiv's excellent quarter: Orders
The two major pluses from the earnings report this morning were the hike in full-year sales guidance and the return to impressive yearly order growth. Starting with order growth, investors were disappointed in February when management reported that fourth-quarter orders were flat compared to the same quarter of the previous year. Even though its trailing-12-month orders were up 30% in the fourth quarter, the weak order performance in the quarter raised fears of deterioration in 2025.
Fortunately, those fears were dispelled by the 13% growth in orders in the first quarter compared to the same period of 2024. Moreover, trailing-12-month orders were up 20%, and the book-to-bill ratio (a key indicator of growth) was 1.4 in the quarter.
Vertiv's excellent quarter: Guidance hike
As for the guidance update, management now expects organic net sales growth of 16.5%-19.5% compared to a prior estimate of 15%-17%. That said, the midpoint of earnings and free cash flow (FCF) guidance was kept the same, even as management raised the high end of the earnings and FCF guidance range due to favorable trading conditions but lowered the low end due to uncertainty around tariffs.
Now trading at less than 24 times the midpoint of FCF guidance for 2025, Vertiv remains an attractively priced growth stock, not least as we are still in the early innings of AI application growth.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
