Vertiv Falls 17% as a Revenue Miss Overshadows Higher Guidance

The data-center power supplier beat on profit and raised its full-year outlook, but second-quarter sales landed below Wall Street's target and the stock had its worst day in more than a year.

Vertiv Holdings (VRT) tumbled 17.3% on Wednesday, closing at $223.04, after second-quarter results showed revenue falling short of Wall Street’s forecast even as profit beat estimates and the company raised its outlook for the year. The reaction was swift. About 21 million shares traded, more than four times the stock’s recent daily average, making it the worst session for the data-center equipment maker in more than a year.

Profit beat, revenue came up short

For the quarter that ended in June, Vertiv reported net sales of $3.27 billion, up 24% from a year earlier and 18% on an organic basis. Adjusted earnings were $1.52 a share, up 60% and ahead of the $1.42 analysts had modeled. On a reported basis, diluted earnings rose 53% to $1.27. On profit, the quarter was strong. The trouble was the top line. Revenue came in $110 million below the $3.38 billion Wall Street expected, a miss of a little over 3%.

Management pinned the gap on timing. Vertiv said the quarter reflected “minor timing shifts, primarily due to temporary supply chain congestion and multi-phased project execution as deployments scale in size and complexity,” language that points to orders sliding between quarters as data-center projects grow larger, not to weakening demand.

Profitability moved the other way from the sales line. Adjusted operating profit climbed 51% to $738 million, and adjusted operating margin reached 22.6%, an improvement of 410 basis points from a year earlier. Operating cash flow more than tripled to $1.1 billion, and adjusted free cash flow was $925 million.

The company also lifted its full-year targets. Vertiv now guides to adjusted earnings of $6.65 to $6.75 a share, up from a prior range of $6.30 to $6.40, on net sales of $13.8 billion to $14.2 billion and organic growth of 30% to 32%. For the raise to hold, the sales the company says merely slipped need to arrive in the second half.

The slide predates the report

Wednesday’s drop landed on a stock that had already been falling. Vertiv came into the report down about 27% over the past 30 days, and the close left it 41% below its 90-day high of $376.23. The session also pushed it under its prior three-month low. That is a fresh low. For a name that rode the artificial-intelligence buildout higher, it has been a fast reversal.

Other large-cap technology and industrial stocks fell on Wednesday as well. Among them was Eaton, a maker of electrical equipment used in data centers, which dropped about 6%. The broad weakness gave Vertiv’s own miss little room to find support.

What to watch

Vertiv’s guidance now sets the bar for the rest of the year. The number to watch is revenue. For the third quarter, the company projected net sales of $3.65 billion to $3.85 billion and adjusted earnings of $1.77 to $1.83 a share. Whether the sales that slipped out of the second quarter reappear in those figures is the open question behind the timing explanation. The full-year sales range of $13.8 billion to $14.2 billion is the other marker to track.

This is a general-market summary for information only — not investment advice, and not a recommendation regarding any security.