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A week ago, Vertiv Holdings Co (NYSE:VRT) came out with a strong set of first-quarter numbers that could potentially lead to a re-rate of the stock. The company beat both earnings and revenue forecasts, with revenue of US$1.1b, some 4.8% above estimates, and statutory earnings per share (EPS) coming in at US$0.09, 155% ahead of expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
After the latest results, the eight analysts covering Vertiv Holdings Co are now predicting revenues of US$4.92b in 2021. If met, this would reflect a modest 7.6% improvement in sales compared to the last 12 months. Per-share earnings are expected to surge 329% to US$0.72. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$4.79b and earnings per share (EPS) of US$0.71 in 2021. So it looks like there's been no major change in sentiment following the latest results, although the analysts have made a small lift in to revenue forecasts.
It may not be a surprise to see thatthe analysts have reconfirmed their price target of US$26.67, implying that the uplift in sales is not expected to greatly contribute to Vertiv Holdings Co's valuation in the near term. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Vertiv Holdings Co analyst has a price target of US$30.00 per share, while the most pessimistic values it at US$24.00. This is a very narrow spread of estimates, implying either that Vertiv Holdings Co is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that Vertiv Holdings Co's rate of growth is expected to accelerate meaningfully, with the forecast 10% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 7.0% over the past year. Compare this with other companies in the same industry, which are forecast to grow their revenue 11% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Vertiv Holdings Co is expected to grow at about the same rate as the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. There was also an upgrade to revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider industry. The consensus price target held steady at US$26.67, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Vertiv Holdings Co. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Vertiv Holdings Co analysts - going out to 2023, and you can see them free on our platform here.
Plus, you should also learn about the 3 warning signs we've spotted with Vertiv Holdings Co .
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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