Vertiv Holdings (NYSE: VRT) saw over a third of its value wiped away yesterday following a disastrous earnings report. Is this another rash reaction from shareholders or was the rapid pullback warranted?
Let's take a look.
Vertiv is an Ohio-based company specializing in critical digital infrastructure and continuity solutions. Its primary customers come from data centers and communication networks. Vertiv offers power management, thermal management, and advanced hardware for managing I.T. equipment. It also boasts a service arm for the continued upkeep of these hardware offerings.
The company went public via SPAC in early 2020 through a subsidiary company of Goldman Sachs.
Vertiv announced its Q4 earnings yesterday and managed to disappoint on almost every measurable metric. The company reported earnings of $0.06 on revenue of $1.41 billion. While the revenue figure came close to analyst estimates of $1.42 billion, earnings missed the mark significantly with analysts expecting $0.28 per share.
These figures represent slim sales growth of only 8% year-over-year (YoY) while earnings were actually halved from the $0.12 per share seen in the year-ago quarter. CEO Rob Johnson explained that the company "consistently underestimated inflation and supply chain constraints for both timing and degree," which ultimately led to the firm effectively undercharging for its products.
Johnson added that they are acting decisively no and in the previous months with what he dubbed "aggressive price actions" in an attempt to offset the headwinds currently facing the firm. However, in perhaps the most damning line from the already disastrous earnings call, management added that "no significant improvement is currently assumed for 2022."
Vertiv closed down over 36% yesterday and is currently trending down a further 6% in pre-market trading.
The short answer is no. The long answer is no, but with some caveats. Vertiv, while slow to react, has now at least attempted to adapt to issues that it had hoped wouldn't last. Pricing alterations should add to revenue figures, and supply chain issues won't continue forever -- hopefully.
Sentiments surrounding the company are at an all-time low, so this could perhaps be an opportunity for the firm to get itself on a path towards outperformance. The next couple of quarters are expected to be more of the same, with low earnings likely. However, if Vertiv can begin to turn things around towards the latter half of 2022 it could well pique our interest once more. A couple of earnings beats could go a long way in winning back investors.
For now though, your money is likely best placed elsewhere. And until Vertiv can show real evidence of top-to-bottom change, that's going to remain the case.
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