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Cramer Spotlights Data Center Giants: GEV & VRT
9 Oct
Summary
- Jim Cramer highlighted GE Vernova and Vertiv for data center industry exposure.
- Vertiv reported strong Q2 sales and operating profit growth.
- GE Vernova's free cash flow surged due to customer downpayments.
Jim Cramer drew attention to GE Vernova (GEV) and Vertiv (VRT) on October 2nd, citing their critical involvement in the expanding data center sector. Cramer noted Vertiv's impressive order backlog in May and highlighted GE Vernova's strategic positioning to benefit from potential tailwinds in nuclear power generation spurred by AI development.
In the second quarter, Vertiv Holdings Co. (VRT) reported a 24% annual increase in net sales and a 44% rise in operating profit, signaling robust activity within the data center market. Despite some minor revenue timing shifts attributed to project execution and supply chain issues, CEO Giordano Albertazzi affirmed strong demand and increasing project complexity.
However, Vertiv's Q2 revenue growth of 17.8% fell short of analyst expectations, raising concerns about backlog conversion amid aggressive capital expenditure growth of 285% to $173 million. Similarly, GE Vernova (GEV) saw its orders lead to a $6.4 billion working capital benefit from customer downpayments in Q2, propelling its free cash flow up by 2,532% to $5.1 billion. The company also raised its full-year cash flow guidance significantly.
Despite these positive indicators, GE Vernova's Q2 EBIT of $653 million and earnings per share missed analyst estimates. The company's forward P/E ratio of 38.76 suggests high long-term growth expectations, though its earnings yield is low at 2.58%. Hedge fund interest remains high for both companies, with 106 funds holding stakes in GE Vernova and 112 in Vertiv during Q2.
