IBD Stock Analysis
- Stock near 50.08 buy point
- Relative strength line just below multiyear highs
- Earnings surging, though sales declining
Industry Group Ranking
* Not real-time data. All data shown was captured at
3:05PM EDT on
Veritiv is the IBD Stock Of The Day as the company capitalizes on the Covid packaging boom to reposition its business and improve its credit profile. VRTV stock neared a buy point last week as it posted record Q1 earnings and raised guidance.
On May 6, Atlanta-based Vertiv reported Q1 EPS of $1.28 vs. a 2-cent year-ago loss. The only analyst who covers the stock had expected earnings of 2 cents per share, according to Zacks Investment Research.
While revenue fell 9% to $1.559 billion, a more favorable product mix and cost controls delivered the upside surprise. Packaging sales increased 6.5% from the year-ago quarter, boosted by demand and pricing, despite one less shipping day.
Vertiv’s other segments are engaged in publishing, printing and supplying facilities from offices to arenas to hospitals. While Covid stay-at-home trends hit the facilities-supply segment, the other segments face secular declines.
Vertiv is focused on building up the higher-growth, higher-margin opportunities, while better managing the costs of less dynamic segments. Packaging grew from 41% of sales in 2018 to 52% in 2020.
VRTV stock exploded 41% to 38.49 on March 3, when VRTV announced record Q4 earnings. The rally hit its peak on March 15, when VRTV stock rose as high as 49.98 down about 5% on the session, an outside downside day.
Now, after an 8-week consolidation, VRTV is making a run on March’s multiyear high and a 50.08 buy point. On Monday, though, VRTV stock retreated 3,1% to 46.89.
Last week, VRTV’s RS line hit a new multiyear high, according to a MarketSmith analysis, reflecting its outperformance vs. the S&P 500, especially since late February. An RS line hitting a new high before an actual breakout is especially bullish.
VRTV has a 98 Relative Strength Rating from IBD, meaning its outperformed 98% of stocks over the past year. It has a 90 IBD Composite Rating. The Composite Rating combines several key fundamental and technical factors into a single score. IBD research shows that all-time stock winners often have a Composite Rating of at least 95 near the start of big runs.
VRTV Stock Buyback
On March 3, Veritiv announced a $50-million stock buyback plan, doubling the prior authorization amount. As of Monday, VRTV stock had a market cap of $765 million.
Veritiv announced last week that its net leverage ratio, or the ratio of debt to EBITDA, had fallen to a record low 2.0. That should allow it to fund growth efforts, potentially including acquisitions.
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