Vertiv's (VRT) encouraging Q3 Americas margins are a positive signal for 2026 incrementals, Morgan Stanley said in a Thursday research report.

The Americas segment generating around 40% incremental in Q3 implies healthy pricing power on new orders and that margin headwinds are transitory. The Wall Street firm raised its 2025 EPS estimate to $4.13 from $3.83 due to the Q3 beat and higher Q4 revenue outlook, which offsets a softer margin forecast.

The company is positioned for a robust Q4 order print despite tariff headwinds, which are expected to fade into 2026. "Order strength and backlog build should support continued top-line performance through 2026 and 2027," according to the note.

Morgan Stanley expects EPS for 2026 and 2027 of $5.27 and $6.53, respectively. "It is one of the only companies in our coverage positioned for 2026 positive revisions, and the upside could be massive if we use Q3 order rates and incremental margins as a proxy," the analysts said.

The firm reiterated its overweight rating on the stock and increased its price target to $200 per share from $165.

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