Latest news with #GerbenBakker
Yahoo
15-05-2025
- Business
- Yahoo
HUBB Q1 Earnings Call: Softer Sales, Margin Management, and Tariff Uncertainty Highlight Quarter
Electrical and electronic products company Hubbell (NYSE:HUBB) missed Wall Street's revenue expectations in Q1 CY2025, with sales falling 2.4% year on year to $1.37 billion. Its non-GAAP profit of $3.50 per share was 6% below analysts' consensus estimates. Is now the time to buy HUBB? Find out in our full research report (it's free). Revenue: $1.37 billion vs analyst estimates of $1.38 billion (2.4% year-on-year decline, 1.3% miss) Adjusted EPS: $3.50 vs analyst expectations of $3.72 (6% miss) Adjusted EBITDA: $285.7 million vs analyst estimates of $301.6 million (20.9% margin, 5.3% miss) Management reiterated its full-year Adjusted EPS guidance of $17.60 at the midpoint Operating Margin: 17.5%, up from 16.3% in the same quarter last year Free Cash Flow Margin: 0.8%, down from 3.7% in the same quarter last year Organic Revenue was flat year on year (2.3% in the same quarter last year) Market Capitalization: $20.58 billion Hubbell's first quarter saw mixed performance as management cited mid-single-digit organic growth in its Electrical Solutions division and a modest rebound in grid infrastructure, offset by ongoing softness in grid automation and rising raw material costs. CEO Gerben Bakker pointed to strong data center demand and efficiency initiatives as positives, but also described the environment as warranting caution due to inflation and new tariffs. Bakker emphasized, 'We see no net change to our prior near-term and long-term views' despite a more dynamic macroeconomic backdrop. Looking forward, management maintained its full-year profit outlook, expressing confidence that recently implemented price increases and productivity actions will help neutralize cost inflation from tariffs and materials. CFO Bill Sperry highlighted that price realization is expected to catch up with cost headwinds by the second half of the year, while also acknowledging that the timing of offsetting reciprocal tariffs remains uncertain. The company continues to see strong order trends and believes it is positioned to benefit from long-term investment in grid modernization and electrification. The latest quarter was shaped by a combination of cost inflation, segment-specific demand trends, and ongoing supply chain and pricing dynamics. Management attributed deviations from expectations primarily to weaker grid automation and lagging cost recovery from tariffs and materials. Electrical Solutions outperformed: The Electrical Solutions business delivered mid-single-digit organic growth, driven by strong demand from data center projects and continued success in industrial reshoring. Margin expansion was supported by ongoing efficiency initiatives and consolidated segment strategy. Grid infrastructure rebounded: Grid infrastructure returned to organic growth after a period of customer inventory normalization. Management cited double-digit order growth and strong transmission and substation markets, reflecting increased utility investment in grid modernization. Grid automation remained soft: Grid automation sales declined by mid-teens percent due to tough comparisons with the prior year. Leadership noted that this segment is now stabilizing, with smaller projects and maintenance activity helping to establish a base level of demand. Tariffs and raw material inflation: Recent cost increases from tariffs and material inflation created a significant earnings headwind. Price increases have been enacted to offset these impacts, but management said the full benefit will be realized later in the year due to the timing of cost recognition under LIFO accounting. Order trends and customer spending plans: Management reported double-digit order growth across key markets and noted that major utility customers have raised multi-year capital plans by approximately 10%. This signals robust demand for transmission and distribution products, supporting the company's long-term growth outlook. Hubbell's outlook focuses on navigating cost pressures, capturing long-term grid investment, and managing supply chain adjustments to support profit targets. Tariff mitigation efforts: Management expects recently enacted price increases and cost-control actions to offset the impact of higher tariffs and material costs; however, there is some uncertainty about the timing, particularly for reciprocal tariffs implemented in April. Grid modernization tailwinds: The company sees sustained demand from utility customers upgrading transmission and substation infrastructure, supported by increased capital spending and secular trends in electrification. Product mix and operational efficiency: Continued growth in higher-margin segments, such as data centers and industrial reshoring, combined with ongoing productivity initiatives, is expected to support margin performance as costs are absorbed and pricing actions take effect. Jeffrey Sprague (Vertical Research): Asked about the $0.50 sensitivity in EPS guidance due to tariffs; management clarified this represents a scenario analysis, not a change to guidance, and aims to fully offset tariff impacts within the year. Charles Tusa (JPMorgan): Inquired about the pace of price realization in the second quarter; management expects sequential price increases to appear more quickly in Electrical Solutions due to shorter backlogs. Nigel Coe (Wolfe Research): Questioned price elasticity and customer reactions to price increases; management reported low elasticity so far and said broad-based pricing actions are being accepted by customers. Christopher Snyder (Morgan Stanley): Pressed on price/cost dynamics in the second half; CFO Bill Sperry confirmed management expects to be price/cost positive later in the year, offsetting first-half headwinds. Julian Mitchell (Barclays): Asked about volume assumptions for second-half growth; management pointed to strong order books, easier comparisons, and inflection in distribution and telecom enclosures as supporting factors. In the coming quarters, the StockStory team will be monitoring (1) the pace at which price increases offset raw material and tariff-driven cost inflation, (2) further recovery in grid automation demand and stabilization of order trends in distribution and telecom, and (3) evidence that utility customers' higher capital spending plans are translating into sustained order and revenue growth. Progress on supply chain diversification and updates on margin expansion initiatives will also be important indicators of execution. Hubbell currently trades at a forward P/E ratio of 21.6×. Is the company at an inflection point that warrants a buy or sell? Find out in our free research report. Donald Trump's victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs. While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years. Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today. Sign in to access your portfolio
Yahoo
01-05-2025
- Business
- Yahoo
Hubbell (NYSE:HUBB) Reports Sales Below Analyst Estimates In Q1 Earnings
Electrical and electronic products company Hubbell (NYSE:HUBB) fell short of the market's revenue expectations in Q1 CY2025, with sales falling 2.4% year on year to $1.37 billion. Its non-GAAP profit of $3.50 per share was 6% below analysts' consensus estimates. Is now the time to buy Hubbell? Find out in our full research report. Revenue: $1.37 billion vs analyst estimates of $1.38 billion (2.4% year-on-year decline, 1.3% miss) Adjusted EPS: $3.50 vs analyst expectations of $3.72 (6% miss) Adjusted EBITDA: $285.7 million vs analyst estimates of $301.6 million (20.9% margin, 5.3% miss) Management reiterated its full-year Adjusted EPS guidance of $17.60 at the midpoint Operating Margin: 17.5%, up from 16.3% in the same quarter last year Free Cash Flow Margin: 0.8%, down from 3.7% in the same quarter last year Market Capitalization: $19.46 billion 'Our results in the first quarter were driven by continued strong operating performance in our Electrical Solutions segment and a return to organic growth in Grid Infrastructure, offset by anticipated softness in Grid Automation and the impact of higher cost inflation' said Gerben Bakker, Chairman, President and CEO. A respected player in the electrical segment, Hubbell (NYSE:HUBB) manufactures electronic products for the construction, industrial, utility, and telecommunications markets. A company's long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Hubbell grew its sales at a tepid 4.6% compounded annual growth rate. This wasn't a great result compared to the rest of the industrials sector, but there are still things to like about Hubbell. Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Hubbell's annualized revenue growth of 5% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak. This quarter, Hubbell missed Wall Street's estimates and reported a rather uninspiring 2.4% year-on-year revenue decline, generating $1.37 billion of revenue. Looking ahead, sell-side analysts expect revenue to grow 6.2% over the next 12 months, similar to its two-year rate. Although this projection indicates its newer products and services will catalyze better top-line performance, it is still below average for the sector. At least the company is tracking well in other measures of financial health. Software is eating the world and there is virtually no industry left that has been untouched by it. That drives increasing demand for tools helping software developers do their jobs, whether it be monitoring critical cloud infrastructure, integrating audio and video functionality, or ensuring smooth content streaming. Click here to access a free report on our 3 favorite stocks to play this generational megatrend. Hubbell has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 16.5%. Looking at the trend in its profitability, Hubbell's operating margin rose by 6.2 percentage points over the last five years, as its sales growth gave it operating leverage. In Q1, Hubbell generated an operating profit margin of 17.5%, up 1.2 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead. We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth is profitable. Hubbell's EPS grew at a spectacular 15.4% compounded annual growth rate over the last five years, higher than its 4.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded. We can take a deeper look into Hubbell's earnings to better understand the drivers of its performance. As we mentioned earlier, Hubbell's operating margin expanded by 6.2 percentage points over the last five years. On top of that, its share count shrank by 1.5%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth. Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business. For Hubbell, its two-year annual EPS growth of 16.6% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base. In Q1, Hubbell reported EPS at $3.50, down from $3.60 in the same quarter last year. This print missed analysts' estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Hubbell's full-year EPS of $16.47 to grow 8.6%. We struggled to find many positives in these results. Its EBITDA missed significantly and its EPS fell short of Wall Street's estimates. Overall, this quarter could have been better. The stock remained flat at $358.88 immediately after reporting. The latest quarter from Hubbell's wasn't that good. One earnings report doesn't define a company's quality, though, so let's explore whether the stock is a buy at the current price. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it's free.
