Earnings Outlook: Hubbell Anticipates Strong Q3 With a Focus on Utility Solutions

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Earnings Outlook: Hubbell Anticipates Strong Q3 With a Focus on Utility Solutions

Hubbell Incorporated (NYSE: HUBB) reported strong operational results in its Q3 2024 Earnings Call, with a 14% year-over-year increase in adjusted earnings per share and significant expansion in adjusted operating margins. Despite challenges in the Telecom sector and inventory normalization in the benefits distribution markets, the company raised its full-year outlook, expecting double-digit growth in adjusted operating profit. Notably, the Benefit Solutions segment is poised for growth, capitalizing on network modernization and electrification trends. The Helene and Milton hurricanes impacted operations but had a neutral net effect on revenues, with storm-related orders expected to boost the fourth quarter.

Key Highlights

  • Adjusted earnings per share increased by 14% year-over-year.
  • Adjusted operating margins expanded by 180 basis points.
  • Full-year outlook raised, with double-digit adjusted operating profit growth anticipated.
  • Strong performance in the Benefit Solutions segment with an 18% increase in dollar margins.
  • Hurricanes had a neutral net effect on Q3 revenues; positive contributions are expected in Q4.
  • The company remains optimistic about maintaining above-average growth rates through 2025.

Company Outlook

Hubbell forecasts continued growth in the Benefit Solutions segment, supported by network modernization and electrification trends. The company plans to leverage its market position and pricing strategy to sustain growth despite macroeconomic uncertainties. Management is optimistic about navigating inventory challenges and benefiting from demand recovery, projecting above-average growth for 2025.

Negative Highlights

  • Telecom sector performance continues to be weak, with an anticipated 30% decline for the year.
  • Organic growth in the benefit segment is expected to be low single digits in Q4, primarily due to storm-related orders.
  • A decline in Aclara's meter sales is expected but may be offset by growth in AMI and Protection & Control.

Positive Highlights

  • The benefit segment achieved a margin expansion of 130 basis points, exceeding 25%.
  • The Electrical Solutions segment saw 3% organic growth with strong performance in data centers and renewable markets.
  • Renewable and data center businesses experienced strong double-digit growth, potentially in the 15%-20% range.
  • The Systems Control business generated approximately $120 million in revenue in Q3, with a full-year projection of $400 million.

Drawbacks

  • The company faced disruptions due to the Helene and Milton hurricanes affecting operations.
  • Challenges in the telecom market led to margin declines and reduced volumes.

Q&A Highlights

  • Management discussed the long-term expansion potential in the Systems Control business.
  • Emphasis was placed on a significant majority of COGS now being U.S.-based, reflecting strategic adjustments to manage tariff impacts.
  • Funding for the BEAD program is expected to contribute towards the end of 2024.
  • The company is committed to maintaining service quality amid inflationary pressures and highlights the importance of customer relationships.

In conclusion, Hubbell's Q3 2024 Earnings Call presented a company leveraging strong market positions and strategic initiatives while addressing industry-specific challenges. With a focus on benefit solutions and infrastructure resilience, Hubbell is set to maintain its growth trajectory into 2025 and beyond.