Wrapping up Q1 earnings, we look at the numbers and key takeaways for the electrical systems stocks, including Powell (NASDAQ:POWL) and its peers.
Like many equipment and component manufacturers, electrical systems companies are buoyed by secular trends such as connectivity and industrial automation. More specific pockets of strong demand include Internet of Things (IoT) connectivity and the 5G telecom upgrade cycle, which can benefit companies whose cables and conduits fit those needs. But like the broader industrials sector, these companies are also at the whim of economic cycles. Interest rates, for example, can greatly impact projects that drive demand for these products.
The 11 electrical systems stocks we track reported a mixed Q1. As a group, revenues beat analysts’ consensus estimates by 1.7% while next quarter’s revenue guidance was 2.9% below.
Thankfully, share prices of the companies have been resilient as they are up 6.8% on average since the latest earnings results.
Powell (NASDAQ:POWL)
Originally a metal-working shop supporting local petrochemical facilities, Powell (NYSE:POWL) has grown from a small Houston manufacturer to a global provider of electrical systems.
Powell reported revenues of $278.6 million, up 9.2% year on year. This print fell short of analysts’ expectations by 1.4%, but it was still a satisfactory quarter for the company with a solid beat of analysts’ EBITDA estimates.
Brett A. Cope, Powell’s Chairman and Chief Executive Officer, stated, “Our second quarter marked another solid quarter of project execution and robust operational efficiency. Powell delivered a 33% increase in gross profit dollar growth on revenue growth of 9%, leading to a gross margin improvement of 530 basis points compared to the prior year. Order activity in the quarter was also strong, highlighted by two large project awards which included a new greenfield LNG facility to be located along the U.S. Gulf Coast and a large mining project in Canada.”
Powell Total Revenue
The stock is down 6.1% since reporting and currently trades at $178.55.
Founded in 1961, Kimball Electronics (NYSE:KE) is a global contract manufacturer specializing in electronics and manufacturing solutions for automotive, medical, and industrial markets.
Kimball Electronics reported revenues of $374.6 million, down 11.9% year on year, outperforming analysts’ expectations by 10.8%. The business had an exceptional quarter with an impressive beat of analysts’ EPS estimates and a solid beat of analysts’ EBITDA estimates.
Kimball Electronics Total Revenue
Kimball Electronics achieved the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 26% since reporting. It currently trades at $18.56.
Credited with introducing the first automatic washing machine, Whirlpool (NYSE:WHR) is a manufacturer of a variety of home appliances.
Whirlpool reported revenues of $3.62 billion, down 19.4% year on year, falling short of analysts’ expectations by 1%. It was a softer quarter as it posted full-year EPS guidance missing analysts’ expectations.
Whirlpool delivered the slowest revenue growth in the group. Interestingly, the stock is up 2.8% since the results and currently trades at $79.84.
One of the pioneers of smart lights, Acuity (NYSE:AYI) designs and manufactures light fixtures and building management systems used in various industries.
Acuity Brands reported revenues of $1.01 billion, up 11.1% year on year. This result came in 2.2% below analysts' expectations. Overall, it was a softer quarter as it also logged a miss of analysts’ organic revenue and EBITDA estimates.
Acuity Brands had the weakest performance against analyst estimates among its peers. The stock is down 3.9% since reporting and currently trades at $256.29.
Allegion plc (NYSE:ALLE) is a provider of security products and solutions that keep people and assets safe and secure in various environments.
Allegion reported revenues of $941.9 million, up 5.4% year on year. This print surpassed analysts’ expectations by 2%. Overall, it was a very strong quarter as it also recorded an impressive beat of analysts’ adjusted operating income estimates.
The stock is up 11.3% since reporting and currently trades at $140.91.
Thanks to the Fed’s series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% in November), and a notable surge followed Donald Trump’s presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by potential trade policy changes and corporate tax discussions, which could impact business confidence and growth. The path forward holds both optimism and caution as new policies take shape.
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