Hubbell Incorporated (NYSE:HUBB) reported a robust performance in the third quarter of 2023 during its recent earnings call. The company saw a 5% increase in sales, hitting $1.4 billion, with operating profit margins at 21.4%. Earnings per share (EPS) increased by 28% to $3.95. The company also announced the acquisition of Systems Control for $1.1 billion and a bolt-on acquisition of Balestro, enhancing its utility components, communications, and controls portfolio.
Key highlights from the call include:
- Continued execution off a strong first half and multiyear performance.
- Significant operating margin expansion due to improved productivity and lower raw material costs.
- Accelerated investments in capacity, productivity, and innovation initiatives to drive long-term returns.
- Expectation of grid modernization and electrification driving growth in markets over the next several years.
- Strong performance in the Utility segment, with 8% growth in sales and nearly 40% growth in operating profit dollars.
- Momentum in the Communications and Controls business with nearly 30% growth.
- Weakening in the Telecom business due to timing issues with projects impacted by stimulus dollars.
- Updated guidance for the fourth quarter, expecting typical seasonality and mid-single-digit fewer sales days.
Hubbell's Utility segment showed impressive performance, with sales growing by 8% to $838 million. The growth in the Transmission & Distribution (T&D) components business balanced with the communications and controls business. However, the telecom sector experienced a temporary weakening due to high interest rates and project timing affected by stimulus dollars.
On the other hand, the company's Electrical segment saw a 1% decline in sales to $538 million, with softness in the residential market but growth in industrial sectors like data centers and renewables.
Hubbell announced two strategic acquisitions: Balestro, a Latin American insulated arrester product company, and Systems Control, a turnkey provider of control and relay panels for substations. The company expects to close both deals by year-end, with funds coming from cash and debt.
Looking ahead, Hubbell expects continued double-digit growth and high margins due to the robust outlook for substation spending as existing substations age and a shift towards in-factory construction. The company also anticipates margin expansion due to positive price-cost dynamics.
Hubbell believes it is well positioned for growth in utility and T&D markets, as well as in growth verticals such as data centers, renewables, and utility T&D. The company plans to provide more details on its 2024 outlook early next year.
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