SHELTON, Conn. — Hubbell Incorporated today reported operating results for the second quarter ended June 30, 2023.
“Hubbell delivered another quarter of strong operating performance,” said Gerben Bakker, Chairman, President and CEO. “As grid modernization and electrification continue to drive investment in critical infrastructure, Hubbell’s portfolio of solutions is uniquely positioned to serve the evolving needs of our utility and electrical customers. We continued to execute effectively for our shareholders in the second quarter, delivering 9% sales growth and operating profit growth of approximately 50%.”
Bakker continued, “In Utility Solutions, robust backlog supported continued growth in T&D Components, while improved availability of semiconductors supported accelerated growth in Communications & Controls in the quarter. Demand remains strong across our utility businesses as utilities actively invest to harden, upgrade and modernize grid infrastructure. In Electrical Solutions, industrial end market growth was solid driven by domestic manufacturing activity, along with continued strength in renewables and datacenter verticals. Channel inventory management continued to impact commercial facing markets as anticipated, and residential markets remained soft.”
Bakker concluded, “Hubbell’s leading positions in attractive markets have enabled the Company to deliver exceptional performance through the first half of 2023. Continued execution on price, cost and productivity provides solid visibility to an improved full year outlook, and we intend to accelerate our investment levels in the second half of 2023 to support long-term customer needs while driving attractive shareholder returns.”
Certain terms used in this release, including “net debt”, “free cash flow”, “organic net sales”, “organic net sales growth”, “restructuring-related costs”, “Adjusted EBITDA”, and certain other “adjusted” measures, are defined under the section entitled “Non-GAAP Definitions.” See page 8 for more information.
SECOND QUARTER FINANCIAL HIGHLIGHTS
The comments and year-over-year comparisons in this segment review are based on second-quarter results in 2023 and 2022.
Utility Solutions segment net sales in the second quarter of 2023 increased 14% to $831 million compared to $729 million reported in the second quarter of 2022. Organic net sales increased 13% in the quarter while acquisitions added 1%. Total Utility T&D Components net sales increased approximately 13% and Utility Communications and Controls net sales increased approximately 16%. Operating income was $200 million, or 24.0% of net sales, in the second quarter of 2023 as compared to $111 million, or 15.3% of net sales in the same period of 2022. Adjusted operating income was $213 million, or 25.6% of net sales, in the second quarter of 2023 as compared to $125 million, or 17.2% of net sales in the same period of the prior year. Increases in operating income and operating margin were primarily due to price realization, lower raw material costs, improved productivity, volume growth and favorable product mix, partially offset by non-material cost inflation and increased investment.
Electrical Solutions segment net sales in the second quarter of 2023 increased 1% to $535 million compared to the second quarter of 2022. Organic net sales decreased 4% in the quarter while acquisitions added 5%. Operating income was $88 million, or 16.5% of net sales, compared to $79 million, or 15.0% of net sales in the same period of 2022. Adjusted operating income was $93 million, or 17.3% of net sales, in the second quarter of 2023 as compared to $83 million, or 15.7% of net sales in the same period of the prior year. Increases in operating income and operating margin were driven primarily by price realization, lower raw material costs and improved productivity, partially offset by lower volume, non-material cost inflation and SKU optimization efforts.
Adjusted diluted EPS from continuing operations in the second quarter 2023 results exclude $0.25 of amortization of acquisition-related intangible assets. Adjusted diluted EPS from continuing operations in the second quarter 2022 results exclude $0.24 of amortization of acquisition-related intangible assets and $0.06 due to a pension settlement charge.
Net cash provided by operating activities from continuing operations was $228 million in the second quarter of 2023 versus net cash provided by operating activities of $189 million in the comparable period of 2022. Free cash flow was $192 million in the second quarter of 2023 versus $168 million in the comparable period of 2022.
SUMMARY & OUTLOOK
For the full year 2023, Hubbell anticipates diluted earnings per share from continuing operations in the range of $13.75-$14.25 and anticipates adjusted diluted earnings per share from continuing operations (“Adjusted EPS”) in the range of $14.75-$15.25. Adjusted EPS excludes amortization of acquisition-related intangible assets, which the Company expects to be approximately $1.00 for the full year. The Company believes Adjusted EPS is a useful measure of underlying performance in light of our acquisition strategy.
Hubbell anticipates full year 2023 total sales growth of 8-10% and organic net sales growth of 7-9%, as compared to full year 2022. The Company anticipates net M&A contributing +1% to full year sales growth.
The diluted EPS and Adjusted EPS ranges are based on an adjusted tax rate of 22.5% to 23.0% and include approximately $0.25 of anticipated restructuring and related investment. The Company expects full year 2023 free cash flow to be greater than $700 million.