SHELTON, Conn. – Hubbell Incorporated today reported operating results for the fourth quarter and full year ended December 31, 2023.
“Hubbell delivered a strong finish to a strong year,” said Gerben Bakker, Chairman, President and CEO. “For the full year 2023, the Company generated over 40% operating profit and earnings growth for our shareholders, while accelerating investments back into our business to serve our customers and drive long-term growth and productivity. We also continued to execute on our strategy to create a focused portfolio of critical infrastructure solutions aligned around grid modernization and electrification.”
Bakker continued, “Fourth quarter results reflect double-digit sales growth, along with significant margin expansion and operating profit growth. Price realization remains strong, supported by leading service levels, and year-over-year volumes were positive in the quarter. In Utility Solutions, transmission markets were robust, while strong growth in communication and controls was driven by backlog conversion. Utility distribution markets continued to be impacted by channel inventory normalization as anticipated, and telecom markets were weak in the quarter. Electrical Solutions growth was driven by both price and volume, while effective execution drove another quarter of strong year-over-year margin expansion. Industrial end markets were solid, and renewables and datacenter verticals each contributed double-digit growth. While commercial markets were modest in the quarter, channel inventory levels have largely stabilized in electrical products markets.”
Bakker concluded, “I am proud of the performance our employees delivered to customers and for shareholders in 2023. Looking ahead, I am confident that the investments we are making in our business will enable us to build on our leading positions with customers in front of and behind the meter, and that we can continue to drive attractive profitable growth for shareholders in 2024 and beyond.”
FINANCIAL HIGHLIGHTS
The comments and year-over-year comparisons in this segment review are based on fourth quarter results from continuing operations in 2023 and 2022.
Utility Solutions segment net sales in the fourth quarter of 2023 increased 13% to $811 million compared to $716 million reported in the fourth quarter of 2022. Organic net sales increased 9% compared to the fourth quarter of 2022, while acquisitions added 4%. Total Utility T&D Components net sales increased approximately 4% and Utility Communications and Controls net sales increased by approximately 48% in the fourth quarter of 2023 as compared to the fourth quarter of 2022. Utility Solutions segment operating income in the fourth quarter of 2023 was $143 million, or 17.6% of net sales, compared to $109 million, or 15.2% of net sales in the same period of 2022. Adjusted operating income was $174 million, or 21.4% of net sales, in the fourth quarter of 2023 as compared to $123 million, or 17.2% of net sales in the same period of the prior year. The increases in operating income and operating margin were primarily due to price realization in excess of cost inflation and volume growth, partially offset by increased investment.
Electrical Solutions segment net sales in the fourth quarter of 2023 of $534 million increased 6% from $503 million in the fourth quarter of 2022. Organic net sales increased 6% in the quarter. Electrical Solutions segment operating income in the fourth quarter of 2023 was $83 million, or 15.5% of net sales, compared to $63 million, or 12.5% of net sales in the same period of 2022. Adjusted operating income was $88 million, or 16.5% of net sales, in the fourth quarter of 2023 as compared to $72 million, or 14.3% of net sales in the same period of the prior year. Increases in operating income and operating margin were primarily due to price realization in excess of cost inflation and volume growth.
During the fourth quarter, the Company acquired Northern Star Holdings, Inc. (commercially known as Systems Control), a manufacturer of substation control and relay panels, for approximately $1.1 billion, using cash and cash equivalents and the proceeds from a $600 million term loan. The Company also entered into an agreement during the quarter to sell its residential lighting business for a cash purchase price of $131 million. The residential lighting sale is subject to customary closing conditions, including regulatory approvals, and is expected to close in the first quarter of 2024.
Adjusted diluted EPS from continuing operations in the fourth quarter 2023 results exclude $0.32 of amortization of acquisition-related intangible assets and $0.21 of transaction, integration, and separation costs. Adjusted diluted EPS from continuing operations in the fourth quarter 2022 results exclude $0.31 of amortization of acquisition-related intangible assets and $0.02 of pension charge.
Net cash provided by operating activities from continuing operations was $346 million in the fourth quarter of 2023 versus $242 million in the comparable period of 2022. Free cash flow (defined as net cash provided by operating activities less capital expenditures) was $284 million in the fourth quarter of 2023 versus $180 million reported in the comparable period of 2022.
SUMMARY & OUTLOOK
For the full year 2024, Hubbell anticipates total sales growth of 8-10% and organic sales growth of 3-5%. Closed acquisitions, net of the pending divestiture of residential lighting, are anticipated to contribute approximately 5% to total sales growth.
Hubbell expects 2024 GAAP diluted earnings per share from continuing operations in the range of $14.40 to $14.90 and adjusted diluted earnings per share from continuing operations (“Adjusted EPS”) in the range of $16.00 to $16.50. Adjusted EPS excludes amortization of acquisition-related intangible assets, which the Company expects to be approximately $1.60 per share for the full year. The Company believes Adjusted EPS is a useful measure of underlying financial performance in light of our acquisition strategy.
The diluted earnings per share and Adjusted EPS ranges are based on an adjusted tax rate of approximately 22.5% and include approximately $0.25 of anticipated restructuring and related investment. The Company expects full year 2024 free cash flow of approximately $800 million.
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