SHELTON, Conn. — Hubbell Incorporated today reported operating results for the second quarter ended June 30, 2022. The Company is reporting its diluted earnings per share data on a continuing operations basis.
“Hubbell delivered another strong quarter of operating performance,” said Gerben Bakker, Chairman, President and Chief Executive Officer. “Strong markets and continued traction on price drove 20% organic net sales growth in the quarter, while solid execution in a dynamic operating environment drove significant operating margin expansion and operating profit growth.”
Bakker continued, “Grid modernization and electrification continue to drive demand for reliable and efficient critical infrastructure solutions. In particular, Utility Solutions orders remain strong and continue to outpace increasing shipment levels, leading to another quarter of backlog build as utilities actively invest to harden and modernize the electrical grid. Robust communications markets also continue to drive strength across both segments as telecom customers invest in building out 5G networks, rural broadband access and fiber-to-the-home upgrades. In Electrical Solutions, strong demand across light industrial, heavy industrial and non-residential markets was partially offset by softness in residential markets.”
Bakker concluded, “We are also pleased to announce the acquisitions of PCX and Ripley Tools. PCX is a leading integrator of datacenter power systems which will bolster our emerging presence in this attractive strategic growth vertical. Ripley Tools is a specialty tools provider which will complement our strong depth and breadth of offering in the electrical T&D and communications markets. Bolt-on acquisitions are a critical component of Hubbell’s strategy for shareholder value creation, and we believe that these businesses are strong strategic fits with attractive long-term financial profiles.”
SECOND QUARTER FINANCIAL HIGHLIGHTS
The comments and year-over-year comparisons in this segment review are based on second quarter results in 2022 and 2021.
Electrical Solutions segment net sales in the second quarter of 2022 increased 13% to $528 million compared to $466 million reported in the second quarter of 2021. Organic net sales increased 14% in the quarter while foreign exchange decreased 1%. Operating income was $79.2 million, or 15.0% of net sales, compared to $69.3 million, or 14.9% of net sales in the same period of 2021. Adjusted operating income was $82.7 million, or 15.7% of net sales, in the second quarter of 2022 as compared to $72.6 million, or 15.6% of net sales in the same period of the prior year. Changes in adjusted operating profit and operating margin were driven primarily by volume growth and price realization in excess of material cost inflation, partially offset by higher logistics and supply chain costs, cost increases in excess of productivity and increased restructuring investment.
Utility Solutions segment net sales in the second quarter of 2022 increased 24% to $729 million compared to $589 million reported in the second quarter of 2021. Organic net sales increased 24% in the quarter. Total Utility T&D Components net sales increased approximately 32% and Utility Communications and Controls net sales increased by approximately 3%. Operating income was $111 million, or 15.3% of net sales, in the second quarter of 2022 as compared to $73 million, or 12.4% of net sales in the same period of 2021. Adjusted operating income was $125 million, or 17.2% of net sales, in the second quarter of 2022 as compared to $89 million, or 15.1% of net sales in the same period of the prior year. Increases in adjusted operating profit and adjusted operating margin were primarily due to volume growth and price realization in excess of material cost inflation, partially offset by higher logistics and supply chain costs, costs increases in excess of productivity, as well as increased investment.
Adjusted second quarter 2022 results exclude $0.24 of amortization of acquisition-related intangible assets and $0.06 due to a pension settlement charge. Adjusted second quarter 2021 results exclude $0.27 of amortization of acquisition-related intangible assets, $0.23 related to the loss on early extinguishment of debt and $0.10 related to the loss on a disposal of a business. Results from discontinued operations are presented on a GAAP basis and include amortization of acquisition-related intangible assets, transaction and separation costs and gain on disposal of business.
Net cash provided by operating activities from continuing operations was $188.6 million in the second quarter of 2022 versus $136.7 million in the comparable period of 2021. Free cash flow was $168.1 million in the second quarter of 2022 versus $119.1 million in the comparable period of 2021.
SUMMARY & OUTLOOK
For the full year 2022, Hubbell anticipates diluted earnings per share in the range of $8.25-$8.65 and anticipates adjusted diluted earnings per share (“Adjusted EPS”) in the range of $9.40-$9.80. Adjusted EPS excludes amortization of acquisition-related intangible assets, which the Company expects to be approximately $1.05 for the full year and approximately $0.10 due to a pension settlement charge. The Company believes Adjusted EPS is a useful measure of underlying performance in light of our acquisition strategy and core operations.
Hubbell anticipates full year 2022 total sales growth of +14-16% and organic net sales growth of +13-15%. The Company anticipates net M&A contributing +1% to full year sales growth and approximately $0.10 of full year Adjusted EPS.
Updated 2022 guidance also incorporates the anticipation of accelerated investments in the second half of 2022. These investments include an acceleration of planned restructuring and footprint optimization initiatives, targeted capacity expansion in areas with high visibility to strong demand, and innovation initiatives in strategic growth verticals. The Company now expects approximately $0.40 per share of anticipated restructuring and related investments for the full year 2022.
The earnings per share and adjusted earnings per share ranges continue to be based on an adjusted tax rate of 22.0% to 22.5%. The Company continues to expect full year 2022 free cash flow conversion of 90-100% of adjusted net income.