Hubbell Reports Strong 3Q Results

SHELTON, Conn. – Hubbell Incorporated reported operating results for the third quarter ended September 30, 2023.

“Hubbell delivered strong earnings growth for shareholders in the third quarter,” said Gerben Bakker, Chairman, President and CEO. “We continued to drive significant margin expansion in the quarter through effective execution on price, cost and productivity, while also accelerating investment levels in capacity, productivity and innovation.”

Bakker continued, “Our leading quality and service levels supported strong price realization in the third quarter. In Utility Solutions, improved lead times drove further channel inventory normalization in utility distribution markets as anticipated, though end customer demand was solid. Transmission markets remained robust, and improved supply chain dynamics enabled accelerated sequential growth in utility communications and controls. Telcom markets were softer in the quarter. In Electrical Solutions, industrial end markets were solid, with strength in renewables and datacenter verticals. Channel inventory management continued to impact commercial facing markets as anticipated, and residential markets remained soft.”

Bakker concluded, “Our third quarter performance reflects continued execution off of a strong first half in 2023. As grid modernization and electrification drive investment in critical infrastructure, Hubbell is uniquely positioned to serve the evolving needs of our utility and electrical customers. We expect to deliver attractive profitable growth for shareholders in 2024 and beyond.”

THIRD QUARTER FINANCIAL HIGHLIGHTS

The comments and year-over-year comparisons in this segment review are based on third quarter results in 2023 and 2022.

Utility Solutions segment net sales in the third quarter of 2023 increased 8% to $838 million compared to $775 million reported in the third quarter of 2022. Organic net sales increased 7% in the quarter while acquisitions added 1%. Total Utility T&D Components net sales increased approximately 3% and Utility Communications and Controls net sales increased approximately 28%. Operating income was $187 million, or 22.3% of net sales, in the third quarter of 2023 as compared to $130 million, or 16.8% of net sales in the same period of 2022. Adjusted operating income was $201 million, or 24.0% of net sales, in the third quarter of 2023 as compared to $144 million, or 18.6% 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, and improved productivity, partially offset by non-material cost inflation and increased investment.

Electrical Solutions segment net sales in the third quarter of 2023 decreased 1% to $538 million compared to $542 million reported in the third quarter of 2022. Organic net sales decreased 1% in the quarter. Operating income was $90 million, or 16.6% of net sales, compared to $74 million, or 13.6% of net sales in the same period of 2022. Adjusted operating income was $94 million, or 17.5% of net sales, in the third quarter of 2023 as compared to $80 million, or 14.8% 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 third quarter 2023 excludes $0.25 of amortization of acquisition-related intangible assets. Adjusted diluted EPS from continuing operations in the third quarter 2022 results exclude $0.28 of amortization of acquisition-related intangible assets and $0.02 due to a pension settlement charge.

Net cash provided by operating activities from continuing operations was $194 million in the third quarter of 2023 versus net cash provided by operating activities of $220 million in the comparable period of 2022. Free cash flow was $159 million in the third quarter of 2023 versus $194 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 $14.00-$14.25 and anticipates adjusted diluted earnings per share from continuing operations (“Adjusted EPS”) in the range of $15.00-$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 its acquisition strategy.

Hubbell anticipates full year 2023 total sales growth of approximately 8% and organic net sales growth of approximately 7%, 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% and include approximately $0.20 of anticipated restructuring and related investment. The Company continues to expect full year 2023 free cash flow to be greater than $700 million.