SHELTON, Conn. – Hubbell Incorporated today reported operating results for the first quarter ended March 31, 2023.
“Hubbell is off to a strong start in 2023,” said Gerben Bakker, Chairman, President and CEO. “Grid modernization and electrification continued to drive robust demand for Hubbell products and solutions, while our leading quality and service levels supported accelerated price realization in the quarter.”
Bakker continued, “Utility Solutions orders remained strong, leading to another quarter of backlog build as customers actively invest in grid hardening and resiliency initiatives, smart grid applications and broadband deployments. In Electrical Solutions, industrial end markets and strategic growth verticals highlighted by renewables were strong, while commercial markets were more modest, and the residential market remained soft as expected.”
Bakker concluded, “Recent investments in capacity and productivity contributed to higher production levels in the first quarter, as well as to improved operational efficiency. With strong financial results in the first quarter, Hubbell is well positioned to accelerate investments back into our businesses to meet the long-term needs of our customers while driving attractive returns for our shareholders.”
FIRST QUARTER FINANCIAL HIGHLIGHTS
The comments and year-over-year comparisons in this segment review are based on first quarter results in 2023 and 2022.
Utility Solutions segment net sales in the first quarter of 2023 increased 20% to $782 million compared to $652 million reported in the first quarter of 2022. Organic net sales increased 19% in the quarter while acquisitions added 1%. Total Utility T&D Components net sales increased approximately 25% and Utility Communications and Controls net sales increased approximately 4%. Operating income was $178 million, or 22.7% of net sales, in the first quarter of 2023 as compared to $88 million, or 13.5% of net sales in the same period of 2022. Adjusted operating income was $191 million, or 24.4% of net sales, in the first quarter of 2023 as compared to $102 million, or 15.7% of net sales in the same period of the prior year. Increases in operating income and operating margin were primarily due to price realization, volume growth, lower raw material costs and improved productivity, partially offset by non-material cost inflation, as well as increased investment.
Electrical Solutions segment net sales in the first quarter of 2023 of $504 million were flat when compared to the first quarter of 2022. Organic net sales decreased 2.5% in the quarter while acquisitions added 3% and foreign exchange caused a less than 1% decrease. Operating income was $71 million, or 14.2% of net sales, compared to $55 million, or 10.9% of net sales in the same period of 2022. Adjusted operating income was $76 million, or 15.0% of net sales, in the first quarter of 2023 as compared to $58 million, or 11.6% 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 non-material cost inflation and increased investment.
Adjusted diluted EPS from continuing operations in the first quarter 2023 results exclude $0.24 of amortization of acquisition-related intangible assets. Adjusted diluted EPS from continuing operations in the first quarter 2022 results exclude $0.24 of amortization of acquisition-related intangible assets.
Net cash provided by operating activities from continuing operations was $114 million in the first quarter of 2023 versus net cash used by operating activities of $14 million in the comparable period of 2022. Free cash flow was a $80 million source of cash in the first quarter of 2023 versus a $36 million use of cash 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 $12.00-$12.50 and anticipates adjusted diluted earnings per share from continuing operations (“Adjusted EPS”) in the range of $13.00-$13.50. 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 conversion of 90% to 95% of adjusted net income from continuing operations.
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