Manufacturers

Hubbell Tops 3Q Profit Forecasts

SHELTON, Conn. — Hubbell Incorporated reported operating results for the third quarter ended September 30, 2016.

Net sales in the third quarter of 2016 were $907 million, an increase of 3% compared to the $877 million reported in the third quarter of 2015. Operating income in the quarter was $136 million as compared to $131 million in the same period of 2015. Excluding restructuring and related costs in both periods, adjusted operating income was $142 million in the third quarter of 2016, compared to $143 million in the third quarter of 2015 (1). Net income attributable to Hubbell in the third quarter of 2016 was $87 million compared to $73 million reported in the comparable period of 2015. Earnings per diluted share for the third quarter of 2016 were $1.56, compared to $1.27 reported in the third quarter of 2015. Excluding restructuring and related costs in both periods and the costs associated with the share reclassification in 2015, adjusted earnings per diluted share were $1.63 in the third quarter of 2016, compared to $1.53 in the third quarter of 2015 (1). Net cash provided from operating activities was $139 million in the third quarter of 2016 versus $94 million in the comparable period of 2015. Free cash flow (defined as cash flow from operating activities less capital expenditures) was $123 million in the third quarter of 2016 versus $77 million reported in the comparable period of 2015 (3).

For the first nine months of 2016 net sales were $2.7 billion,  an increase of 4% compared to the same period of the prior year. Operating income was $370 million compared to $363 million for the comparable period of 2015. Excluding restructuring and related costs, adjusted operating income for the first nine months of 2016 was $389 million, compared to $395 million for the comparable period of 2015 (1). Net income attributable to Hubbell was $229 million in the first nine months of 2016 compared to $216 million for the comparable period of 2015. Earnings per diluted share for the first nine months of 2016 were $4.08 compared to $3.71 reported for the first nine months of 2015. Excluding restructuring and related costs in both periods and the costs associated with the share reclassification in 2015, adjusted earnings per diluted share for the first nine months of 2016 were $4.31 compared with $4.21  for the comparable period of 2015 (1) .  Net cash provided from operating activities was $261 million for the first nine months of 2016 versus $193 million in the comparable period of 2015. Free cash flow was $215 million compared to $141 million reported in the first nine months of 2015 (3).

OPERATIONS REVIEW

“Acquisitions drove sales growth in the quarter in the face of flat end markets,” said David G. Nord, Chairman, President and Chief Executive Officer. “Growth in lower margin non-residential and residential markets offset moderating declines in higher margin oil and core industrial markets. On the utility side, distribution markets increased while project delays impacted transmission markets.

“Our business model continues to perform well, despite the sluggish market environment,” commented Mr. Nord. “We are investing in acquisitions, which are yielding sales growth. We are developing innovative products and expanding into both new and adjacent markets to even better serve our customers. We are implementing cost reduction actions and realizing productivity savings.  And we are seeing the benefits of effective capital deployment in the form of lower share count while maintaining a healthy balance sheet.” Mr. Nord added, “These actions supported seven percent growth in adjusted earnings per diluted share in the quarter and help position the Company for continued success.”

SEGMENT REVIEW

The comments and year-over-year comparisons in this segment review are based on third quarter results in 2016 and 2015.

Electrical segment net sales in the third quarter of 2016 increased 3% to $635 million compared to $618 million reported in the third quarter of 2015. Acquisitions added 4% to net sales in the quarter and foreign currency translation reduced sales by 1%. Organic sales were flat. Operating income was $81 million, or 12.7% of net sales, compared to $79 million, or 12.8% of net sales, in the same period of 2015. Excluding restructuring and related costs, adjusted operating income was $86 million, or 13.6% of net sales compared to $89 million, or 14.4% of net sales in the same period of 2015 (1). The decreases in adjusted operating income and adjusted operating margin were primarily due to unfavorable mix and price (1).

Power segment net sales in the third quarter of 2016 increased 5% to $273 million compared to $260 million reported in the third quarter of 2015. Acquisitions added 5% to net sales in the quarter, while organic sales were flat and the impact of foreign currency translation was immaterial. Compared to the third quarter of 2015, operating income increased 6% to $55 million, or 10 basis points to 20.2% of net sales. Excluding restructuring and related costs, adjusted operating income was $56 million, or 20.5% of net sales compared to $54 million, or 20.8% of net sales in the same period of 2015 (1). Changes in adjusted operating income and adjusted operating margin were primarily due to acquisitions.

SUMMARY & OUTLOOK

“Against a backdrop of choppy and uncertain markets, we remain focused on generating productivity and reducing costs,” stated Mr. Nord. “With three quarters of 2016 completed, we are tightening our full year 2016 earnings per share expectation to $5.25 to $5.35 from $5.20 to $5.40. This expectation anticipates $0.35 of restructuring and related costs. We still expect free cash flow to exceed 90% of net income.

“Our bottom line focus will continue in 2017, as end market conditions moderate. We expect renovation growth to outpace new construction increases in non-residential markets, while growth remains steady in transmission and distribution. We also expect mid single digit growth in residential and slight improvement in industrial and energy end markets.” Mr. Nord continued, “We believe we will benefit from incremental profit on volume growth and savings from cost actions while we face headwinds from price pressure and higher material costs.” Mr. Nord concluded, “We anticipate capital deployment will also be a lever to create shareholder value, as we expect acquisitions to remain a key part of our growth strategy.”

The full report can be viewed here.

 

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