- Q3 diluted EPS from continuing operations of $3.70; adjusted diluted EPS from continuing operations of $3.95
- Q3 net sales +5% (organic +4%, acquisitions +1%)
- Operating margin expansion of 460 bps; adjusted operating margin expansion of 440 bps
- Raise FY23 diluted EPS from continuing operations to $14.00-$14.25; adjusted diluted EPS of $15.00-$15.25
SHELTON, CT. – Hubbell Incorporated (NYSE: HUBB) today 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.”
Mr. 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.”
Mr. 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.”
Certain terms used in this release, including “net debt”, “free cash flow”, “organic net sales”, “organic net sales growth”, “restructuring-related costs”, “Adjusted EBITDA”, and certain other “adjusted” measures, are defined under the section entitled “Non-GAAP Definitions.” See page 8 for more information.
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 our 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.
CONFERENCE CALL
Hubbell will conduct an earnings conference call to discuss its third quarter 2023 financial results today, October 31, 2023 at 10:00 a.m. ET. A live audio of the conference call will be available and can be accessed by visiting Hubbell’s “Investor Relations – Events/Presentations” section of www.hubbell.com. Audio replays will also be available at the conclusion of the call by visiting www.hubbell.com and selecting “Investors” from the options at the bottom of the page and then “Events/Presentations” from the drop-down menu.
FORWARD-LOOKING STATEMENTS
Certain statements contained herein may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements about expectations regarding our financial results, condition and outlook, anticipated end markets, near-term volume, continued Company investment to support growth and productivity initiatives, grid modernization and electrification trends continuing to drive investment in critical infrastructure, meeting the needs of our customers, channel inventory normalization, favorable price, cost and productivity trends, operating profit growth and margin expansion, having an anticipated seasonally strong fourth quarter and our positioning to continue delivering attractive profitable growth for shareholders in 2024 and beyond, statements regarding the consummation of the proposed acquisition of the Systems Control business and the anticipated benefits to the Company thereof, including the timing for the proposed transaction to become accretive, the projected 2024 EDITDA multiple and Systems Control estimated 2024 sales, and all statements, including our projected financial results, set forth in the “Summary & Outlook” section above, as well as other statements that are not strictly historic in nature. In addition, all statements regarding anticipated growth, changes in operating results, market conditions and economic conditions are forward-looking. These statements may be identified by the use of forward-looking words or phrases such as “believe”, “expect”, “anticipate”, “intend”, “depend”, “plan”, “estimated”, “predict”, “target”, “should”, “could”, “may”, “subject to”, “continues”, “growing”, “prospective”, “forecast”, “projected”, “purport”, “might”, “if”, “contemplate”, “potential”, “pending”, “target”, “goals”, “scheduled”, “will”, “will likely be”, and similar words and phrases. Such forward-looking statements are based on our current expectations and involve numerous assumptions, known and unknown risks, uncertainties and other factors which may cause actual and future performance or the Company’s achievements to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to: business conditions, geopolitical conditions (including the wars in Ukraine and Israel, as well as trade tensions with China) and changes in general economic conditions in particular industries, markets or geographic regions, and ongoing softness in the residential markets, as well the potential for a significant economic slowdown, continued inflation, stagflation or recession, higher interest rates, and higher energy costs; our ability to offset increases in material and non-material costs through price recovery and volume growth; effects of unfavorable foreign currency exchange rates and the potential use of hedging instruments to hedge the exposure to fluctuating rates of foreign currency exchange on inventory purchases; the outcome of contingencies or costs compared to amounts provided for such contingencies, including those with respect to pension withdrawal liabilities; achieving sales levels to meet revenue expectations; unexpected costs or charges, certain of which may be outside the Company’s control; the effects of trade tariffs, import quotas and other trade restrictions or actions taken by the United States, United Kingdom, and other countries, including changes in U.S. trade policies; failure to achieve projected levels of efficiencies, cost savings and cost reduction measures, including those expected as a result of our lean initiatives and strategic sourcing plans, regulatory issues, changes in tax laws including multijurisdictional implementation of the Organisation for Economic Co-operation and Development’s comprehensive base erosion and profit shifting plan, or changes in geographic profit mix affecting tax rates and availability of tax incentives; the impact of and ability to fully integrate strategic acquisitions, including the acquisitions of PCX Holding LLC, Ripley Tools, LLC, Nooks Hill Road, LLC, REF Automation Limited, REF Alabama Inc., EI Electronics LLC, and Indústria Eletromecânica Balestro Ltda.; the impact of certain divestitures, including the benefits and costs of the sale of the Commercial and Industrial Lighting business to GE Current; the ability to effectively develop and introduce new products, expand into new markets and deploy capital; the ability to complete the proposed acquisition of the Systems Control business on the proposed terms or on the anticipated timeline, or at all; failure to achieve the anticipated benefits from the proposed transaction; other risks related to the completion of the proposed transaction and actions related thereto, including transaction costs and/or unknown or inestimable liabilities; risks related to the integration of the Systems Control business and the future opportunities and plans for the combined company; and other factors described in our Securities and Exchange Commission filings, including the “Business”, “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Forward-Looking Statements” and “Quantitative and Qualitative Disclosures about Market Risk” sections in the Annual Report on Form 10-K for the year ended December 31, 2022 and Quarterly Reports on Form 10-Q.
About the Company
Hubbell Incorporated is a leading manufacturer of utility and electrical solutions enabling customers to operate critical infrastructure safely, reliably and efficiently. With 2022 revenues of $4.9 billion, Hubbell solutions electrify economies and energize communities. The corporate headquarters is located in Shelton, CT.
Learn more here.