Hubbell Q3 2021 Results: EPS Misses by $0.13, Misses on Revenue

  • Q3 net sales +9% (organic +5%)
  • Q3 diluted EPS of $1.98; adjusted diluted EPS of $2.24
  • Update FY21 reported diluted EPS to $6.85-$7.05
  • Update FY21 adjusted diluted EPS to $8.30-$8.50

SHELTON, CT. (October 26, 2021) – Hubbell Incorporated (HUBB) today reported operating results for the third quarter ended September 30, 2021.

“Hubbell successfully navigated through a dynamic operating environment in the third quarter,” said Gerben Bakker, Chairman, President and Chief Executive Officer. “While material inflation, supply chain disruptions, and increased freight and logistics costs caused operational headwinds in the quarter, the Company actively mitigated through price increases and other productivity initiatives. Price realization of +7% in the third quarter represented a significant acceleration from first half levels, and prior restructuring and organizational efficiency initiatives continue to deliver ongoing cost savings.”

Mr. Bakker continued, “Customer demand for reliable and efficient critical infrastructure solutions remained strong across our Utility and Electrical businesses, driving another quarter of significant orders growth. While unit volumes were down slightly year-over-year in the quarter due to supply chain constraints, above average backlog visibility gives us confidence in a strong finish to the full year.”

“In Utility Solutions, demand strength was broad-based across power, gas and water utility customers for T&D components, as well as communications & controls. Although supply chain disruptions limited third quarter shipments, secular trends including grid modernization, hardening of aging infrastructure, and the renewable energy transition are expected to continue driving attractive growth over the long term. In Electrical Solutions, sales and orders growth was led by strong demand for connectors, grounding and wiring products across light industrial verticals, including communications, solar, and industrial manufacturing markets. This strength was partially offset by softness in commercial and residential lighting markets.”

Mr. Bakker concluded, “We are pleased with the results of the third quarter, as our employees across the enterprise executed with urgency and efficiency to operate with discipline while serving our customers with best-in-class quality and reliability. Looking ahead, we are confident in our ability to deliver for our customers and shareholders as we work to fulfill strong demand while continuing to implement price and productivity initiatives.”

Certain terms used in this release, including “Net debt”, “Free Cash Flow”, “Organic net sales”, “Organic growth”, “Restructuring-related costs”, “EBITDA”, and certain “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 2021 and 2020.

Electrical Solutions segment net sales in the third quarter of 2021 increased 11% to $612 million compared to $551 million reported in the third quarter of 2020. Organic sales increased 9% in the quarter while acquisitions contributed 1% and foreign exchange contributed 1%. Operating income was $72.0 million, or 11.8% of net sales, compared to $65.9 million, or 12.0% of net sales in the same period of 2020. Adjusted operating income was $76.1 million, or 12.4% of net sales, in the third quarter of 2021 as compared to $70.1 million, or 12.7% of net sales in the same period of the prior year. Changes in adjusted operating profit and operating margin were driven primarily by strong price realization, modest volume growth, and restructuring benefits, offset by material inflation and higher logistics and supply chain costs.

Utility Solutions segment net sales in the third quarter of 2021 increased 8% to $602 million compared to $558 million reported in the third quarter of 2020. Organic sales increased 2% in the quarter, with acquisitions, net of dispositions, contributing approximately 6% growth. Total Utility T&D Components sales increased approximately 10% and Utility Communications and Controls sales increased by approximately 4%. Operating income was $83 million, or 13.8% of net sales, in the third quarter of 2021 as compared to $97 million, or 17.4% of net sales in the same period of 2020. Adjusted operating income was $98 million, or 16.3% of net sales, in the third quarter of 2021 as compared to $111 million, or 20.0% of net sales in the same period of the prior year. Decreases in adjusted operating profit and adjusted operating margin were primarily due to lower volumes, material inflation, and higher logistics and supply chain costs, partially offset by strong price realization and restructuring benefits.

Adjusted third quarter 2021 results exclude $0.26 of amortization of acquisition-related intangible assets. Adjusted third quarter 2020 results exclude $0.25 of amortization of acquisition-related intangible assets as well as $0.09 due to a pension settlement charge.

Net cash provided by operating activities was $98 million in the third quarter of 2021 versus $151.9 million in the comparable period of 2020. Free cash flow was $70 million in the third quarter of 2021 versus $135.2 million reported in the comparable period of 2020 as the Company built working capital to secure materials and components to serve strong customer demand.

SUMMARY & OUTLOOK

For the full year 2021, Hubbell anticipates sales growth of 12-13%. This expectation is comprised of 8-9% organic growth, including 5% price realization, bolstered by approximately 3-4% growth from acquisitions and a modest tailwind from foreign exchange.

Hubbell anticipates 2021 earnings per diluted share in the range of $6.85-$7.05 and anticipates adjusted diluted earnings per share (“Adjusted EPS”) in the range of $8.30-$8.50. Adjusted EPS excludes amortization of acquisition-related intangible assets, which the Company expects to be approximately $1.15 for the full year. Adjusted EPS also excludes a loss on the early extinguishment of debt from the 2022 Notes that were redeemed by the Company on April 2, 2021, as well as a loss recognized on the disposal of a business during the second quarter of 2021. The Company believes Adjusted EPS is a useful measure of underlying performance in light of our acquisition strategy and core operations.

The earnings per share and adjusted earnings per share ranges are based on an adjusted tax rate of approximately 21% and include approximately $0.20-$0.25 per share of anticipated restructuring and related investment. The ranges also incorporate the impact of acquisitions, which we anticipate adding approximately $0.20 to full year adjusted earnings. The Company expects full year 2021 free cash flow conversion at approximately 100% of adjusted net income.

CONFERENCE CALL

Hubbell will conduct an earnings conference call to discuss its third quarter 2021 financial results today, October 26, 2021 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 of the recorded conference call will be available after the call and can be accessed two hours after the conclusion of the original conference call by calling (855) 859-2056 and using passcode 6696827. The replay will remain available until November 25, 2021 at 11:59 p.m. ET. 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 opportunity for operational improvement, our ability to drive consistent and differentiated performance, the impact of our high quality portfolio of electrical solutions and utility solutions with strong brand value and best in class reliability, and our projected financial results set forth in “Summary & Outlook” 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, including those regarding the adverse impact of the COVID-19 pandemic on the Company’s end markets, supply chain disruptions and material costs. These statements may be identified by the use of forward-looking words or phrases such as “believe”, “expect”, “anticipate”, “plan”, “estimated”, “target”, “should”, “could”, “may”, “subject to”, “continues”, “growing”, “projected”, “if”, “potential”, “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: The scope and duration of the COVID-19 pandemic and its impact on global economic systems, our employees, sites, operations, customers, material costs and supply chain; 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 tariffs and other trade actions taken by the U.S. and other countries; changes in demand for our products, as well as product sales prices and material costs; expected benefits of productivity improvements and cost reduction actions; effects of unfavorable foreign currency exchange rates; the impact of U.S. tax reform legislation; general economic and business conditions; the impact of and the ability to complete and integrate strategic acquisitions; the impact of certain divestitures; the ability to effectively develop and introduce new products, expand into new markets and deploy capital; and other factors described in our Securities and Exchange Commission filings, including the “Business”, “Risk Factors”, and “Quantitative and Qualitative Disclosures about Market Risk” Sections in the Annual Report on Form 10-K for the year ended December 31, 2020 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 reliably and efficiently. With 2020 revenues of $4.2 billion, Hubbell solutions empower and energize communities in front of and behind the meter. The corporate headquarters is located in Shelton, CT.

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