As the Q3 earnings season wraps, let’s dig into this quarter’s best and worst performers in the electrical systems industry, including Powell (NASDAQ:POWL) and its peers.
Like many equipment and component manufacturers, electrical systems companies are buoyed by secular trends such as connectivity and industrial automation. More specific pockets of strong demand include Internet of Things (IoT) connectivity and the 5G telecom upgrade cycle, which can benefit companies whose cables and conduits fit those needs. But like the broader industrials sector, these companies are also at the whim of economic cycles. Interest rates, for example, can greatly impact projects that drive demand for these products.
The 16 electrical systems stocks we track reported a mixed Q3. As a group, revenues beat analysts’ consensus estimates by 1.2% while next quarter’s revenue guidance was 0.5% below.
While some electrical systems stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 1.6% since the latest earnings results.
Powell (NASDAQ:POWL)
Originally a metal-working shop supporting local petrochemical facilities, Powell (NYSE:POWL) has grown from a small Houston manufacturer to a global provider of electrical systems.
Powell reported revenues of $275.1 million, up 31.8% year on year. This print fell short of analysts’ expectations by 4%. Overall, it was a mixed quarter for the company with a solid beat of analysts’ EBITDA estimates.
Brett A. Cope, Powell’s Chairman and Chief Executive Officer, stated, “Powell delivered a strong fourth quarter performance that closed out another incredible year for the Company. We experienced tremendous growth in our largest markets, with our top line growing by 45% in fiscal 2024.”
Powell pulled off the fastest revenue growth of the whole group. Still, the market seems discontent with the results. The stock is down 3.2% since reporting and currently trades at $231.87.
Is now the time to buy Powell? Access our full analysis of the earnings results here, it’s free.
Best Q3: Methode Electronics (NYSE:MEI)
Founded in 1946, Methode Electronics (NYSE:MEI) is a global supplier of custom-engineered solutions for Original Equipment Manufacturers (OEMs).
Methode Electronics reported revenues of $292.6 million, up 1.6% year on year, outperforming analysts’ expectations by 9%. The business had an incredible quarter with an impressive beat of analysts’ EPS estimates and a solid beat of analysts’ EBITDA estimates.
Methode Electronics achieved the biggest analyst estimates beat among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 3.2% since reporting. It currently trades at $11.25.
Is now the time to buy Methode Electronics? Access our full analysis of the earnings results here, it’s free.
Weakest Q3: Napco (NASDAQ:NSSC)
Napco Security Technologies, Inc. (NASDAQ:NSSC) is a leading manufacturer and designer of high-tech electronic security devices, cellular communication services for intrusion and fire alarm systems, and school safety solutions.
Napco reported revenues of $44 million, up 5.6% year on year, falling short of analysts’ expectations by 5.5%. It was a disappointing quarter as it posted a significant miss of analysts’ EBITDA estimates and a significant miss of analysts’ EPS estimates.
Napco delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 12.9% since the results and currently trades at $33.63.
Read our full analysis of Napco’s results here.
Verra Mobility (NASDAQ:VRRM)
Managing over 165 million tolling transactions per year, Verra Mobility (NYSE:VRRM) is a leading provider of smart mobility technology that enhances safety, efficiency, and convenience on roadways.
Verra Mobility reported revenues of $225.6 million, up 7.4% year on year. This print met analysts’ expectations. Taking a step back, it was a slower quarter as it recorded a significant miss of analysts’ adjusted operating income estimates.
The stock is down 4.9% since reporting and currently trades at $24.69.
Read our full, actionable report on Verra Mobility here, it’s free.
LSI (NASDAQ:LYTS)
Enhancing commercial environments, LSI (NASDAQ:LYTS) provides lighting and display solutions for businesses and retailers.
LSI reported revenues of $138.1 million, up 11.9% year on year. This result beat analysts’ expectations by 5.5%. It was a very strong quarter as it also logged an impressive beat of analysts’ EPS estimates and a narrow beat of analysts’ EBITDA estimates.
The stock is up 4.6% since reporting and currently trades at $18.99.
Read our full, actionable report on LSI here, it’s free.
Market Update
Thanks to the Fed's series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market has thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% each in November and December), and a notable surge followed Donald Trump's presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by the pace and magnitude of future rate cuts as well as potential changes in trade policy and corporate taxes once the Trump administration takes over. The path forward is marked by uncertainty.
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