) second quarter earnings of $1.37 per share were above the Zacks
Consensus Estimate of $1.30 on the back of a lower tax rate and
outstanding share count.
Hubbell reported revenues of $801.3 million for the quarter,
which was up 8.3% sequentially and 2.9% year over year driven by
Hubbell's end markets were essentially flat in the quarter.
Non-residential construction was relatively mixed and a flat bag.
On the residential side, however, Hubbell saw good growth in the
last quarter. However, Utilities were weaker sequentially due to
transmission and distribution.
Hubbell has two operating segments-Electrical and Power
Systems, which generated 70.4% and 29.6% of revenues,
respectively in the quarter.
Revenues by Segment
were up 9.5% sequentially and 5.3% year over year to $564.5
million. About 3 percentage points of the year-over-year increase
were due to acquisitions, partially offset by notable weakness in
Power Systems sales
were up 5.3% sequentially but down 2.2% from last year. The
year-over-year decrease was due to lower levels of project
related transmission spending and weaker distribution sales,
partially offset by the favorable impact of an acquisition.
Operating Profit by Segment
Operating margin in the Electrical segment was 15.7%, up 9%
from the year-ago quarter. Hubbell stated that better pricing and
improved productivity led to strong margin performance in the
Power Systems operating margin of 18.2% was up 30 basis points
(bps) year over year. The increase from last year was on account
of a favorable product mix, partially offset by facility
Hubbell's gross margin for the quarter was 33.9%, up 200 bps
from the previous quarter's 31.9%. Gross margin was up 50 bps
from the year-ago quarter.
Hubbell's operating expenses of $139.9 million were higher
than the year-ago quarter. Operating margin of 16.5% was up 50
bps sequentially and 160 bps from the year-ago quarter as
selling, general and administrative (SG&A) expenses increased
as a percentage of sales.
On a pro forma basis, Hubbell's net income was $83.0 million
or a 10.4% net income margin, compared to $66.8 million or 9.0%
in the previous quarter and a profit of $78.0 million or 10.0%
net income margin in the year-ago quarter. Reported earnings per
share were $1.37 compared to $1.10 in the prior quarter and $1.29
in the same quarter last year. There were no one-time items.
The cash and short-term investments balance at quarter end was
$593.6 million, down $22.9 million during the quarter. Accounts
receivables were $468.8 million versus $443.6 million in the
Cash generated from operations was $65.8 million versus $42.7
million in the prior quarter. The company spent $13.0 million on
capex, $26.6 million on dividends and $6.5 million on share
Management does not provide a quarterly guidance and provides
only limited guidance for the year. Accordingly, for 2013, the
Electrical segment is expected to be up 5-7% and the Power
segment is expected to be up 2-4%. The Electrical business will
be helped by growth in residential market and new deals.
The increase in the Power segment will be driven by benefits
from the Trinetics deal. Therefore, management expects overall
sales to be up 4 to 6%, driven by the recent acquisition.
The utilities market is expected to grow 0-2%, the industrial
market is expected to grow in low-single digits while the
residential market is likely to be up 15%, same as expected
earlier. Management stated that it is starting to see some signs
of growth in the non-residential commercial business and expects
growth of 1% to 3% (same as previous expectations).
Management expects an operating margin improvement of 30 bps
The company's earnings exceeded our expectations with both
revenues and earnings up year over year. Though the end markets
remained flat in the quarter, management expects all the markets
to improve in the second half of the year. While uncertainty
persists in non-residential construction markets, the trend is
positive and likely to remain so throughout the year. Management
also expects non-residential market to improve going forward
driven by strength in the renovation mark.
Currently, Hubbell has a Zacks Rank #3 (Hold). Investors can
also consider some other stocks with a positive Zacks Rank and
expected surprise prediction or ESP Read:
Zacks Earnings ESP: A Better Method
), Earnings ESP of +8.33% and a Zacks Rank #2 (Buy)
), Earnings ESP of +1.96% and a Zacks Rank #2 (Buy)
Scientific Games Corporation
), with an ESP of +100.0% and a Zacks Rank #3 (Hold)
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