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    HUBB
    Earnings call· Mar 2025(Q1 FY25)

    HUBBELL Q1 FY25 earnings call HUBB

    May 1, 2025 Source

    Executive summary

    Hubbell Q1 FY25 — Strong Electrical Solutions and Grid Infrastructure Growth Offset by Automation Softness and Cost Headwinds

    Hubbell navigated Q1 FY25 with robust performance in Electrical Solutions and a return to growth in grid infrastructure, despite anticipated softness in grid automation and significant cost inflation from tariffs and raw materials. Management maintains its full-year outlook, confident in its pricing and productivity actions to offset headwinds, while emphasizing long-term opportunities driven by grid modernization and electrification megatrends.

    Highlights

    5

    • Electrical Solutions delivered mid-single-digit organic growth with continued adjusted operating margin expansion of 70 basis points.

    • Grid infrastructure returned to organic growth in the quarter, with double-digit growth in transmission and substation markets.

    • Grid infrastructure orders were up double digits year-over-year in Q1, with strong trends across all end markets.

    • Multiyear capital plans from top investor-owned utility customers have revised upwards by approximately 10% over the past 6 months.

    • The company repurchased $125 million worth of shares in Q1, with $600 million remaining authorization.

    Concerns

    3

    • Grid automation sales were down 15% year-over-year due to challenging prior-year comparisons.

    • The company faced a $10 million drag in Q1 from increased cost inflation due to higher raw material prices and tariffs.

    • Reciprocal tariffs enacted in April could create a $0.50 per share sensitivity to the full-year adjusted EPS outlook if not fully offset within FY25.

    Guidance & targets

    5
    CategoryTargetConfidence
    Full Year 2025 Adjusted EPS Outlook
    Maintained, targeting neutral impact from reciprocal tariffs
    high materiality
    High
    Full Year 2025 Organic Growth
    6% to 8%
    high materiality
    High
    Full Year 2025 Organic Growth - Volume Contribution
    3% to 4%
    medium materiality
    High
    Full Year 2025 Organic Growth - Price Contribution
    3% to 4%
    medium materiality
    High
    Full Year 2025 Free Cash Flow Conversion
    90% or greater
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Utility Solutions
    Sales decreased due to a 15% contraction in grid automation, offset by low single-digit growth in grid infrastructure. Transmission and substation markets showed double-digit growth. Distribution sales were down but showed sequential improvement, indicating the end of customer inventory destocking. Operating margins were impacted by price/cost productivity headwinds.
    Grid infrastructure growth: low single-digitGrid automation contraction: 15%Transmission and substation growth: double-digitGrid infrastructure orders growth: double digits YoY
    		$857M-4%—$180M operating profit, down 80 bps
    Electrical Solutions
    Achieved mid-single-digit growth excluding the residential lighting divestiture, driven by strong data center demand (double-digit growth in balance of systems and PCX business). Operating margin expanded by 70 basis points due to volume growth and efficiency gains.
    Data center growth: double-digitPCX business growth: strong
    		—mid-single-digit—$84M operating profit, up 70 bps

    Operational metrics

    10
    Operating Margin Change
    -40YoY
    Q1 FY25

    Company-wide operating margin declined due to a $10 million drag from higher raw material prices and tariffs, partially offset by positive pricing.

    Price/Cost Productivity Drag
    $10M
    Q1 FY25

    A $10 million drag on operating profit in Q1 from material costs and tariffs, which the company aims to offset in the second half of the year.

    Tariff and Raw Material Cost Impact
    $135M
    FY25

    The total cost impact for FY25 from tariffs implemented in February/March and higher raw material prices. Mitigation actions, primarily price increases effective mid-April, are expected to neutralize this impact within the calendar year.

    Reciprocal Tariffs Potential EPS Sensitivity
    $0.50
    FY25

    A potential downside sensitivity to full-year adjusted EPS from reciprocal tariffs enacted in April, due to the timing of LIFO accounting recognizing costs versus price increases taking effect. This could result in a full-year adjusted EPS range of $16.85-$17.35, representing a $0.50 reduction from the original plan.

    Cash Generation
    $2B
    FY25-FY27

    Projected cash generation over the three-year period from 2025 to 2027, after accounting for dividends and anti-dilutive share repurchases.

    Share Repurchases Executed
    $125M
    Q1 FY25

    Amount of shares repurchased in the first quarter of 2025.

    Share Repurchase Authorization Remaining
    $600M
    as of Q1 FY25

    Remaining authorization for share repurchases, which was increased earlier in the year.

    Multiyear Capital Plans Revision
    10%upwards
    past 6 months

    Average increase in multiyear capital plans from a representative group of top investor-owned utility customers over the past six months, compared to prior plans.

    China Supply Chain Exposure
    mid-single digitscut in half over several years
    current

    China represents a mid-single-digit percentage of the company's supply chain mix, having been cut in half over the last several years through divestitures and reshoring efforts.

    LIFO Headwind
    $20M
    Q2 FY25

    Anticipated headwind from LIFO accounting in the second quarter, following a $10 million headwind in Q1, expected to be offset by price and productivity in the second half.

    Industry KPIs

    2
    MetricValueDetails
    Orders bookings growthdouble digits%
    Data center exposure pipelinedouble-digit%

    Orderbook & backlog

    1
    Grid Infrastructure Ordersdouble digitsQ1 FY25

    up YoY

    Order trends strong across each of the end markets (transmission, substation, distribution, telecom).

    Risks & headwinds

    3
    Increased Cost InflationFY25

    $135M impact on FY25 costs

    Mitigation: Implemented price actions effective mid-April; negotiating with suppliers, realigning supply chains, other cost actions.

    Reciprocal Tariffs Impact TimingFY25, potentially extending to Q1 FY26

    Potential $0.50 EPS sensitivity, leading to a range of $16.85-$17.35

    Mitigation: Mitigation actions underway (price and productivity levers); targeting neutralization within FY25, but LIFO lag could push full offset to Q1 FY26.

    Macroeconomic UncertaintyNear-term

    Warrants caution and continued proactive cost management

    Mitigation: Markets bolstered by megatrends and proven resilient; maintaining full year outlook; strong order trends and favorable end markets support growth expectations.

    What to watch in Q2 FY25

    5

    Reciprocal Tariff Neutralization

    Next quarter
    CurrentMitigation actions underway, targeting neutralization within FY25
    TargetFull neutralization of $0.50 EPS sensitivity within FY25

    Why it matters

    The timing of📎 offsetting reciprocal tariffs will impact full-year EPS, with potential for LIFO lag to push neutralization into Q1 FY26.

    William Sperry (Executives): The second column is the reciprocal tariffs that were enacted in April, we, too, will neutralize these effects using price and productivity levers. And those mitigation actions are underway. We've been in contact with our customers. Those price increases are not yet fully implemented. They're expected to go in later this month. And so we don't know about stick rates as well. And so while we're confident we'll offset and neutralize these -- it's not fully clear yet that, that will happen within calendar year '25, given the LIFO lag and the fact that we'll be recognizing these costs immediately.

    Q&A highlights

    5

    Confirming that the $0.50 sensitivity implies a potential full-year EPS range of $16.85-$17.35, which is $0.50 lower than the original plan.

    Management confirmed the analyst's interpretation of the $0.50 sensitivity as a potential negative outcome relative to the plan, but emphasized it's a sensitivity analysis, not a revised guide, as actions are in place to neutralize the impact.

    “Jeffrey Sprague (Analysts): ...you're suggesting a negative outcome here relative to your plan is a year that looks like $16.85, $17.35. $0.50 on the top and bottom. Daniel Innamorato (Executives): Yes, I think that's correct, Jeff.”

    asked by Jeffrey Sprague · answered by Daniel Innamorato

    2 min read6 chapters

    Detailed Narrative

    01

    Overall Financial Performance

    Hubbell reported Q1 FY25 sales of $1.365 billion, a decrease largely driven by the divestiture of residential lighting. Despite this, the company achieved strong operating performance in Electrical Solutions and a return to organic growth in grid infrastructure. Operating profit was $264 million, with margins down 40 basis points year-over-year, primarily due to a $10 million drag from higher raw material costs and tariffs.

    02

    Electrical Solutions Momentum

    The Electrical Solutions segment delivered mid-single-digit organic growth, driven by strong data center demand, particularly in balance of systems products like connectors and grounding, and robust performance in the PCX business. The segment also achieved 70 basis points of adjusted operating margin expansion, benefiting from volume growth and efficiency gains from "compete collectively" initiatives.

    03

    Utility Solutions Dynamics

    Utility Solutions saw low single-digit growth in grid infrastructure, with double-digit growth in transmission and substation markets due to grid modernization and electrification trends. Distribution markets, while down in Q1, showed sequential sales and order improvement, indicating the end of customer inventory normalization. Grid automation sales contracted 15% against a tough 30% prior-year comparable, but is stabilizing with smaller projects and MRO activity.

    04

    Tariff and Cost Inflation Management

    Hubbell, a U.S.-centric manufacturer, faced a $135 million impact on 2025 costs from tariffs implemented in February/March and higher raw material prices. The company has already implemented price increases, effective mid-April, to neutralize this first wave. Reciprocal tariffs enacted in April are also being addressed with mitigation actions, though their full neutralization within FY25 is subject to LIFO accounting timing, potentially creating a $0.50 EPS sensitivity.

    05

    Long-term Market Outlook and Capital Plans

    Management remains confident in the long-term growth outlook, underpinned by secular trends in grid modernization and electrification. Grid infrastructure orders were up double digits year-over-year in Q1, and multiyear capital plans from top investor-owned utility customers have increased by approximately 10% over the past six months, signaling sustained investment in T&D markets.

    06

    Capital Deployment Strategy

    The company projects $3.5 billion in operating cash flow and $3 billion in free cash flow from FY25-FY27. After dividends and anti-dilutive share repurchases, this leaves $2 billion in cash generation, excluding borrowing capacity. Hubbell prioritizes M&A for strategic growth but also has flexibility for share repurchases, having bought back $125 million in Q1 against a $600 million authorization.

    AI-generated summary of the company’s earnings call. Not investment advice.