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    HUBB
    Earnings call· Jun 2025(Q2 FY25)

    HUBBELL Q2 FY25 earnings call HUBB

    Jul 29, 2025 Source

    Executive summary

    Hubbell Q2 FY25 — Double-Digit EPS Growth and Raised Full-Year Outlook

    Hubbell reported strong Q2 FY25 results, marked by double-digit adjusted EPS growth and significant operating margin expansion, prompting a raised full-year outlook. The company successfully navigated inflationary pressures through proactive pricing and productivity, while benefiting from robust demand in grid infrastructure and data centers. A strategic shift to FIFO accounting aims to better match expenses and revenues, supporting continued profitable growth amidst dynamic market conditions.

    Highlights

    5

    • Delivered double-digit adjusted EPS growth, up 11% to $4.93.

    • Achieved 120 basis points of adjusted operating margin expansion.

    • Grid Infrastructure organic growth of 7% in Utility Solutions.

    • Electrical Solutions delivered mid-single-digit organic growth with 9% adjusted operating profit growth, driven by strong data center demand.

    • Raised full-year adjusted EPS outlook to $17.65-$18.15, representing a $0.30 increase at both ends.

    Concerns

    3

    • Grid automation performance was weaker than anticipated, contracting 13%.

    • Raw material inflation and tariffs are driving incremental cost inflation relative to initial outlook.

    • Heavy industrial and non-residential markets in Electrical Solutions are more cautious, contemplating flat contributions for the year.

    Guidance & targets

    8
    CategoryTargetConfidence
    Full year adjusted earnings per share
    $17.65 to $18.15
    high materiality
    High
    Full year organic growth
    4% to 6%
    high materiality
    High
    Full year adjusted operating margin
    Expansion
    high materiality
    High
    Full year adjusted EPS growth
    High single-digit
    high materiality
    High
    Aclara business growth
    Return to growth
    medium materiality
    Medium
    Full year price contribution to sales growth
    3 points
    medium materiality
    High
    Full year volume contribution to sales growth
    2 points
    medium materiality
    High
    Free cash flow conversion
    90%
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Utility Solutions
    Growth driven by Grid Infrastructure, with distribution markets returning to growth as channel destocking concluded. Grid Automation was weaker due to roll-off of large projects. Favorable mix from higher-margin T&D components.
    Operating profit growth: 7%Operating margin: 25.5%Operating margin change: up 140 bpsGrid Infrastructure organic growth: 7%Transmission and substation growth: double-digitDistribution sales growth: mid-single-digitGrid Automation contraction: 13%
    		$936M1%—$239M
    Electrical Solutions
    Solid organic growth, with a small contribution from Ventev acquisition. Strong data center demand and light industrial markets. Margin expansion driven by volume, price/cost management, and productivity.
    Operating profit growth: 9%Operating margin: 22.5%Operating margin change: up 100 bpsData center growth: very significant contributorLight industrial markets: very strong
    		$545M4%—$124M

    Operational metrics

    12
    Adjusted EPS growth
    11%
    Q2 FY25

    Outgrowing operating profit growth with non-op tailwinds.

    Adjusted operating profit growth
    8%
    Q2 FY25

    Company-wide.

    Adjusted operating margin
    24.4%up 120 bps
    Q2 FY25

    Company-wide.

    COGS decrease from FIFO transition
    $29M
    Q2 FY25

    Impact of adopting unified FIFO-based inventory accounting standard.

    COGS decrease from FIFO transition
    $20M
    H1 FY25

    Impact of adopting unified FIFO-based inventory accounting standard.

    EPS impact from FIFO transition
    $0.30
    H1 FY25

    Equivalent to the range in guidance made.

    Share repurchases
    $225M
    H1 FY25

    To prevent the balance sheet from getting lazy.

    Share repurchase average
    $40M-$50M
    Annual

    Historical average range for share repurchases.

    Price contribution to sales growth
    2 points
    H1 FY25

    In the first half of the year.

    Price contribution to sales growth
    3 points
    FY25

    Anticipated for the full year, contributing to 4-6% organic sales growth.

    Volume contribution to sales growth
    2 points
    FY25

    Anticipated for the full year, contributing to 4-6% organic sales growth.

    Telecom (Enclosures) growth
    flatyear-over-year
    Q2 FY25

    Reverted to growth, indicating bottoming in Q1.

    Industry KPIs

    2
    MetricValueDetails
    Orders bookings growthhigh teens%
    Data center exposure pipeline30%%

    Deals & partnerships

    2
    UndisclosedSmall bolt-on acquisition in the utility space, making enclosures for water utilities and data collection.

    Helps water utilities collect and send data.

    UndisclosedSale of a small business that was not contributing to the growth and margin profile.

    Part of tending to the portfolio and weeding out non-core assets.

    Risks & headwinds

    3
    Raw material inflation and tariffs2025

    Driving incremental cost inflation relative to initial outlook

    Mitigation: Proactive pricing and productivity actions; aiming for positive price/cost productivity.

    Macroeconomic and inflationary uncertaintiesNear-term

    Dynamic environment

    Mitigation: Well-positioned in attractive markets with a leading portfolio; proactively managing cost structure and pricing.

    Heavy industrial and non-residential market softnessSecond half of FY25

    A little bit soft; contemplating flat contributions for the year

    Mitigation: Focus on other strong verticals like data centers and light industrial.

    What to watch in Q3 FY25

    5

    Aclara business growth

    Q4 FY25
    Current13% contraction (Q2 FY25), flat sequentially for last 3 quarters
    TargetReturn to growth

    Why it matters

    Indicates stabilization and potential for low single-digit growth from a new base, impacting overall Utility segment performance.

    we think we're expecting that in the fourth quarter Aclara will return to growth and be able to have a steadier operation moving forward as we sort of absorbed this reaction to that heavy backlog here in the prior year.

    Q&A highlights

    6

    Is mid-single-digit growth in electrical distribution sustainable, or is it still muted by inventory issues?

    Management confirmed that mid-single-digit growth is the underlying, sustainable rate reflecting end-user demand, with easier comparisons expected in the second half of the year.

    “Mid-single digit is the underlying growth rate, what we see reflected of end user demand is what they're actually hanging on the infrastructure.”

    asked by Jeffrey Sprague · answered by Gerben Bakker

    2 min read6 chapters

    Detailed Narrative

    01

    FIFO Accounting Transition

    Hubbell adopted a unified FIFO-based inventory accounting standard, moving from a previous state of roughly half LIFO, half FIFO. This transition aims to simplify business reviews, better match expense and revenue recognition during inflationary periods, and align with reporting peers. The change resulted in a $29 million decrease in COGS in Q2 FY25 and a $20 million decrease for H1 FY25, impacting H1 FY25 EPS by approximately $0.30. The company expects accelerated tax payments to be offset by cash benefits from new tax legislation.

    02

    Market Dynamics and Growth Drivers

    The company is experiencing strong evidence of secular growth megatrends, particularly in grid modernization, electrification, and data centers. Grid Infrastructure achieved 7% organic growth, with double-digit growth in transmission and substation, and mid-single-digit growth in distribution as channel destocking concluded. Data centers remain a significant contributor to Electrical Solutions, with an anticipated 30% growth for the full year, while light industrial markets also showed strong performance.

    03

    Price/Cost Management

    Despite raw material inflation and tariffs driving incremental cost increases, Hubbell has been proactive in implementing pricing actions and driving productivity. Management is confident in achieving positive price/cost productivity for 2025. The company uses price as a primary lever to hedge against commodity and metal inflation (including copper, steel, and aluminum), with ongoing dialogue with customers and distributors to manage these dynamics effectively.

    04

    Segment Performance Nuances

    While Grid Infrastructure demonstrated robust growth, Grid Automation (Aclara) experienced a 13% contraction in Q2 FY25 due to the roll-off of large projects and difficult prior-year comparisons. However, Aclara is expected to stabilize and return to growth in Q4 FY25 from a new, lower base. Electrical Solutions delivered solid 4% sales growth, benefiting from data centers and light industrial, with continued operating margin expansion driven by volume, price/cost management, and productivity initiatives.

    05

    Capital Allocation and M&A

    Hubbell continues to actively manage its portfolio, recently closing a small bolt-on acquisition in the utility space (enclosures for water utilities) and divesting a small non-core business. The M&A pipeline remains active, with a strategic focus on higher-growth areas such as T&D, data centers, and light industrial. The company also repurchased $225 million in shares during H1 FY25 to optimize its balance sheet, indicating a balanced capital allocation approach.

    06

    Operational Efficiency and Investment

    The company is committed to simplifying its business to enhance productivity and operating efficiencies, which are expected to drive long-term margin expansion. Key initiatives include realigning the sales force in Electrical Solutions by geography to foster cross-selling and vertical market focus. Hubbell is also making strategic investments in restructuring, new product development, and exploring AI applications to gain further efficiencies while balancing cost management with long-term growth ambitions.

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