Hubbell (HUBB) Q4 FY25 earnings call: guidance and Q&A

Can you provide more color on order trends, particularly the complexion across the business? Is strong CapEx negatively impacting MRO activity in the core legacy business?

Order momentum has been strong since September, especially in T&D and data center, driving Q4 organic sales growth. The company is primarily a book-to-bill business, but order strength has built some backlog in T&D. It's hard to distinguish CapEx vs. OpEx impact on MRO as materials are fungible, but generation investments are strong, and T&D/distribution markets are supportive of long-term growth.

“the order strength over the fourth quarter really drove our organic sales growth. So it wasn't working backlog or anything. This was reflected in the actual orders that we saw.”

asked by Jeffrey Sprague · answered by Gerben Bakker

The meters and AMI business is still declining. Is there something else going on, or is it just a lack of project activity? What is the outlook for this business?

The business consumed backlog throughout 2025, and larger projects haven't returned, leading to smaller projects and replacement product. The book-to-bill ratio is now around 1, indicating stabilization off a lower base. Management expects modest growth from this lower base going forward, with some easier comps in Q1.

“It's a little bit what you said, Jeff. It's -- as we worked through '25 and as we communicated, we're still working through that large project backlog and through a lot of '25, we actually consumed backlog as we did that.”

asked by Jeffrey Sprague · answered by Gerben Bakker

Should we assume Q1 FY26 will be outside the recent normal of 19% to 20% of the year's EPS, given the margin expansion guide and front-loaded restructuring?

The company expects a strong start to the year from an organic growth and margin expansion perspective. While Q1 will see solid year-over-year growth, using percentages of the full year's EPS can be very sensitive. Restructuring investments of $15M-$20M are expected to be front-end loaded, with about 1/3 in Q1, and the tax rate tends to be higher in Q1.

“I think, Julian, we'll see a strong start to the year from an organic perspective, and Gerben highlighted that. So I think you'll see nice 1Q year-over-year growth.”

asked by Julian Mitchell · answered by Joseph Capozzoli

What are the current assumptions for raw materials prices, particularly metals, underlying the mid-single-digit cost inflation forecast for 2026?

The company is closely watching metal prices (copper, aluminum, steel) which saw creep in Q4 and continued into January. The mid-single-digit cost inflation forecast for 2026 is based on prices around where they exited the year. This is a gross number, not net of productivity, and is expected to be managed effectively with price and productivity actions, similar to 2025.

“we did see some creep coming out of the fourth quarter with higher copper, aluminum, steel. And we're anticipating -- maybe more broadly, including metals and other inflation, we're anticipating about mid-single digits for cost inflation in 2026.”

asked by Steve Tusa · answered by Joseph Capozzoli

Can you discuss first half vs. second half growth in grid infrastructure, especially transmission/substation vs. electrical distribution? Also, how will the anticipated $900M-$1B free cash flow be deployed?

Transmission and substation are expected to continue growing in high-single to low-double digits. Distribution, which strengthened throughout 2025, is expected to grow in mid-single digits for 2026, reflecting underlying demand rather than restock. Free cash flow will be deployed similarly to 2025, prioritizing high-return CapEx, attractive bolt-on M&A, and supplementing with share repurchases, while remaining disciplined.

“we're thinking about $900 million to $1 billion of free cash flow next year. And I think 2025 was a really good year of deploying capital to a combination of high-quality CapEx program. Our M&A was rather successful with 3 deals at roughly $950 million deployed.”

asked by Joe O'Dea · answered by Joseph Capozzoli

The mid-teens data center growth forecast seems below market trends for 2026. What informs this view?

The 60%+ Q4 data center growth (40% for full year) was heavily driven by the modular power distribution skid business's project load in 2025. While this business expects a heavy project load in 2026, the year-over-year growth rates will step down from the high 2025 base. Connectors and grounding products also contribute. A good part of this business is short-cycle, so if demand proves stronger, the company will serve it.

“The modular power distribution skid business... had a pretty heavy project load throughout 2025, which really drove a lot of those strong year-over-year growth rates from '25 versus '24. They anticipate to continue a heavy project load in 2026. So those growth rates in '26 versus '25 will step down a little bit.”

asked by Nigel Coe · answered by Joseph Capozzoli

Given recent high-profile transactions at reasonable multiples, is it still possible to acquire at similar multiples, or have seller/buyer expectations shifted?

Multiples have increased from single-digit levels, but returns remain good due to higher growth rates in attractive businesses. Hubbell is a strong buyer for 'right down the fairway' bolt-ons and larger deals, leveraging synergies and complementary growth. While competition can make individual deals outliers, current multiples are generally consistent with recent trends, not higher or lower. The company remains disciplined, viewing dividends and share repurchases as alternatives.

“the returns on those businesses are still very good for us because the growth rates have gone up. Those are more attractive businesses. We do really well with those.”

asked by Tommy Moll · answered by Gerben Bakker

What are the margin accretion benefits of DMC Power versus integration costs? And for HES, ex-data center, the guide implies a potential inverse in growth in the back half; is this caution or specific factors?

DMC Power's sales and margins in Q4 were in line with expectations. The FY26 outlook for DMC includes $130M revenue and ~40% operating margins, net of integration costs. For HES, the strong Q4 exit rate was heavily data center-driven. While data center projects have good visibility throughout 2026, the year-over-year growth rates for Electrical Solutions will naturally shrink in Q4 2026 due to the very strong Q4 2025 comparable.

“Our outlook contemplates $130 million of revenue and roughly 40% operating margins, which is net of integration costs. So that -- no change in how we were thinking about DMC and communicating that coming out of the fourth quarter to start the year”

asked by Alexander Virgo · answered by Joseph Capozzoli