The end of the earnings season is always a good time to take a step back and see who shined (and who not so much). Let’s take a look at how electrical systems stocks fared in Q2, starting with Atkore (NYSE:ATKR).
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 14 electrical systems stocks we track reported a satisfactory Q2. As a group, revenues beat analysts’ consensus estimates by 2% while next quarter’s revenue guidance was in line.
After much suspense, the Federal Reserve cut its policy rate by 50bps (half a percent) in September 2024. This marks the central bank’s first easing of monetary policy since 2020 and the end of its most pointed inflation-busting campaign since the 1980s. Inflation had begun to run hot in 2021 post-COVID due to a confluence of factors such as supply chain disruptions, labor shortages, and stimulus spending. While CPI (inflation) readings have been supportive lately, employment measures have prompted some concern. Going forward, the markets will debate whether this rate cut (and more potential ones in 2024 and 2025) is perfect timing to support the economy or a bit too late for a macro that has already cooled too much.
Luckily, electrical systems stocks have performed well with share prices up 10.9% on average since the latest earnings results.
Atkore (NYSE:ATKR)
Protecting the things that power our world, Atkore (NYSE:ATKR) designs and manufactures electrical safety products.
Atkore reported revenues of $822.4 million, down 10.5% year on year. This print was in line with analysts’ expectations, but overall, it was a disappointing quarter for the company with underwhelming EBITDA guidance for the full year and a miss of analysts’ operating margin estimates.
“Atkore delivered Adjusted EBITDA margins over 25% on essentially flat volume compared to the prior year,” said Bill Waltz, Atkore President and Chief Executive Officer.
Unsurprisingly, the stock is down 24.8% since reporting and currently trades at $89.03.
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Best Q2: 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 $288.2 million, up 49.8% year on year, outperforming analysts’ expectations by 29.7%. The business had an incredible quarter with an impressive beat of analysts’ earnings estimates.
Powell pulled off the biggest analyst estimates beat and fastest revenue growth among its peers. The market seems happy with the results as the stock is up 107% since reporting. It currently trades at $275.59.
Weakest Q2: 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 $258.5 million, down 10.8% year on year, falling short of analysts’ expectations by 3%. It was a disappointing quarter as it posted a miss of analysts’ earnings estimates.
Interestingly, the stock is up 10.8% since the results and currently trades at $11.15.
Vertiv (NYSE:VRT)
Formerly part of Emerson (NYSE:) Electric, Vertiv (NYSE:VRT) manufactures and services infrastructure technology products for data centers and communication networks.
Vertiv reported revenues of $1.95 billion, up 12.6% year on year. This print met analysts’ expectations. It was a very strong quarter as it also logged an impressive beat of analysts’ operating margin estimates and full-year revenue guidance exceeding analysts’ expectations.
Vertiv pulled off the highest full-year guidance raise among its peers. The stock is up 23.7% since reporting and currently trades at $112.62.
OSI Systems (NASDAQ:OSIS)
With a name reflecting its initial focus on optical sensors, OSI Systems (NASDAQ:OSIS) is a designer and manufacturer of specialized electronic systems and components.
OSI Systems reported revenues of $480.9 million, up 16.8% year on year. This number beat analysts’ expectations by 2.9%. It was an exceptional quarter as it also produced an impressive beat of analysts’ Security
revenue estimates.
OSI Systems had the weakest full-year guidance update among its peers. The stock is up 3.7% since reporting and currently trades at $150.03.
This content was originally published on Stock Story
