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HUBBELL INC (HUBB)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered margin-driven EPS outperformance despite modest revenue contraction: net sales $1,334.3M (-0.9% y/y), GAAP EPS $3.64, Adjusted EPS $4.10 (+11% y/y), with GAAP operating margin 19.3% and Adjusted operating margin 21.8% (+240 bps y/y) .
  • Utility Solutions grew on Systems Control and grid infrastructure strength (+4% y/y sales to $847.1M) while Electrical Solutions declined on the 2024 residential lighting divestiture; both segments expanded margins materially in Q4 .
  • 2025 initial outlook: total and organic sales growth 4–5%, GAAP EPS $16.00–$16.50, Adjusted EPS $17.35–$17.85, adjusted tax rate 22.0–22.5%, FCF conversion ≥90% of adjusted net income; ~ $1.35/sh amortization and ~$20M restructuring embedded .
  • Strategic capital allocation continues: $1.32 quarterly dividend declared Jan 31, 2025; new $500M share repurchase authorization approved Feb 12, 2025 (adds to $260M remaining on the prior authorization) .
  • Management flagged destocking fading at IOUs (book-to-bill >1 in grid infrastructure); grid automation (meters/AMI) near-term headwinds expected to improve after Q1’25; company prepared to offset potential tariff impacts via pricing/productivity .

What Went Well and What Went Wrong

  • What Went Well

    • Significant margin expansion on strong execution: “double-digit growth in operating profit, earnings per share and free cash flow” in Q4; Adjusted operating margin +240 bps y/y to 21.8% .
    • Utility Solutions growth and Systems Control accretion: segment sales +4% y/y to $847M; Adjusted margin 22.9% (+150 bps y/y), supported by acquisitions and grid infrastructure strength .
    • Cash generation and capital returns: Q4 free cash flow $364.4M (+28% y/y); full-year FCF $810.8M; dividend declared ($1.32/share) and new $500M buyback authorization .

  • What Went Wrong

    • Organic sales softness (-3% in Q4) with specific weakness in telecom enclosures (-20% in Utility) and grid automation (meters/AMI) down ~11% y/y; management cited project roll-offs and tough comps .
    • Electrical Solutions top-line declined due to the lighting divestiture; segment sales -9% y/y to $487.2M despite solid margin execution (Adj margin 20.0%, +350 bps) .
    • Q4 sales below internal expectations due to year-end incentive dynamics (rebates, FCF-driven bonuses) delaying shipments into January, pressuring reported Q4 volume .

Financial Results

Headline results vs prior periods

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Net Sales ($USD Millions)$1,345.8 $1,452.5 $1,442.6 $1,334.3
GAAP Diluted EPS ($)$3.16 $3.94 $4.05 $3.64
Adjusted Diluted EPS ($)$3.69 $4.37 $4.49 $4.10
GAAP Operating Margin (%)16.8% 20.7% 21.1% 19.3%
Adjusted Operating Margin (%)19.4% 22.8% 23.2% 21.8%

Notes:

  • Q4 2024: sales -0.9% y/y; Adjusted EPS +11% y/y; Adjusted operating margin +240 bps y/y .
  • Sequentially, margins eased from Q3 but remained well above Q4’23; cash generation accelerated .

Segment performance

SegmentMetricQ4 2023Q2 2024Q3 2024Q4 2024
Utility SolutionsNet Sales ($MM)$811.4 $926.5 $933.1 $847.1
GAAP Op Margin (%)17.6% 21.2% 22.6% 19.6%
Adjusted Op Margin (%)21.4% 24.0% 25.3% 22.9%
Electrical SolutionsNet Sales ($MM)$534.4 $526.0 $509.5 $487.2
GAAP Op Margin (%)15.5% 20.0% 18.3% 19.0%
Adjusted Op Margin (%)16.5% 20.8% 19.4% 20.0%

Notes:

  • Utility Solutions: y/y sales +4% in Q4; grid infrastructure +~12%, grid automation -~11% (tough comps, project roll-offs); Systems Control accretive to growth and margins .
  • Electrical Solutions: Q4 sales decline driven by residential lighting divestiture; organic -1% y/y; significant margin expansion from portfolio mix and simplification .

KPIs and cash

KPIQ4 2023Q2 2024Q3 2024Q4 2024
Free Cash Flow ($MM)$283.6 $205.7 $188.8 $364.4
Cash from Operations ($MM)$345.5 $239.6 $227.0 $432.4
Net Debt / Total Capital (%)34% (12/31/23) 30% (6/30/24) 27% (9/30/24) 24% (12/31/24)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Sales GrowthFY 2025N/A (initial 2025 outlook)4–5%New
Organic Sales GrowthFY 2025N/A4–5%New
GAAP Diluted EPSFY 2025N/A$16.00–$16.50New
Adjusted Diluted EPSFY 2025N/A$17.35–$17.85New
Adjusted Tax RateFY 2025N/A22.0–22.5%New
Restructuring & related investmentFY 2025N/A~ $20MNew
Amortization of acquired intangiblesFY 2025N/A~ $1.35/shNew
Free Cash Flow ConversionFY 2025N/A≥ 90% of adjusted net incomeNew
DividendOngoing$1.225/qtr prior; +8% increase announced Oct 2024$1.32/qtr (declared Jan 31, 2025)Increased
Share RepurchaseAuthorization$260M remaining (as of 12/31/24)New $500M authorization (exp. Feb 2028), in addition to $260M remainingIncreased capacity

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
AI/Data centers“Robust project activity drove strong sales in datacenters and renewables” (Q2) ; continued strength in Q3 Expect mid-teens growth in data center in 2025 as AI accelerates large projects Strengthening growth vector
Grid Automation (meters/AMI)Q2 +10% y/y; Q3 +4% y/y Q4 -~11% y/y on tough comps/project roll-offs; expect Q1’25 similar before improving through rest of 2025 Near-term headwind, improving 2H25
Grid InfrastructureQ2 +12% y/y; Q3 +15% y/y Double-digit growth continues; book-to-bill >1 for first time since early 2023 Demand re-accelerating
Utility distribution destocking“Customer inventory normalization” Q2/Q3 Destock isolating to IOUs; visibility improving; fading into 2025 Easing headwind
Telecom enclosuresWeak through Q2/Q3 Down ~20% in Q4; rightsized cost base; growth to be selective given pricing pressure Stabilizing from lower base
Pricing/PCPPrice > cost, productivity emphasized in Q2/Q3 Positive price (>1 pt in Q4); proactive tariff response planned; continued productivity Sustained tailwind
Tariffs/MacroForward-looking risk cited in releases Mexico COGS exposure “mid-teens” ballpark; plan to offset with pricing/productivity; fluid policy backdrop Manageable risk with levers

Management Commentary

  • “Hubbell delivered double-digit growth in operating profit, earnings per share and free cash flow in the fourth quarter… continued operational execution resulted in significant margin expansion and we delivered earnings per share ahead of our prior outlook range.” – Gerben Bakker, CEO .
  • “Book-to-bill in grid infrastructure was above one for the first time since early 2023… strongly suggestive that the effects of destocking are fading in 2025.” – Bill Sperry, CFO .
  • “We anticipate 4% to 5% organic growth in 2025… mid-teens growth in our data center business as artificial intelligence drives accelerated build-out… and free cash flow conversion of at least 90% of adjusted net income.” – Gerben Bakker .

Q&A Highlights

  • Destocking visibility: IOU inventory normalization is now the primary pocket; VIP customers provide better line of sight; destock not a single-date event but improving into 2025 .
  • Tariffs readiness: China exposure now “quite small”; Mexico COGS “mid-teens” ballpark; company will move quickly on pricing and productivity to neutralize impacts; fluid policy environment .
  • Pricing/margins: Q4 price “more than 1 point” overall; breadth positive across the portfolio except telecom; Electrical Solutions achieved 20% adjusted margin in Q4, seen as sustainable with continued mix/efficiency benefits .
  • Seasonality: Q1 typically low-20s percent of full-year EPS; 2025 Q1 growth below full-year growth trajectory (4–5%) with better compares in the following three quarters .
  • Grid automation cadence: Meters/AMI expected down in Q1’25, then improve through the balance of the year; broader grid automation still expected to grow slightly for FY25 .
  • M&A pipeline: Closed a ~ $70M bolt-on (wireless networks) to Electrical segment the day before the call; active pipeline supported by a strong balance sheet .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 were unavailable at time of analysis due to a data access limit. As a result, we cannot provide “vs. consensus” comparisons for sales/EPS. Management stated EPS came in ahead of their prior outlook range, but did not reference external consensus on the call or in the release .
  • If you want, we can refresh S&P Global consensus and add “beat/miss” deltas when access restores.

Key Takeaways for Investors

  • Margin resilience is the story: EPS growth in Q4 was driven by pricing, productivity, portfolio mix, and Systems Control accretion despite softer organic volume; this playbook remains intact for 2025 .
  • Utility demand set-up improving: grid infrastructure book-to-bill >1 and destock fading at IOUs point to improving volume execution through 2025; meters/AMI to trough in 1H before recovering .
  • Electrical Solutions mix upgrade: after divesting residential Lighting, the segment is printing “2-handle” margins with support from data center and renewables verticals; management sees a multiyear road map for further efficiencies .
  • 2025 outlook credible and balanced: 4–5% organic growth with continued margin expansion and ≥90% FCF conversion provides cash for M&A and buybacks; buyback capacity expanded with new $500M authorization .
  • Tariff risk manageable: Mexico COGS exposure mid-teens, but pricing and PCP levers plus reshoring and limited China exposure should cushion potential policy shocks .
  • Near-term trading setup: Q1 seasonality and grid automation headwinds suggest slower start vs FY guide; improving orders and easing destock should support a back-half reacceleration narrative .
  • Medium-term thesis: Secular grid modernization, AI/data center build-outs, and portfolio transformation (Systems Control, Electrical unification) underpin above-trend EPS compounding into 2025 and beyond .

Citations:

  • Q4 2024 and FY context: press release and 8-K exhibit (financial statements, segments, cash flow, guidance) .
  • Q3 2024 and Q2 2024 trends: press releases (financials, segments, organic growth) .
  • Earnings call transcript: prepared remarks and Q&A (destocking, book-to-bill, tariffs, pricing, seasonality, grid automation outlook, M&A update) .
  • Dividend and buyback press releases .