Hubbell Inc. (HUBB)- Weak Beat + Low Accruals
Rebuilding low accruals may delay the expected turnaround
We last wrote about Hubbell (HUBB) on Substack in our 8/7 piece Red Flags Behind Hubbell’s 2Q’24 Numbers in which we highlighted multiple instances of the company’s results receiving a leg up from declining accrual balances. In the months that followed, the stock rose about 30% with expectations for an acceleration in sales growth driven by electricity demand for AI and quantum computing applications. The company has hinted at a turnaround after weaker sales in Q2 and Q3, but our analysis of the company’s fourth-quarter results shows that even if sales solidify, the company could face significant headwinds from rebuilding low accruals accounts.
HUBB’s adjusted EPS of $4.10 for 4Q’24 beat estimates by 8 cents. Both its organic growth of -3% and its revenue of $1.3 billion fell short of forecasts. Management indicated on the earnings call that customer destocking may be largely over. It believes that Q1’25 could be the low point for 2025 and guided to EPS growth of 6% for 2025 on 4%-5% organic sales growth.
However, we still saw problems with 4Q’24 results. Without unusual benefits, the company would have missed its earnings estimates and we see multiple headwinds that may arise if HUBB has to rebuild reserves in several areas with more normalcy returning to sales.
Let’s get behind HUBB’s numbers: