As the Q2 earnings season comes to a close, it’s time to take stock of this quarter’s best and worst performers in the electrical systems industry, including Powell (NASDAQ:POWL) and its peers.
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 mixed Q2. As a group, revenues beat analysts’ consensus estimates by 2.3% while next quarter’s revenue guidance was 0.7% below.
In light of this news, share prices of the companies have held steady as they are up 1.6% on average since the latest earnings results.
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. This print exceeded analysts’ expectations by 29.7%. Overall, it was an incredible quarter for the company with an impressive beat of analysts’ earnings and EBITDA estimates.
Powell pulled off the biggest analyst estimates beat and fastest revenue growth of the whole group. Unsurprisingly, the stock is up 96.6% since reporting and currently trades at $262.15.
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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 $344 million, up 23.2% year on year, outperforming analysts’ expectations by 8%. The business had a stunning quarter with an impressive beat of analysts’ EBITDA estimates.
OSI Systems achieved the highest full-year guidance raise among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 6.5% since reporting. It currently trades at $133.07.
Weakest Q2: Kimball Electronics (NASDAQ:KE)
Founded in 1961, Kimball Electronics (NYSE:KE) is a global contract manufacturer specializing in electronics and manufacturing solutions for automotive, medical, and industrial markets.Kimball Electronics reported revenues of $430.2 million, down 13.3% year on year, falling short of analysts’ expectations by 3.6%. It was a disappointing quarter as it posted full-year revenue guidance missing analysts’ expectations.
Kimball Electronics delivered the weakest performance against analyst estimates and weakest full-year guidance update in the group. As expected, the stock is down 10.8% since the results and currently trades at $18.21.
LSI (NASDAQ:LYTS)
Enhancing commercial environments, LSI (NASDAQ:LYTS) provides lighting and display solutions for businesses and retailers.LSI reported revenues of $129 million, up 4.3% year on year. This result surpassed analysts’ expectations by 1.6%. Overall, it was a strong quarter as it also produced an impressive beat of analysts’ EBITDA estimates.
The stock is up 12.3% since reporting and currently trades at $16.56.
Allegion (NYSE:ALLE)
Allegion plc (NYSE:ALLE) is a provider of security products and solutions that keep people and assets safe and secure in various environments.Allegion reported revenues of $967.1 million, up 5.4% year on year. This print was in line with analysts’ expectations. More broadly, it was a mixed quarter as it also logged optimistic earnings guidance for the full year but a miss of analysts’ organic revenue estimates.
The stock is down 7.5% since reporting and currently trades at $139.65.
Market Update
The Fed cut its policy rate by 50bps (half a percent) in September 2024, the first in roughly four years. This marks the end of its most pointed inflation-busting campaign since the 1980s. While CPI (inflation) readings have been supportive lately, employment measures have bordered on worrisome. The markets will be assessing whether this rate cut's timing (and more potential ones in 2024 and 2025) is ideal for supporting the economy or a bit too late for a macro that has already cooled too much.Want to invest in winners with rock-solid fundamentals? Check out our and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
This content was originally published on Stock Story
