As the Q1 earnings season wraps, let’s dig into this quarter’s best and worst performers in the electrical systems industry, including Encore Wire (NASDAQ:WIRE) 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 16 electrical systems stocks we track reported a satisfactory Q1. As a group, revenues beat analysts’ consensus estimates by 2.5% while next quarter’s revenue guidance was in line.
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.
Luckily, electrical systems stocks have performed well with share prices up 11.3% on average since the latest earnings results.
Encore Wire (NASDAQ:WIRE)
Started in a small warehouse in Texas in 1989, Encore Wire (NASDAQ:WIRE) manufactures a range of electrical building wire and cables.Encore Wire reported revenues of $632.7 million, down 4.2% year on year. This print exceeded analysts’ expectations by 7.3%. Overall, it was an exceptional quarter for the company with a decent beat of analysts’ earnings estimates.
Interestingly, the stock is up 2.2% since reporting and currently trades at $289.95.
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Best Q1: 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 scored 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 Q1: 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.
Whirlpool (NYSE:WHR)
Credited with introducing the first automatic washing machine, Whirlpool (NYSE:WHR) is a manufacturer of a variety of home appliances.Whirlpool reported revenues of $3.99 billion, down 16.8% year on year. This result was in line with analysts’ expectations. Taking a step back, it was a mixed quarter with a miss of analysts’ operating margin estimates.
Whirlpool had the slowest revenue growth among its peers. The stock is up 5.6% since reporting and currently trades at $104.21.
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 print surpassed analysts’ expectations by 2.9%. It was an exceptional quarter as it also produced an impressive beat of analysts’ Security revenue estimates and full-year revenue guidance exceeding analysts’ expectations.
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
