As the craze of earnings season draws to a close, here’s a look back at some of the most exciting (and some less so) results from Q2. Today, we are looking at electrical systems stocks, starting with Methode Electronics (NYSE:MEI).
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 15 electrical systems stocks we track reported a mixed Q2. As a group, revenues beat analysts’ consensus estimates by 1.8% while next quarter’s revenue guidance was 2.1% below.
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.
In light of this news, electrical systems stocks have held steady with share prices up 4.9% on average since the latest earnings results.
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. This print fell short of analysts’ expectations by 3%. Overall, it was a disappointing quarter for the company with a miss of analysts’ earnings estimates.
President and Chief Executive Officer Jon DeGaynor said, “Our sales in the quarter were on track with our expectations, while our adjusted pre-tax loss was better than our expectations. We continue to navigate a challenging transition from our legacy programs to the launching of a multitude of new programs. Our bookings remained solid, and our EV activity rebounded from our previous quarter.”
Interestingly, the stock is up 3.4% since reporting and currently trades at $10.40.
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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 85.3% since reporting. It currently trades at $247.10.
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 and a miss of analysts’ earnings estimates.
Kimball Electronics delivered the weakest performance against analyst estimates and weakest full-year guidance update in the group. As expected, the stock is down 16.1% since the results and currently trades at $17.14.
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 $965.6 million, up 5.8% year on year. This number surpassed analysts’ expectations by 1.1%. It was a strong quarter as it also recorded a decent beat of analysts’ operating margin and earnings estimates.
The stock is up 13.7% since reporting and currently trades at $144.64.
Sanmina (NASDAQ:SANM)
Founded in 1980, Sanmina (NASDAQ:SANM) is an electronics manufacturing services company offering end-to-end solutions for various industries.Sanmina reported revenues of $1.84 billion, down 16.6% year on year. This number missed analysts’ expectations by 1.1%. Overall, it was a disappointing quarter as it also recorded a miss of analysts’ earnings estimates and revenue guidance for next quarter missing analysts’ expectations.
The stock is down 12% since reporting and currently trades at $66.45.
This content was originally published on Stock Story
