Wrapping up Q2 earnings, we look at the numbers and key takeaways for the electrical systems stocks, including Napco (NASDAQ:NSSC) 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 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.
Inflation progressed towards the Fed's 2% goal recently, leading the Fed to reduce its policy rate by 50bps (half a percent or 0.5%) in September 2024. This is the first cut in four years. While CPI (inflation) readings have been supportive lately, employment measures have bordered on worrisome. The markets will be debating 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.
Thankfully, electrical systems stocks have been resilient with share prices up 5.1% on average since the latest earnings results.
Napco (NASDAQ:NSSC)
Napco Security Technologies, Inc. (NASDAQ:NSSC) is a leading manufacturer and designer of high-tech electronic security devices, cellular communication services for intrusion and fire alarm systems, and school safety solutions.Napco reported revenues of $50.33 million, up 12.7% year on year. This print was in line with analysts’ expectations, but overall, it was a mixed quarter for the company with a narrow beat of analysts’ earnings estimates.
Richard Soloway, Chairman and CEO, commented, "Fiscal 2024 concluded with record revenue and net income for both the 4th quarter and the full fiscal 2024 year ending June 30, 2024."
Unsurprisingly, the stock is down 29.7% since reporting and currently trades at $38.99.
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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 81.9% since reporting. It currently trades at $242.48.
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 14.3% since the results and currently trades at $17.51.
Atkore (NYSE:ATKR)
Protecting the things that power our world, Atkore (NYSE:ATKR) designs and manufactures electrical safety products.Atkore reported revenues of $822.4 million, down 10.5% year on year. This result was in line with analysts’ expectations. Taking a step back, it was a disappointing quarter as it logged underwhelming EBITDA guidance for the full year.
The stock is down 31.3% since reporting and currently trades at $81.41.
Verra Mobility (NASDAQ:VRRM)
Managing over 165 million tolling transactions per year, Verra Mobility (NYSE:VRRM) is a leading provider of smart mobility technology that enhances safety, efficiency, and convenience on roadways.Verra Mobility reported revenues of $222.4 million, up 8.8% year on year. This result was in line with analysts’ expectations. More broadly, it was a slower quarter as it recorded full-year revenue guidance missing analysts’ expectations.
The stock is down 1.8% since reporting and currently trades at $27.15.
This content was originally published on Stock Story
