Looking back on electrical systems stocks’ Q3 earnings, we examine this quarter’s best and worst performers, 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 Q3. As a group, revenues beat analysts’ consensus estimates by 0.8% while next quarter’s revenue guidance was 0.5% below.
Thankfully, share prices of the companies have been resilient as they are up 6.5% on average since the latest earnings results.
Weakest Q3: 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 $44 million, up 5.6% year on year. This print fell short of analysts’ expectations by 5.5%. Overall, it was a disappointing quarter for the company with a significant miss of analysts’ EBITDA estimates and a significant miss of analysts’ EPS estimates.
Richard Soloway, Chairman and CEO, commented, "Fiscal 2025 began with record revenue and net income for any first quarter in the Company's history and represents the sixteenth consecutive quarter of record sales for a quarterly reporting period."
Napco delivered the weakest performance against analyst estimates of the whole group. Interestingly, the stock is up 4.8% since reporting and currently trades at $40.47.
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Best Q3: 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 pulled off the biggest analyst estimates beat and highest full-year guidance raise among its peers. The market seems happy with the results as the stock is up 19.1% since reporting. It currently trades at $169.25.
Thermon (NYSE:THR)
Creating the first packaged tracing systems, Thermon (NYSE:THR) is a leading provider of engineered industrial process heating solutions for process industries.Thermon reported revenues of $114.6 million, down 7.3% year on year, falling short of analysts’ expectations by 1.3%. It was a disappointing quarter as it posted full-year revenue guidance missing analysts’ expectations significantly.
Thermon delivered the weakest full-year guidance update in the group. Interestingly, the stock is up 7.8% since the results and currently trades at $31.73.
Acuity Brands (NYSE:AYI)
One of the pioneers of smart lights, Acuity (NYSE:AYI) designs and manufactures light fixtures and building management systems used in various industries.Acuity Brands reported revenues of $1.03 billion, up 2.2% year on year. This print topped analysts’ expectations by 0.8%. Overall, it was a very strong quarter as it also put up a solid beat of analysts’ EBITDA estimates and an impressive beat of analysts’ adjusted operating income estimates.
The stock is up 18.7% since reporting and currently trades at $327.01.
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 $275.1 million, up 31.8% year on year. This print came in 4% below analysts' expectations. All in all, it was a mixed quarter for the company.
Powell scored the fastest revenue growth among its peers. The stock is down 13% since reporting and currently trades at $271.90.
Market Update
In response to the Fed's rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed's 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.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
