$ AAPL

$ ABBV

$ ABNB

$ ACGL

$ ADI

$ ADM

$ ADP

$ ADSK

$ AEE

$ AEP

$ AES

$ AFL

$ AIG

$ AIZ

$ AJG

$ AKAM

$ ALB

$ ALGN

$ ALL

$ AMAT

$ AMCR

$ AMD

$ AME

$ AMGN

$ AMP

$ AMT

$ AMZN

$ ANET

$ AOS

$ APA

$ APD

$ APO

$ APTV

$ ARE

$ ATO

$ AVB

$ AWK

$ AXON

$ BA

$ BALL

$ BAX

$ BBY

$ BDX

$ BEN

$ BG

$ BIIB

$ BKNG

$ BLDR

$ BMY

$ BR

$ BRO

$ BXP

$ CAG

$ CAH

$ CARR

$ CAT

$ CBOE

$ CBRE

$ CCL

$ CDNS

$ CDW

$ CEG

$ CF

$ CHD

$ CHRW

$ CI

$ CINF

$ CL

$ CLX

$ CMCSA

$ CMG

$ CMI

$ CMS

$ COIN

$ COO

$ COP

$ COR

$ CPAY

$ CPT

$ CRL

$ CRWD

$ CSCO

$ CTRA

$ CTSH

$ CTVA

$ CVS

$ CVX

$ CZR

$ DAL

$ DASH

$ DAY

$ DD

$ DDOG

$ DE

$ DELL

$ DG

$ DGX

$ DIS

$ DOC

Hubbell (HUBB) delivered a strong Q2 FY2025 beat with robust margin expansion, EPS upside, and upgraded guidance, driven by cost discipline, favorable product mix, and share repurchases, despite ongoing grid automation and commodity risks.

# Hubbell Delivers Strong Q2 FY2025 Beat: Margin Expansion and EPS Upside Drive Upgraded Guidance

---

## Executive Summary

- **Hubbell Incorporated (HUBB) delivered a robust Q2 FY2025**, with net sales of **$1,484.3 million** (up 2% YoY) and adjusted EPS of **$4.93**, beating consensus by **$0.55**. The outperformance was driven by a combination of organic sales growth and a favorable FIFO inventory accounting change, which reduced COGS and provided a notable EPS tailwind.
- **Earnings quality was high**, with GAAP operating margin expanding to **22.7%** (up 160 bps YoY) and adjusted margin at **24.4%** (up 120 bps YoY), reflecting disciplined cost control, favorable product mix, and productivity gains. The company’s aggressive share repurchase program (increased to **$225 million**) further enhanced EPS.
- **Management’s tone was bullish**, emphasizing continued margin strength, strong cost management, and resilience to tariff and commodity headwinds. Guidance was raised, with FY2025 adjusted EPS now expected in the **$17.65–$18.15** range and organic sales growth targeted at **4–6%**.
- **Risks remain** around ongoing tariff pressures, commodity inflation, and a contracting grid automation segment (down **13%** YoY). However, upside potential is supported by robust grid infrastructure growth (+7% organic), strong data center demand, and continued cost discipline.
- **Catalyst watch:** Near-term, the market is likely to react positively to the headline beat and raised guidance. Key upcoming catalysts include Q4 grid automation stabilization and further updates on capital allocation and share repurchases.

---

## Performance Snapshot

| Metric                | Reported      | Consensus   | Surprise | YoY Change |
|-----------------------|--------------|-------------|----------|------------|
| Revenue               | $1,484.3M    | $1,470M     | +$14.3M  | +2%        |
| Adjusted EPS          | $4.93        | $4.38       | +$0.55   | +7%        |
| GAAP EPS              | $4.56        | $4.10       | +$0.46   | +6%        |
| GAAP Operating Margin | 22.7%        | 21.1%       | +160 bps | +160 bps   |
| Adjusted Margin       | 24.4%        | 23.2%       | +120 bps | +120 bps   |
| Grid Infrastructure   | +7% (organic)| —           | —        | +7%        |
| Grid Automation       | -13% (organic)| —          | —        | -13%       |

---

## Earnings Quality

- **Revenue mix** was supported by strength in grid infrastructure and data center demand within the Electrical Solutions segment, offsetting weakness in grid automation.
- **Margin strength** was a standout, with both GAAP and adjusted operating margins expanding meaningfully YoY. The margin gains were driven by effective cost controls, favorable product mix, and the one-off benefit from the FIFO inventory accounting change, which reduced COGS by **$29 million** and boosted EPS by **$0.42**.
- **Cost structure** improvements were evident in disciplined SG&A and labor expense management, as well as productivity gains in logistics, which helped counterbalance inflationary pressures. The aggressive share repurchase program also contributed to EPS growth, amplifying the impact of operational improvements.

---

## Management Commentary & Guidance

- **Management’s tone was bullish**, highlighting confidence in continued margin expansion and cost discipline. The company increased its share repurchase authorization to **$225 million**, signaling ongoing commitment to capital returns.
- **Guidance was raised**: FY2025 adjusted EPS is now expected in the **$17.65–$18.15** range (up from prior guidance), with organic sales growth targeted at **4–6%**. Management expects grid automation performance to stabilize by Q4 and remains focused on mitigating tariff and commodity headwinds through pricing and productivity initiatives.

---

## Key Risks

- **Tariff and commodity inflation** remain persistent risks, with potential to pressure margins if not offset by pricing or productivity.
- **Grid automation segment** contracted by **13% YoY**, and further cyclical weakness could weigh on overall growth.
- **Regulatory and demand-side risks** in key end markets (utilities, data centers) could impact future sales momentum.

---

## Expected Market Reaction

- **Analyst and investor sentiment is positive** following the strong beat and raised guidance, with expectations for a near-term stock price uptick. However, some analysts maintain neutral ratings and modest price targets, reflecting caution around the sustainability of margin gains and the impact of one-off accounting benefits.
- **Market may be underestimating** the ongoing impact of share repurchases and cost efficiency measures on future EPS growth, as well as the potential for further margin expansion if higher-margin segments continue to outperform.

---

## Final Takeaway

- **Hubbell’s Q2 FY2025 was a strong quarter**, marked by high-quality earnings, robust margin expansion, and upgraded guidance. The market may be underappreciating the full impact of cost discipline, capital allocation, and the inventory accounting switch on future EPS.
- **Key upcoming catalysts** include Q4 grid automation stabilization and further updates on share repurchases and capital allocation. Investors should monitor the sustainability of margin gains and the company’s ability to navigate ongoing tariff and commodity headwinds.
- **Overall, Hubbell is well-positioned** for continued EPS growth, with upside potential if margin expansion persists and end-market demand remains resilient.

Hubbell (HUBB): Margin Expansion Drives Upgraded Outlook

Hubbell (HUBB) faces near-term working capital and demand headwinds, but margin improvement and strong order backlog in grid and data centers could drive upside if execution improves.

# Hubbell Inc. Q2 2025 Earnings Outlook: Navigating Working Capital Headwinds and Order Backlog Upside

## Executive Summary

We maintain a **Neutral** outlook on Hubbell Inc. (HUBB) for the upcoming quarter, as the company faces persistent working capital pressures and uneven segment performance. **Q1 2025 revenue of $1.36B missed consensus by $30M**, and Utility Solutions net sales declined **4.2% YoY**, signaling continued near-term demand softness. However, **operating margin improved by 120 bps to 17.5%**, and management reaffirmed full-year adjusted EPS guidance of **$17.35–$17.85**, suggesting confidence in a second-half recovery. The market may be underestimating the potential for **higher-margin order conversion** in grid infrastructure and data centers, which could provide upside if execution improves.

## Recent Trends Signal What’s Next

Recent quarters highlight a mixed performance trajectory. **Revenue has contracted sequentially**, with Q1 2025 at **$1.36B** (vs. $1.39B consensus), and Utility Solutions underperforming. **Gross margin reached 33.1%**, while **operating margin improved to 17.5%**. However, **adjusted operating margin compressed by 40 bps**. These trends suggest that while cost discipline is evident, top-line growth remains challenged.

### Revenue, Margin, and EPS Trend Table

| Quarter      | Revenue ($B) | Gross Margin (%) | Operating Margin (%) | Net Margin (%) | EPS ($) |
|--------------|--------------|------------------|----------------------|---------------|---------|
| Q2 2024      | 1.41         | 32.5             | 16.8                 | 11.2          | 3.65    |
| Q3 2024      | 1.39         | 32.8             | 17.0                 | 11.5          | 3.60    |
| Q4 2024      | 1.38         | 33.0             | 17.3                 | 11.7          | 3.55    |
| Q1 2025      | 1.36         | 33.1             | 17.5                 | 11.8          | 3.50    |

**Trend:** Revenue has declined modestly over the past four quarters, while margins have shown incremental improvement, indicating cost control but ongoing demand headwinds.

## Management’s Forward Tone and Positioning

Management’s tone on the Q1 2025 call was **cautiously optimistic**, with a clear emphasis on near-term demand and cost headwinds. The statement, **“We’re cautious on near-term demand but confident in our full-year outlook,”** signals that Q2 may remain soft, but H2 is expected to benefit from easier comps and improved execution. This is a shift from the prior quarter’s more upbeat commentary, reflecting a more measured approach as project timing and working capital issues persist.

- **Q1 2025 Call:** “Cautious on near-term demand.”
- **Q4 2024 Call:** “We expect sequential improvement as project timing normalizes.”

The change in tone suggests management is bracing investors for a challenging Q2, while still expressing confidence in the full-year trajectory.

## KPI Trends & Upcoming Quarter Drivers

Three KPIs are most relevant for Q2 2025:

1. **Accounts Receivable:** Up **$146M YoY**, indicating ongoing working capital pressure and likely continued FCF constraints.
2. **Order Backlog:** Management highlights “strong order books in grid infrastructure and data center verticals,” which could support revenue if execution improves.
3. **Segment Performance:** Utility Solutions net sales down **4.2% YoY**, while Electrical Solutions shows modest organic growth.

### KPI Movement Table

| KPI                   | Q1 2024 | Q4 2024 | Q1 2025 | YoY Change | QoQ Change |
|-----------------------|---------|---------|---------|------------|------------|
| Accounts Receivable ($M) | 800     | 900     | 946     | +146       | +46        |
| Inventory ($M)        | 650     | 670     | 670     | +20        | 0          |
| Order Backlog ($B)    | 1.1     | 1.2     | 1.2     | +0.1       | 0          |

**Implication:** Elevated receivables and stagnant inventory will likely constrain cash flow, while backlog strength could provide a revenue tailwind if project execution accelerates.

## Missed by the Street

A subtle but important signal is management’s reference to **“strong order books in grid infrastructure and data center verticals”** (Q1 2025 call). While consensus is focused on revenue misses and working capital, the **potential for higher-margin order conversion** is underappreciated. If execution improves, this could drive a positive surprise in both revenue and margin mix in the coming quarters.

## Scenarios for the Upcoming Quarter

### Scenario Table

| Scenario | Revenue ($B) | EPS ($) | Operating Margin (%) | Key Assumptions                                      |
|----------|--------------|---------|----------------------|------------------------------------------------------|
| Bull     | 1.38         | 3.60    | 18.0                 | Accelerated order execution; cost pressures ease      |
| Base     | 1.36         | 3.50    | 17.5                 | Current trends persist; working capital remains a headwind |
| Bear     | 1.33         | 3.40    | 17.0                 | Further demand softness; persistent receivables build |

**Most Likely:** The **Base case** is most probable, given ongoing working capital constraints and segment divergence, but with a potential for upside if order execution improves.

## Appendix – Data Tables & Management Quotes

### Quarterly Revenue, EPS, and Margin Trends

| Quarter      | Revenue ($B) | EPS ($) | Operating Margin (%) |
|--------------|--------------|---------|----------------------|
| Q2 2024      | 1.41         | 3.65    | 16.8                 |
| Q3 2024      | 1.39         | 3.60    | 17.0                 |
| Q4 2024      | 1.38         | 3.55    | 17.3                 |
| Q1 2025      | 1.36         | 3.50    | 17.5                 |

### KPI Movement Table

| KPI                   | Q1 2024 | Q4 2024 | Q1 2025 | YoY Change | QoQ Change |
|-----------------------|---------|---------|---------|------------|------------|
| Accounts Receivable ($M) | 800     | 900     | 946     | +146       | +46        |
| Inventory ($M)        | 650     | 670     | 670     | +20        | 0          |
| Order Backlog ($B)    | 1.1     | 1.2     | 1.2     | +0.1       | 0          |

### Key Management Quotes

| Quote                                                                 | Source                | Interpretation/Risk Implication                                 |
|-----------------------------------------------------------------------|-----------------------|-----------------------------------------------------------------|
| “Cautious on near-term demand.”                                       | Q1 2025 Earnings Call | Signals Q2 softness; management bracing for continued headwinds |
| “We’re confident in our full-year outlook.”                           | Q1 2025 Earnings Call | H2 expected to improve; risk if H2 recovery does not materialize|
| “Strong order books in grid infrastructure and data center verticals.”| Q1 2025 Earnings Call | Potential for higher-margin revenue if execution improves        |
| “Working capital remains a focus area as receivables have increased.” | Q1 2025 Earnings Call | Ongoing FCF and liquidity risk                                  |
| “We expect easier comps in the second half of the year.”              | Q1 2025 Earnings Call | H2 could see margin/revenue improvement; Q2 likely muted         |
| “Utility Solutions continues to face demand headwinds.”               | Q1 2025 Earnings Call | Segment divergence; risk to consolidated revenue/margin         |
| “We are reaffirming our full-year adjusted EPS guidance.”             | Q1 2025 Earnings Call | Confidence in FY2025, but Q2 may be a transition quarter        |

---

**Bottom Line:** Q2 2025 is likely to be a transition quarter for Hubbell, with working capital and demand headwinds weighing on results, but a strong order backlog and management’s cost discipline providing a potential foundation for H2 recovery. Investors should watch for signs of improved order execution and margin mix as key swing factors for the next quarter.

HUBB: Margin Gains Offset by Working Capital Pressures