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On Friday, Bernstein SocGen Group adjusted its outlook on Hubbell (NYSE:HUBB), reducing the price target from $507.00 to $446.00, while still affirming an Outperform rating on the company’s shares. The adjustment comes as Hubbell’s stock has declined nearly 19% over the past six months, though InvestingPro analysis suggests the stock is currently undervalued. With a market capitalization of $18.4 billion and strong financial health metrics, the company continues addressing the impacts of increased raw material costs and tariffs.
The utility segment of Hubbell experienced an 80 basis points decrease in adjusted operating profit margin year-over-year. Despite these challenges, the company maintains a healthy gross profit margin of 34% and generates substantial free cash flow of $811 million. This decline was attributed to rising raw material costs, tariffs under the International Emergency Economic Powers Act (IEEPA), and reduced volumes from both the distribution segment and the conclusion of large meter and Advanced Metering Infrastructure (AMI) projects. To counter these challenges, Hubbell has enacted several strategies. (InvestingPro subscribers can access 10+ additional key insights about Hubbell’s financial performance.)
Management at Hubbell took measures starting in April, including price increases and proactive cost management, anticipated to have a net neutral effect on 2025’s financials. Additionally, to counteract tariffs, the company plans to implement further pricing actions expected to take effect in late May. However, due to the Last In, First Out (LIFO) accounting method, the positive impacts of these actions may not be evident until the second half of the year.
Hubbell is also engaging in discussions with clients and suppliers to safeguard profitability and is considering relocating manufacturing facilities, although such a move would take one to two years to execute. On a positive note, the distribution segment has shown signs of recovery with sequential improvements in sales and orders. Management remains optimistic about the normalization of inventory levels, despite acknowledging the possibility of lingering areas of weakness.
In other recent news, Hubbell Inc reported its Q1 2025 earnings, which fell short of market expectations. The company posted earnings per share (EPS) of $3.50, missing the forecast of $3.72, and revenue reached $1.37 billion, slightly below the anticipated $1.39 billion. Despite the earnings miss, Hubbell highlighted strong growth in its data centers and light industrial segments, supported by mega projects and reshoring efforts. The company is also focusing on streamlining operations and reducing supply chain risks, while grid infrastructure markets begin to show recovery signs. Analysts have noted the company’s efforts to mitigate tariff impacts and manage costs through pricing strategies and operational efficiencies. Hubbell maintains its full-year adjusted EPS guidance, expecting organic growth of 6-8%, with both volume and pricing contributing. The company aims to offset the impact of tariffs and anticipates stronger growth in the latter half of the year.
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