Electrical and electronic products company Hubbell (NYSE: HUBB) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 2.4% year on year to $1.37 billion. Its non-GAAP profit of $3.50 per share was 6% below analysts’ consensus estimates.

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StockStory’s Take

Hubbell’s first quarter saw mixed performance as management cited mid-single-digit organic growth in its Electrical Solutions division and a modest rebound in grid infrastructure, offset by ongoing softness in grid automation and rising raw material costs. CEO Gerben Bakker pointed to strong data center demand and efficiency initiatives as positives, but also described the environment as warranting caution due to inflation and new tariffs. Bakker emphasized, “We see no net change to our prior near-term and long-term views” despite a more dynamic macroeconomic backdrop.

Looking forward, management maintained its full-year profit outlook, expressing confidence that recently implemented price increases and productivity actions will help neutralize cost inflation from tariffs and materials. CFO Bill Sperry highlighted that price realization is expected to catch up with cost headwinds by the second half of the year, while also acknowledging that the timing of offsetting reciprocal tariffs remains uncertain. The company continues to see strong order trends and believes it is positioned to benefit from long-term investment in grid modernization and electrification.

Key Insights from Management’s Remarks

The latest quarter was shaped by a combination of cost inflation, segment-specific demand trends, and ongoing supply chain and pricing dynamics. Management attributed deviations from expectations primarily to weaker grid automation and lagging cost recovery from tariffs and materials.

• Electrical Solutions outperformed: The Electrical Solutions business delivered mid-single-digit organic growth, driven by strong demand from data center projects and continued success in industrial reshoring. Margin expansion was supported by ongoing efficiency initiatives and consolidated segment strategy.
• Grid infrastructure rebounded: Grid infrastructure returned to organic growth after a period of customer inventory normalization. Management cited double-digit order growth and strong transmission and substation markets, reflecting increased utility investment in grid modernization.
• Grid automation remained soft: Grid automation sales declined by mid-teens percent due to tough comparisons with the prior year. Leadership noted that this segment is now stabilizing, with smaller projects and maintenance activity helping to establish a base level of demand.
• Tariffs and raw material inflation: Recent cost increases from tariffs and material inflation created a significant earnings headwind. Price increases have been enacted to offset these impacts, but management said the full benefit will be realized later in the year due to the timing of cost recognition under LIFO accounting.
• Order trends and customer spending plans: Management reported double-digit order growth across key markets and noted that major utility customers have raised multi-year capital plans by approximately 10%. This signals robust demand for transmission and distribution products, supporting the company’s long-term growth outlook.

Drivers of Future Performance

Hubbell’s outlook focuses on navigating cost pressures, capturing long-term grid investment, and managing supply chain adjustments to support profit targets.

• Tariff mitigation efforts: Management expects recently enacted price increases and cost-control actions to offset the impact of higher tariffs and material costs; however, there is some uncertainty about the timing, particularly for reciprocal tariffs implemented in April.
• Grid modernization tailwinds: The company sees sustained demand from utility customers upgrading transmission and substation infrastructure, supported by increased capital spending and secular trends in electrification.
• Product mix and operational efficiency: Continued growth in higher-margin segments, such as data centers and industrial reshoring, combined with ongoing productivity initiatives, is expected to support margin performance as costs are absorbed and pricing actions take effect.

Top Analyst Questions

• Jeffrey Sprague (Vertical Research): Asked about the $0.50 sensitivity in EPS guidance due to tariffs; management clarified this represents a scenario analysis, not a change to guidance, and aims to fully offset tariff impacts within the year.
• Charles Tusa (JPMorgan): Inquired about the pace of price realization in the second quarter; management expects sequential price increases to appear more quickly in Electrical Solutions due to shorter backlogs.
• Nigel Coe (Wolfe Research): Questioned price elasticity and customer reactions to price increases; management reported low elasticity so far and said broad-based pricing actions are being accepted by customers.
• Christopher Snyder (Morgan Stanley): Pressed on price/cost dynamics in the second half; CFO Bill Sperry confirmed management expects to be price/cost positive later in the year, offsetting first-half headwinds.
• Julian Mitchell (Barclays): Asked about volume assumptions for second-half growth; management pointed to strong order books, easier comparisons, and inflection in distribution and telecom enclosures as supporting factors.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be monitoring (1) the pace at which price increases offset raw material and tariff-driven cost inflation, (2) further recovery in grid automation demand and stabilization of order trends in distribution and telecom, and (3) evidence that utility customers’ higher capital spending plans are translating into sustained order and revenue growth. Progress on supply chain diversification and updates on margin expansion initiatives will also be important indicators of execution.

Hubbell currently trades at a forward P/E ratio of 21.6×. In the wake of earnings, is it a buy or sell? See for yourself in our free research report.

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