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Is Powell (POWL) Stock a Smart Buy Before Q3 Earnings Report?
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Powell Industries, Inc. (POWL - Free Report) is scheduled to release third-quarter fiscal 2024 (ended June 2024) results on Jul 30, before market open.
The Zacks Consensus Estimate for fiscal third-quarter earnings is pegged at $2.12 per share, which has been unchanged in the past 60 days. The consensus mark implies growth of 39.5% from the year-ago actual. The Zacks Consensus Estimate for revenues is pegged at $217.4 million, suggesting a 13% increase from the year-ago actual.
POWL's Estimate Movement
Image Source: Zacks Investment Research
POWL has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing three quarters, the average beat being 66.9%. In the last reported quarter, the company delivered an earnings surprise of 45.5%.
The electrical equipment manufacturer’s strong performance can be largely attributed to its strong foothold and improving conditions in its oil and gas and petrochemical markets. A solid pipeline of projects within the LNG market and its growing presence across the data center and electric utility sectors, along with a solid backlog, have been key catalysts behind the company’s growth.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Powell this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here, as elaborated below.
Earnings ESP: Powell has an Earnings ESP of 0.00% as both the Zacks Consensus Estimate and the Most Accurate Estimate are pegged at $2.12. You can uncover the best stocks before they are reported with our Earnings ESP Filter.
Healthy levels of project activity and a strong backlog level are likely to have enhanced Powell’s fiscal third-quarter performance. Exiting the fiscal second quarter (ended March 2024), POWL’s backlog level totaled $1.3 billion, out of which a solid volume of orders consisted of small and medium-sized awards.
The company has been witnessing several favorable trends across its oil, gas and petrochemical end markets that include growth in energy transition projects, such as biofuels, carbon capture and hydrogen. Also, significant project awards, supported by high investments in LNG, related gas processing and petrochemical processes, are likely to have driven its fiscal third-quarter revenues.
Higher demand for electrical power from data centers in the United States has also been driving the demand for POWL’s products and solutions. Powell is strengthening its participation across the electrical power value chain and benefiting from momentum in data center and utility end markets. A strong booking in electric utility and commercial markets is likely to have augmented its performance in the to-be-reported quarter.
Powell is expected to have benefited from its capacity expansion initiatives, particularly at the electrical products factory in Houston. The expansionary efforts have been enabling the company to better serve its customers with enhanced offerings across data centers, hydrogen, biofuels, carbon capture and other transitional energy markets. This is expected to get reflected in POWL’s results for the to-be-reported quarter.
Given strength across its end markets, Powell is anticipated to have put up a healthy margin performance, supported by its focus on project execution, operational efficiencies and pricing actions.
However, the company has been witnessing escalating costs of sales and operating expenses, which are likely to have weighed on its bottom-line performance. Also, the company has been witnessing supply-chain constraints for specifically engineered components, which are anticipated to have inflated costs and delayed the delivery of products to its customers.
Price Performance & Valuation
Powell’s shares have exhibited an uptrend in the past year, leaving behind its peers and the Zacks Manufacturing - Electronics industry. POWL shares have skyrocketed 129.1%, outperforming the industry’s and the S&P 500’s growth of 20.3% and 19%, respectively. The company’s peers Schneider Electric S.E. (SBGSY - Free Report) and EnerSys (ENS - Free Report) have gained 34.3% and 1.4%, respectively, in the same period.
POWL Outperforms Industry, S&P 500 & Peers
Image Source: Zacks Investment Research
With a forward 12-month price-to-earnings of 15.08X, which is below the industry average of 24.34X, the stock presents a potentially attractive valuation for investors. Also, the stock is trading below many of its peers, such as Franklin Electric Co., Inc. (FELE - Free Report) and Schneider Electric.
Price-to-Earnings (Forward 12 Months)
Image Source: Zacks Investment Research
Investment Thesis
With a comprehensive and diversified product portfolio, Powell has been capitalizing on the growing opportunities in oil and gas, and petrochemical end markets. The company's strong focus on innovation, diversification of its product and customer mix, and expansionary efforts at the Houston facility have improved its growth potential.
Robust demand in multiple end markets, including data centers, hydrogen, biofuels, carbon capture and other transitional energy markets, bodes well for the company ahead of its fiscal third-quarter earnings. To add to its strengths, POWL continues to reward shareholders with substantial dividends, supported by a strong cash flow and operational excellence.
Should You Buy POWL Now?
Solid momentum across end markets, constant focus on project executions, strategic market expansions and innovative product offerings position Powell favorably for strong fiscal third-quarter results.
With a favorable valuation compared with the industry and industry peers, and strong earnings projections, POWL is well-positioned to deliver sustained growth and shareholders’ value. We believe that the POWL stock is an ideal candidate for investors' portfolio addition.
Image: Bigstock
Is Powell (POWL) Stock a Smart Buy Before Q3 Earnings Report?
Powell Industries, Inc. (POWL - Free Report) is scheduled to release third-quarter fiscal 2024 (ended June 2024) results on Jul 30, before market open.
The Zacks Consensus Estimate for fiscal third-quarter earnings is pegged at $2.12 per share, which has been unchanged in the past 60 days. The consensus mark implies growth of 39.5% from the year-ago actual. The Zacks Consensus Estimate for revenues is pegged at $217.4 million, suggesting a 13% increase from the year-ago actual.
POWL's Estimate Movement
Image Source: Zacks Investment Research
POWL has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing three quarters, the average beat being 66.9%. In the last reported quarter, the company delivered an earnings surprise of 45.5%.
The electrical equipment manufacturer’s strong performance can be largely attributed to its strong foothold and improving conditions in its oil and gas and petrochemical markets. A solid pipeline of projects within the LNG market and its growing presence across the data center and electric utility sectors, along with a solid backlog, have been key catalysts behind the company’s growth.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Powell this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here, as elaborated below.
Earnings ESP: Powell has an Earnings ESP of 0.00% as both the Zacks Consensus Estimate and the Most Accurate Estimate are pegged at $2.12. You can uncover the best stocks before they are reported with our Earnings ESP Filter.
Zacks Rank: POWL presently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Powell Industries, Inc. Price and EPS Surprise
Powell Industries, Inc. price-eps-surprise | Powell Industries, Inc. Quote
Factors Shaping Quarterly Performance
Healthy levels of project activity and a strong backlog level are likely to have enhanced Powell’s fiscal third-quarter performance. Exiting the fiscal second quarter (ended March 2024), POWL’s backlog level totaled $1.3 billion, out of which a solid volume of orders consisted of small and medium-sized awards.
The company has been witnessing several favorable trends across its oil, gas and petrochemical end markets that include growth in energy transition projects, such as biofuels, carbon capture and hydrogen. Also, significant project awards, supported by high investments in LNG, related gas processing and petrochemical processes, are likely to have driven its fiscal third-quarter revenues.
Higher demand for electrical power from data centers in the United States has also been driving the demand for POWL’s products and solutions. Powell is strengthening its participation across the electrical power value chain and benefiting from momentum in data center and utility end markets. A strong booking in electric utility and commercial markets is likely to have augmented its performance in the to-be-reported quarter.
Powell is expected to have benefited from its capacity expansion initiatives, particularly at the electrical products factory in Houston. The expansionary efforts have been enabling the company to better serve its customers with enhanced offerings across data centers, hydrogen, biofuels, carbon capture and other transitional energy markets. This is expected to get reflected in POWL’s results for the to-be-reported quarter.
Given strength across its end markets, Powell is anticipated to have put up a healthy margin performance, supported by its focus on project execution, operational efficiencies and pricing actions.
However, the company has been witnessing escalating costs of sales and operating expenses, which are likely to have weighed on its bottom-line performance. Also, the company has been witnessing supply-chain constraints for specifically engineered components, which are anticipated to have inflated costs and delayed the delivery of products to its customers.
Price Performance & Valuation
Powell’s shares have exhibited an uptrend in the past year, leaving behind its peers and the Zacks Manufacturing - Electronics industry. POWL shares have skyrocketed 129.1%, outperforming the industry’s and the S&P 500’s growth of 20.3% and 19%, respectively. The company’s peers Schneider Electric S.E. (SBGSY - Free Report) and EnerSys (ENS - Free Report) have gained 34.3% and 1.4%, respectively, in the same period.
POWL Outperforms Industry, S&P 500 & Peers
Image Source: Zacks Investment Research
With a forward 12-month price-to-earnings of 15.08X, which is below the industry average of 24.34X, the stock presents a potentially attractive valuation for investors. Also, the stock is trading below many of its peers, such as Franklin Electric Co., Inc. (FELE - Free Report) and Schneider Electric.
Price-to-Earnings (Forward 12 Months)
Image Source: Zacks Investment Research
Investment Thesis
With a comprehensive and diversified product portfolio, Powell has been capitalizing on the growing opportunities in oil and gas, and petrochemical end markets. The company's strong focus on innovation, diversification of its product and customer mix, and expansionary efforts at the Houston facility have improved its growth potential.
Robust demand in multiple end markets, including data centers, hydrogen, biofuels, carbon capture and other transitional energy markets, bodes well for the company ahead of its fiscal third-quarter earnings. To add to its strengths, POWL continues to reward shareholders with substantial dividends, supported by a strong cash flow and operational excellence.
Should You Buy POWL Now?
Solid momentum across end markets, constant focus on project executions, strategic market expansions and innovative product offerings position Powell favorably for strong fiscal third-quarter results.
With a favorable valuation compared with the industry and industry peers, and strong earnings projections, POWL is well-positioned to deliver sustained growth and shareholders’ value. We believe that the POWL stock is an ideal candidate for investors' portfolio addition.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.