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Powell's Share Price Trades Near 52-Week High: How to Play It?
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Shares of Powell Industries, Inc. (POWL - Free Report) are showing impressive gains of late, hovering at more than $200 per share in the past seven trading sessions. The stock closed at $221.99 on Monday, just 1.8% below its 52-week high of $226.
In the past three months, the electrical equipment manufacturer’s shares have jumped 53.4%, outpacing the Zacks Manufacturing - Electronics industry and the S&P 500’s returns of 5.4% and 4.0%, respectively. The company has also outperformed other industry players like EnerSys (ENS - Free Report) and Franklin Electric Co., Inc. (FELE - Free Report) , which have returned 0.3% and 10.3%, respectively, over the same time frame.
POWL Outperforms Industry, Sector & S&P 500
Image Source: Zacks Investment Research
The Powell stock is also trading above both its 50-day and 200-day moving averages, indicating solid upward momentum and price stability. This reflects a positive market sentiment and confidence in the company's financial health and long-term prospects.
Powell Shares Trade Above 50-Day & 200-Day SMA
Image Source: Zacks Investment Research
Factors Favoring POWL
The strongest driver of Powell’s business at the moment is the persistent strength across its oil and gas, and petrochemical markets, which grew 56% and 158% year over year in the third-quarter fiscal 2024 (ended June 2024), respectively. Several favorable trends in oil and gas, and petrochemical markets hold promise for the company’s long-term growth. This includes growth in energy transition projects, such as biofuels, carbon capture and hydrogen.
Significant project awards, supported by high investments in LNG, related gas processing and petrochemical processes, have set POWL apart as a leading supplier of critical electrical infrastructure.
Courtesy of its diversification efforts beyond the core oil, gas and petrochemical markets, the company has also enhanced its market share across the utility, data center, commercial and other industrial markets. Increasing demand for electrical power from data centers is creating opportunities for the company’s growth.
Powell is strengthening its participation across the electrical power value chain and benefiting from solid momentum in data center and utility end markets. The company witnessed strong bookings in electric utility and commercial markets in the first nine months of fiscal 2024 in the United States.
This has led to impressive growth in the backlog level, which was $1.3 billion exiting the third quarter of fiscal 2024. Of this backlog, the company expects to generate $841 million in revenues by the end of third-quarter fiscal 2025 (ending June 2025). It is worth noting that POWL’s new orders totaled $356 million in third-quarter fiscal 2024, consisting of a healthy volume of small and medium-sized awards. This reflects the company’s core competencies and well-balanced portfolio across diversified markets.
Powell’s facility expansion project at the product factory in Houston will help it execute its current backlog and plan for modest future volume growth. The expansionary efforts, which are targeted to be completed by mid-fiscal 2025, will enhance the company’s customer offerings across data centers, hydrogen, carbon capture and other transitional energy markets.
Given the strength across its businesses, the Zacks Consensus Estimate for POWL’s fiscal 2024 (ending September 2024) revenues is pegged at $1.01 billion, indicating 45% year-over-year growth. The same for fourth-quarter fiscal 2024 (ended September 2024) stands at $276.7 million, suggesting year-over-year growth of 32.6%.
Better Returns Than Industry
Powell’s trailing 12-month return on equity (“ROE”) is indicative of its growth potential. ROE for the trailing 12 months is 33.09%, much higher than the industry’s 10%, reflecting the company’s efficient use of shareholders’ funds.
Image Source: Zacks Investment Research
Return on assets is 15.56%, also ahead of the industry’s 5.61%, indicating that Powell has been utilizing its assets efficiently to generate returns.
Image Source: Zacks Investment Research
Stock Valuation
With a forward 12-month price-to-earnings ratio of 18.48X, which is below the industry average of 24.29X, the POWL stock presents an attractive valuation for investors. Also, the stock is cheaper than its peer, Schneider Electric S.E. (SBGSY - Free Report) , which is overvalued than the industry.
Price-to-Earnings (Forward 12 Months)
Image Source: Zacks Investment Research
What’s Hurting the Stock?
Amid the positives, escalating costs and operating expenses have been major headwinds for the company. For instance, in the first nine months of fiscal 2024, Powell’s cost of sales climbed 37.8% year over year, while selling, general and administrative expenses increased 8.4%. The cost of sales, as a percentage of revenues, was 73.9% for the period. Also, the persistence of supply-chain constraints for specifically engineered components might inflate costs and delay the delivery of products to its customers.
Stiff competition from major players like Franklin Electric could hamper the company’s ability to maintain its market share. Macroeconomic headwinds like underlying inflation and higher interest rates might create a challenging backdrop.
Estimate Trend
The company’s earnings estimates for fiscal 2024 and fiscal 2025 (ending September 2025) have been unchanged at $12.01 and $12.44, respectively, over the past 60 days.
Image Source: Zacks Investment Research
Final Thoughts
Given its promising long-term prospects and healthy return on equity, maintaining a position in Powell, which currently carries a Zacks Rank #3 (Hold), appears to be the right choice. This stance reflects confidence in Powell's growth trajectory and its potential to deliver sustained value to investors over time. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Powell's Share Price Trades Near 52-Week High: How to Play It?
Shares of Powell Industries, Inc. (POWL - Free Report) are showing impressive gains of late, hovering at more than $200 per share in the past seven trading sessions. The stock closed at $221.99 on Monday, just 1.8% below its 52-week high of $226.
In the past three months, the electrical equipment manufacturer’s shares have jumped 53.4%, outpacing the Zacks Manufacturing - Electronics industry and the S&P 500’s returns of 5.4% and 4.0%, respectively. The company has also outperformed other industry players like EnerSys (ENS - Free Report) and Franklin Electric Co., Inc. (FELE - Free Report) , which have returned 0.3% and 10.3%, respectively, over the same time frame.
POWL Outperforms Industry, Sector & S&P 500
Image Source: Zacks Investment Research
The Powell stock is also trading above both its 50-day and 200-day moving averages, indicating solid upward momentum and price stability. This reflects a positive market sentiment and confidence in the company's financial health and long-term prospects.
Powell Shares Trade Above 50-Day & 200-Day SMA
Image Source: Zacks Investment Research
Factors Favoring POWL
The strongest driver of Powell’s business at the moment is the persistent strength across its oil and gas, and petrochemical markets, which grew 56% and 158% year over year in the third-quarter fiscal 2024 (ended June 2024), respectively. Several favorable trends in oil and gas, and petrochemical markets hold promise for the company’s long-term growth. This includes growth in energy transition projects, such as biofuels, carbon capture and hydrogen.
Significant project awards, supported by high investments in LNG, related gas processing and petrochemical processes, have set POWL apart as a leading supplier of critical electrical infrastructure.
Courtesy of its diversification efforts beyond the core oil, gas and petrochemical markets, the company has also enhanced its market share across the utility, data center, commercial and other industrial markets. Increasing demand for electrical power from data centers is creating opportunities for the company’s growth.
Powell is strengthening its participation across the electrical power value chain and benefiting from solid momentum in data center and utility end markets. The company witnessed strong bookings in electric utility and commercial markets in the first nine months of fiscal 2024 in the United States.
This has led to impressive growth in the backlog level, which was $1.3 billion exiting the third quarter of fiscal 2024. Of this backlog, the company expects to generate $841 million in revenues by the end of third-quarter fiscal 2025 (ending June 2025). It is worth noting that POWL’s new orders totaled $356 million in third-quarter fiscal 2024, consisting of a healthy volume of small and medium-sized awards. This reflects the company’s core competencies and well-balanced portfolio across diversified markets.
Powell’s facility expansion project at the product factory in Houston will help it execute its current backlog and plan for modest future volume growth. The expansionary efforts, which are targeted to be completed by mid-fiscal 2025, will enhance the company’s customer offerings across data centers, hydrogen, carbon capture and other transitional energy markets.
Given the strength across its businesses, the Zacks Consensus Estimate for POWL’s fiscal 2024 (ending September 2024) revenues is pegged at $1.01 billion, indicating 45% year-over-year growth. The same for fourth-quarter fiscal 2024 (ended September 2024) stands at $276.7 million, suggesting year-over-year growth of 32.6%.
Better Returns Than Industry
Powell’s trailing 12-month return on equity (“ROE”) is indicative of its growth potential. ROE for the trailing 12 months is 33.09%, much higher than the industry’s 10%, reflecting the company’s efficient use of shareholders’ funds.
Image Source: Zacks Investment Research
Return on assets is 15.56%, also ahead of the industry’s 5.61%, indicating that Powell has been utilizing its assets efficiently to generate returns.
Image Source: Zacks Investment Research
Stock Valuation
With a forward 12-month price-to-earnings ratio of 18.48X, which is below the industry average of 24.29X, the POWL stock presents an attractive valuation for investors. Also, the stock is cheaper than its peer, Schneider Electric S.E. (SBGSY - Free Report) , which is overvalued than the industry.
Price-to-Earnings (Forward 12 Months)
Image Source: Zacks Investment Research
What’s Hurting the Stock?
Amid the positives, escalating costs and operating expenses have been major headwinds for the company. For instance, in the first nine months of fiscal 2024, Powell’s cost of sales climbed 37.8% year over year, while selling, general and administrative expenses increased 8.4%. The cost of sales, as a percentage of revenues, was 73.9% for the period. Also, the persistence of supply-chain constraints for specifically engineered components might inflate costs and delay the delivery of products to its customers.
Stiff competition from major players like Franklin Electric could hamper the company’s ability to maintain its market share. Macroeconomic headwinds like underlying inflation and higher interest rates might create a challenging backdrop.
Estimate Trend
The company’s earnings estimates for fiscal 2024 and fiscal 2025 (ending September 2025) have been unchanged at $12.01 and $12.44, respectively, over the past 60 days.
Image Source: Zacks Investment Research
Final Thoughts
Given its promising long-term prospects and healthy return on equity, maintaining a position in Powell, which currently carries a Zacks Rank #3 (Hold), appears to be the right choice. This stance reflects confidence in Powell's growth trajectory and its potential to deliver sustained value to investors over time. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.