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POWL Down 15.8% in a Month: Should You Buy the Dip or Wait?
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The stock markets have experienced a significant downturn in the past month as investor sentiment has soured amid escalating trade war concerns. The latest tariff threats have raised concerns about increased costs and their impact on consumer purchasing power. Powell Industries, Inc. (POWL - Free Report) has not been immune to this broader market decline.
In the past month, shares of POWL have lost 15.8%, wider than the broader electronics manufacturing industry and the S&P 500’s decline of 5% and 7.5%, respectively. The stock also shows a downside against its industry peers like Eaton Corporation plc (ETN - Free Report) and EnerSys (ENS - Free Report) , which have lost 3.9% and 2.3%, respectively, over the same period.
POWL Stock Price Performance
Image Source: Zacks Investment Research
Despite its recent downturn, POWL’s shares have gained 19.9% over the past year, outperforming the S&P 500’s growth of 10.1% and the industry’s 14.4% decline. The electrical equipment manufacturer’s strong foothold and improving conditions in the oil & gas and electric utility markets have enabled it to stay afloat amid the market downturn. Also, its efforts to expand its presence beyond these core markets have enhanced its market share across the petrochemical, commercial and other industrial markets.
Let us delve deeper into Powell’s long-term prospects before assessing whether to buy, hold or sell the stock.
Factors Driving the Stock
The strongest driver of Powell’s business at the moment is the oil & gas and electric utility markets. Revenues from the oil & gas and electric utility markets grew 14.5% and 26% year over year in first-quarter fiscal 2025 (ended December 2024), respectively. Several favorable trends including growth in energy transition projects, such as biofuels, carbon capture and hydrogen, have been driving the company’s performance. Also, significant project awards supported by high investments in LNG, related gas processing and petrochemical processes, have set Powell apart as a leading supplier of critical electrical infrastructure.
Increasing demand for electrical power from data centers is also creating a new opportunity for its growth. Powell is strengthening its participation across the electrical power value chain and benefiting from momentum in the data center and utility end markets. Notably, it has been witnessing strong bookings in the electric utility and commercial markets in the United States.
Courtesy of solid bookings, the company’s backlog level increased to $1.3 billion (exiting the fiscal first quarter). New orders totaled $269 million in the fiscal first quarter compared with $267 million in the fourth quarter of fiscal 2024 and $198 million in the year-ago quarter. Importantly, the new orders consisted of a solid volume of small and medium-sized awards that reflected the company’s core competencies and well-balanced portfolio across markets.
The company is spending about $11 million as part of its facility expansion project at the Houston product factory. The expansionary efforts, which are targeted to be completed by mid-fiscal 2025, will help Powell execute its current backlog and enhance its customer offerings across data centers, hydrogen, carbon capture and other transitional energy markets.
Powell’s efforts to reward its shareholders also add to its appeal. In February 2025, it hiked its quarterly dividend by approximately 1% to 26.75 cents per share. The company’s strong liquidity position supports its shareholder-friendly activities. Powell exited the fiscal first quarter with no long-term debt and cash equivalents of $325.6 million, higher than $315.3 million at the end of fiscal 2024.
POWL Stock Valuation
With a forward 12-month price-to-earnings ratio of 12.64X, which is well below the industry average of 21.65X, POWL stock presents an attractive valuation for investors. Also, the stock is cheaper than its peer, ESCO Technologies Inc. (ESE - Free Report) , which is trading at 26.39X.
POWL Price-to-Earnings (Forward 12 Months)
Image Source: Zacks Investment Research
Near-Term Concerns Prevail
Despite the positives, Powell has been bearing the brunt of high operating costs and expenses. For instance, in the first quarter of fiscal 2025, its cost of sales surged 24.8% year over year, while selling, general and administrative expenses rose 5.5% due to high raw material costs. The cost of sales, as a percentage of revenues, was 75.4% for the quarter.
Also, in fiscal 2024, its cost of sales climbed 34% year over year, while selling, general and administrative expenses increased 7.7%. It’s worth noting that material costs represented 47% of the company’s revenues in fiscal 2024, 49% in fiscal 2023 and 51% in fiscal 2022.
The company uses a variety of raw materials, including steel, copper, aluminum and various engineered electrical components, in its businesses. The persistence of supply-chain constraints for engineered components amid the trade war concern might continue to inflate costs and delay the delivery of products to its customers.
POWL’s Earnings Estimate Revision Trend
Amid these, the company’s earnings estimates for second-quarter fiscal 2025 (ending March 2025) have decreased 0.9% to $3.34 per share over the past 60 days. Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Image Source: Zacks Investment Research
Should You Buy POWL Stock Now?
Despite being attractively valued and having strong fundamentals, Powell has been witnessing some near-term challenges. Investors should monitor the developments pertaining to the Zacks Rank #3 (Hold) stock closely for a more appropriate entry point as an erroneous and hasty decision could affect portfolio gains.
However, those who already own this stock may stay invested as the company's strength across its businesses, diversified portfolio and healthy liquidity position offer solid long-term prospects.
Image: Bigstock
POWL Down 15.8% in a Month: Should You Buy the Dip or Wait?
The stock markets have experienced a significant downturn in the past month as investor sentiment has soured amid escalating trade war concerns. The latest tariff threats have raised concerns about increased costs and their impact on consumer purchasing power. Powell Industries, Inc. (POWL - Free Report) has not been immune to this broader market decline.
In the past month, shares of POWL have lost 15.8%, wider than the broader electronics manufacturing industry and the S&P 500’s decline of 5% and 7.5%, respectively. The stock also shows a downside against its industry peers like Eaton Corporation plc (ETN - Free Report) and EnerSys (ENS - Free Report) , which have lost 3.9% and 2.3%, respectively, over the same period.
POWL Stock Price Performance
Image Source: Zacks Investment Research
Despite its recent downturn, POWL’s shares have gained 19.9% over the past year, outperforming the S&P 500’s growth of 10.1% and the industry’s 14.4% decline. The electrical equipment manufacturer’s strong foothold and improving conditions in the oil & gas and electric utility markets have enabled it to stay afloat amid the market downturn. Also, its efforts to expand its presence beyond these core markets have enhanced its market share across the petrochemical, commercial and other industrial markets.
Let us delve deeper into Powell’s long-term prospects before assessing whether to buy, hold or sell the stock.
Factors Driving the Stock
The strongest driver of Powell’s business at the moment is the oil & gas and electric utility markets. Revenues from the oil & gas and electric utility markets grew 14.5% and 26% year over year in first-quarter fiscal 2025 (ended December 2024), respectively. Several favorable trends including growth in energy transition projects, such as biofuels, carbon capture and hydrogen, have been driving the company’s performance. Also, significant project awards supported by high investments in LNG, related gas processing and petrochemical processes, have set Powell apart as a leading supplier of critical electrical infrastructure.
Increasing demand for electrical power from data centers is also creating a new opportunity for its growth. Powell is strengthening its participation across the electrical power value chain and benefiting from momentum in the data center and utility end markets. Notably, it has been witnessing strong bookings in the electric utility and commercial markets in the United States.
Courtesy of solid bookings, the company’s backlog level increased to $1.3 billion (exiting the fiscal first quarter). New orders totaled $269 million in the fiscal first quarter compared with $267 million in the fourth quarter of fiscal 2024 and $198 million in the year-ago quarter. Importantly, the new orders consisted of a solid volume of small and medium-sized awards that reflected the company’s core competencies and well-balanced portfolio across markets.
The company is spending about $11 million as part of its facility expansion project at the Houston product factory. The expansionary efforts, which are targeted to be completed by mid-fiscal 2025, will help Powell execute its current backlog and enhance its customer offerings across data centers, hydrogen, carbon capture and other transitional energy markets.
Powell’s efforts to reward its shareholders also add to its appeal. In February 2025, it hiked its quarterly dividend by approximately 1% to 26.75 cents per share. The company’s strong liquidity position supports its shareholder-friendly activities. Powell exited the fiscal first quarter with no long-term debt and cash equivalents of $325.6 million, higher than $315.3 million at the end of fiscal 2024.
POWL Stock Valuation
With a forward 12-month price-to-earnings ratio of 12.64X, which is well below the industry average of 21.65X, POWL stock presents an attractive valuation for investors. Also, the stock is cheaper than its peer, ESCO Technologies Inc. (ESE - Free Report) , which is trading at 26.39X.
POWL Price-to-Earnings (Forward 12 Months)
Image Source: Zacks Investment Research
Near-Term Concerns Prevail
Despite the positives, Powell has been bearing the brunt of high operating costs and expenses. For instance, in the first quarter of fiscal 2025, its cost of sales surged 24.8% year over year, while selling, general and administrative expenses rose 5.5% due to high raw material costs. The cost of sales, as a percentage of revenues, was 75.4% for the quarter.
Also, in fiscal 2024, its cost of sales climbed 34% year over year, while selling, general and administrative expenses increased 7.7%. It’s worth noting that material costs represented 47% of the company’s revenues in fiscal 2024, 49% in fiscal 2023 and 51% in fiscal 2022.
The company uses a variety of raw materials, including steel, copper, aluminum and various engineered electrical components, in its businesses. The persistence of supply-chain constraints for engineered components amid the trade war concern might continue to inflate costs and delay the delivery of products to its customers.
POWL’s Earnings Estimate Revision Trend
Amid these, the company’s earnings estimates for second-quarter fiscal 2025 (ending March 2025) have decreased 0.9% to $3.34 per share over the past 60 days. Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Image Source: Zacks Investment Research
Should You Buy POWL Stock Now?
Despite being attractively valued and having strong fundamentals, Powell has been witnessing some near-term challenges. Investors should monitor the developments pertaining to the Zacks Rank #3 (Hold) stock closely for a more appropriate entry point as an erroneous and hasty decision could affect portfolio gains.
However, those who already own this stock may stay invested as the company's strength across its businesses, diversified portfolio and healthy liquidity position offer solid long-term prospects.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.