Quarterly earnings results are a good time to check in on a company’s progress, especially compared to its peers in the same sector. Today we are looking at Kimball Electronics (NASDAQ:KE) and the best and worst performers in the electrical systems industry.
Like many equipment and component manufacturers, electrical systems companies are buoyed by secular trends such as connectivity and industrial automation. More specific pockets of strong demand include Internet of Things (IoT) connectivity and the 5G telecom upgrade cycle, which can benefit companies whose cables and conduits fit those needs. But like the broader industrials sector, these companies are also at the whim of economic cycles. Interest rates, for example, can greatly impact projects that drive demand for these products.
The 15 electrical systems stocks we track reported a slower Q2. As a group, revenues beat analysts’ consensus estimates by 1.6% while next quarter’s revenue guidance was 2.1% below.
Big picture, the Federal Reserve has a dual mandate of inflation and employment. The former had been running hot throughout 2021 and 2022 but cooled towards the central bank's 2% target as of late. This prompted the Fed to cut its policy rate by 50bps (half a percent) in September 2024. Given recent employment data that suggests the US economy could be wobbling, the markets will be assessing whether this rate and future cuts (the Fed signaled more to come in 2024 and 2025) are the right moves at the right time or whether they're too little, too late for a macro that has already cooled.
In light of this news, electrical systems stocks have held steady with share prices up 3.5% on average since the latest earnings results.
Kimball Electronics (NASDAQ:KE)
Founded in 1961, Kimball Electronics (NYSE:KE) is a global contract manufacturer specializing in electronics and manufacturing solutions for automotive, medical, and industrial markets.
Kimball Electronics reported revenues of $430.2 million, down 13.3% year on year. This print fell short of analysts’ expectations by 3.6%. Overall, it was a disappointing quarter for the company with full-year revenue guidance missing analysts’ expectations and a miss of analysts’ earnings estimates.
Richard D. Phillips, Chief Executive Officer, stated, “Q4 was another quarter focused on ‘controlling what we can control’. The operating environment for the EMS industry remains challenged and many contract manufacturing organizations, Kimball included, have adjusted expectations on continued weakness in end market demand. In the verticals we serve, the pull back has been more significant than originally anticipated, and we continue to appropriately adjust our cost structure to maintain competitiveness with stable operating margins, improve working capital management with lower inventory levels, and generate positive cash flow.”
Kimball Electronics Total Revenue
Kimball Electronics delivered the weakest performance against analyst estimates and weakest full-year guidance update of the whole group. Unsurprisingly, the stock is down 13.2% since reporting and currently trades at $17.75.
Originally a metal-working shop supporting local petrochemical facilities, Powell (NYSE:POWL) has grown from a small Houston manufacturer to a global provider of electrical systems.
Powell reported revenues of $288.2 million, up 49.8% year on year, outperforming analysts’ expectations by 29.7%. The business had an incredible quarter with an impressive beat of analysts’ earnings estimates.
Powell Total Revenue
Powell delivered the biggest analyst estimates beat and fastest revenue growth among its peers. The market seems happy with the results as the stock is up 60.1% since reporting. It currently trades at $213.50.
Founded in 1946, Methode Electronics (NYSE:MEI) is a global supplier of custom-engineered solutions for Original Equipment Manufacturers (OEMs).
Methode Electronics reported revenues of $258.5 million, down 10.8% year on year, falling short of analysts’ expectations by 3%. It was a disappointing quarter as it posted a miss of analysts’ earnings estimates.
Interestingly, the stock is up 10.8% since the results and currently trades at $11.15.
Founded in 1980, Sanmina (NASDAQ:SANM) is an electronics manufacturing services company offering end-to-end solutions for various industries.
Sanmina reported revenues of $1.84 billion, down 16.6% year on year. This number came in 1.1% below analysts' expectations. It was a disappointing quarter as it also recorded a miss of analysts’ earnings estimates. In addition revenue guidance for the next quarter missed analysts’ expectations.
The stock is down 10.7% since reporting and currently trades at $67.43.
Credited with introducing the first automatic washing machine, Whirlpool (NYSE:WHR) is a manufacturer of a variety of home appliances.
Whirlpool reported revenues of $3.99 billion, down 16.8% year on year. This result was in line with analysts’ expectations. Zooming out, it was a mixed quarter as it also produced full-year revenue guidance beating analysts’ expectations but a miss of analysts’ operating margin estimates.
Whirlpool had the slowest revenue growth among its peers. The stock is up 4.1% since reporting and currently trades at $102.70.
Help us make StockStory more helpful to investors like yourself. Join our paid user research session and receive a $50 Amazon gift card for your opinions. Sign up here.
StockStory aims to help individual investors beat the market.
