Strong Earnings Growth Anticipated for Powell Industries
Upcoming Earnings and Overview
Powell Industries, Inc. (POWL) will announce its first-quarter fiscal 2025 results, which covers the period that ended December 2024, on February 6, after the market closes.
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The Zacks Consensus Estimate for this fiscal quarter’s earnings is $2.83 per share, reflecting a decrease of 6.6% over the past 60 days. However, this still signals an impressive growth of 42.9% compared to last year. Revenue for this period is anticipated to reach $244.2 million, representing a notable 25.9% increase year-over-year.
Overview of POWL Earnings Expectations
Image Source: Zacks Investment Research
Powell has consistently exceeded earnings expectations, posting positive surprises in all four previous quarters, with an average surprise of 57.6%. The latest quarter saw an 8% earnings surprise, showcasing the company’s strong performance.
The company’s success can be attributed to its firm position in the oil, gas, and petrochemical sectors, as well as its growing involvement in data centers and electric utilities. A robust backlog has significantly bolstered Powell’s growth trajectory.
Expectations for POWL’s Earnings
Current data suggests that Powell may not beat earnings this quarter due to mixed signals. An effective Earnings ESP (Earnings Surprise Prediction) occurs when there is a positive difference between the consensus estimate and actual earnings, combined with a favorable Zacks Rank of 1 (Strong Buy), 2 (Buy), or 3 (Hold). In Powell’s case, however, the following factors come into play:
Earnings ESP: Powell’s Earnings ESP stands at 0.00% since both the Zacks Consensus and the Most Accurate Estimate are identical at $2.83. Investors can identify promising stocks prior to announcements by utilizing our Earnings ESP Filter.
Zacks Rank: Powell is currently rated as Zacks Rank 3. For more details, check out today’s top Zacks Rank stocks.
Powell Industries Stock Performance and Earnings Surprises
Powell Industries, Inc. price and EPS surprise | Powell Industries, Inc. Quote
Drivers Behind POWL’s Recent Performance
Powell has experienced favorable trends, especially within the oil, gas, and petrochemical markets. Growth in energy transition projects—such as biofuels, carbon capture, and hydrogen—has further influenced its performance. Significant project awards and increased investments in LNG and gas processing are also expected to boost revenues this quarter.
Moreover, rising demand for electrical power from U.S. data centers has positively impacted the company’s products and services. Powell’s increased involvement across the electrical power sector and strong momentum in electric utility markets have been advantageous.
The company’s backlog reached $1.3 billion by the end of the fourth quarter of fiscal 2024 (September 2024), indicating strong order growth, particularly in smaller projects. This diversified portfolio across sectors is likely to enhance first-quarter results.
Moreover, an expansion project at Powell’s Houston facility is expected to support the execution of its backlog and drive growth during this initial fiscal quarter. These developments facilitate improved customer engagement within various transitional energy markets.
While the company shows promise, rising sales costs and operating expenses could impact profitability. Material costs accounted for 47% of revenue in fiscal 2024 and 49% in fiscal 2023. Additionally, challenges in supply-chain management regarding specific components may further inflate costs and delay deliveries.
Considering Powell’s substantial international operations, fluctuations in foreign currencies may affect its overall profit margins.
POWL Stock Performance and Valuation
Over the past year, Powell’s shares have risen significantly, outperforming both its industry peers and the Zacks Manufacturing – Electronics sector. The stock has appreciated by 193.9%, in contrast to the industry and S&P 500 growth rates of 10.8% and 24%, respectively, with competitors such as Eaton Corporation plc (ETN) and Franklin Electric Co., Inc. (FELE) rising only 30.4% and 3.1%, respectively.
POWL Stock Surpasses Industry and Market Benchmarks
Image Source: Zacks Investment Research
With a forward price-to-earnings ratio of 17.03X, which is below the industry average of 24.60X, Powell’s stock appears to offer a favorable investment opportunity. However, it remains relatively overvalued compared to its competitor, EnerSys (ENS), currently trading at 9.69X.
Conclusion on Investment Potential
Powell is positioned to benefit from increasing opportunities in oil and gas as well as petrochemical markets, supported by a diverse and comprehensive product lineup. Continued growth across sectors such as data centers, hydrogen, biofuels, and carbon capture stands to enhance the company’s prospects moving forward.
Powell Industries Faces Challenges Ahead of Earnings Report
With its fiscal first-quarter earnings report approaching, analysts are weighing the prospects for Powell Industries, Inc. (POWL).
Evaluating Powell’s Strengths and Setbacks
Powell Industries has demonstrated resilience through its commitment to innovation, a strong backlog, and facility expansion in Houston, which have enhanced its growth outlook. However, worries linger over rising operating costs and supply-chain issues, particularly concerning engineered components. These factors are anticipated to negatively impact the company’s margins in the forthcoming quarter.
Key Considerations for Investors
While Powell Industries boasts solid fundamentals and attractive valuation, it has recently encountered some immediate hurdles. Investors are advised to closely observe updates related to this stock since making a hasty decision might jeopardize returns. It could be wise to hold off on purchasing until the earnings report is released.
Nevertheless, investors currently holding POWL shares may want to remain committed. The company’s robust estimates and solid share price performance indicate promising long-term potential despite current challenges.
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The views expressed in this article belong to the author and may not reflect those of Nasdaq, Inc.
