Hubbell Q1 2025 Earnings Report

Hubbell EPS Results

• Actual EPS: $3.50
• Consensus EPS: $3.73
• Beat/Miss: Missed by -$0.23
• One Year Ago EPS: $3.60

Hubbell Revenue Results

• Actual Revenue: $1.37 billion
• Expected Revenue: $1.39 billion
• Beat/Miss: Missed by -$21.50 million
• YoY Revenue Growth: -2.40%

Hubbell Announcement Details

• Quarter: Q1 2025
• Date: 5/1/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 1, 2025
• Conference Call Time: 10:00AM ET

Hubbell (NYSE:HUBB), together with its subsidiaries, designs, manufactures, and sells electrical and utility solutions in the United States and internationally. It operates through two segments, Electrical Solutions and Utility Solutions. The Electrical Solution segment offers standard and special application wiring device products, rough-in electrical products, connector and grounding products, lighting fixtures, and other electrical equipment for use in industrial, commercial, and institutional facilities by electrical contractors, maintenance personnel, electricians, utilities, and telecommunications companies, as well as components and assemblies. It also designs and manufactures various industrial controls, and communication systems for use in the non-residential and industrial markets, as well as in the oil and gas, and mining industries. This segment sells its products through electrical and industrial distributors, home centers, retail and hardware outlets, lighting showrooms, and residential product-oriented internet sites; and special application products primarily through wholesale distributors to contractors, industrial customers, and original equipment manufacturers. The Utility Solution segment designs, manufactures, and sells electrical distribution, transmission, substation, and telecommunications products, such as arresters, insulators, connectors, anchors, bushings, and enclosures cutoffs and switches; and utility infrastructure products, including smart meters, communications systems, and protection and control devices. This segment sells its products to distributors. Its brand portfolio includes Hubbell, Kellems, Bryant, Burndy, CMC, Bell, TayMac, Wiegmann, Killark, Hawke, Aclara, Fargo, Quazite, Hot Box, etc. The company was founded in 1888 and is headquartered in Shelton, Connecticut.

Hubbell Q1 2025 Earnings Call Transcript

Key Takeaways

• In Q1 Hubbell delivered mid-single-digit organic growth and margin expansion in Electrical Solutions, while Grid Infrastructure returned to organic growth but Grid Automation sales declined on tough comparables, all offset partially by higher raw materials costs and tariffs.
• The company faces a ~$135 million headwind from raw material inflation and tariffs in 2025, plus additional reciprocal tariffs, and has implemented pricing actions and productivity levers aimed at neutralizing these impacts within the year (with a noted $0.50 EPS sensitivity if LIFO timing delays recovery).
• Hubbell maintained its full-year 2025 outlook of 6%–8% organic sales growth (3%–4% volume and 3%–4% price), EPS of $16.85–$17.35, and free cash flow at or above 90% of net income.
• Utility Solutions saw double-digit growth in transmission and substation markets as customers invest in grid modernization, and distribution orders are improving sequentially as inventory destocking subsides.
• With a conservative balance sheet and projected ~$2 billion of free cash flow from 2025–2027 after dividends and share buybacks, Hubbell prefers to deploy capital into acquisitions to expand its portfolio and drive long-term shareholder value.

Presentation

[Operator]

Please be advised today's conference is being recorded.

[Operator]

I would now like to hand the conference over to your speaker today, Dan Imerov. You may begin.

[Dan Innamorato, VP - IR & Corporate Strategy at Hubbell]

Thanks, operator. Good morning, everyone, and thank you for joining us. Earlier this morning, we issued a press release announcing our results for the first quarter of twenty twenty five. The press release and slides are posted to the Investors section of our website at hubbell.com. I'm joined today by our Chairman, President and CEO, Gerben Bakker and our Executive Vice President and CFO, Bill Sperry.

[Dan Innamorato, VP - IR & Corporate Strategy at Hubbell]

Please note our comments this morning may include statements related to the expected future results of our company. These are forward looking statements as defined by the Private Securities Litigation Reform Act of 1995. Please note the discussion of forward looking statements in our press release and consider it incorporated by reference to this call. Additionally, comments may also include non GAAP financial measures. Those measures are reconciled to the comparable GAAP measures, which are included in the press release and slides.

[Dan Innamorato, VP - IR & Corporate Strategy at Hubbell]

Now let me turn the call over to Gurman.

[Gerben Bakker, Chairman, President & CEO at Hubbell]

Great. Thanks, Dan. Good morning. Thank you for joining us to discuss Hubbell's first quarter twenty twenty five results.

[Gerben Bakker, Chairman, President & CEO at Hubbell]

Our results in the quarter were driven by continued strong operating performance in our Electrical Solutions segment and a return to organic growth in Grid Infrastructure, offset by anticipated softness in Grid Automation and the impact of increased cost inflation from higher raw materials prices and tariffs. In Electrical Solutions, we delivered mid single digit organic growth with continued adjusted operating margin expansion and strong core adjusted operating profit growth. Our segment unification efforts and our strategy to complete compete collectively are driving outgrowth in key vertical markets, most notably evidenced by strong data center growth in the first quarter. From an operational standpoint, we continue to simplify our business to drive productivity and operating efficiencies, which we are confident will drive long term margin expansion. In Utility Solutions, while Grid Automation sales were down on challenging prior year comparisons, as anticipated, our Grid Infrastructure business returned to organic growth in the quarter.

[Gerben Bakker, Chairman, President & CEO at Hubbell]

Transmission and substation markets remained strong, as utility customers invest to interconnect new sources of low 10 generation on the grid. We delivered another quarter of double digit growth across these markets in the quarter, as our leading positions and premium brands position us well to capitalize on a growing funnel of project opportunities. In distribution markets, we are encouraged by recent order trends and are confident that we are emerging from the recent period of customer inventory normalization. Before I turn it over to Bill to discuss the results and our outlook in more detail, I'd like to provide some opening comments on how we are positioning Hubbell to mitigate recent cost inflation and near term macroeconomic uncertainty. Hubbell is a US centric manufacturing company, with more than 90% of our sales in The US, and a largely US based manufacturing footprint.

[Gerben Bakker, Chairman, President & CEO at Hubbell]

Our international sales are served primarily on a local for local basis. While recent raw materials, inflation and tariffs implemented in February and March drove a headwind in the first quarter, we have already implemented action to offset those impacts within 2025. And we are taking the actions necessary to offset the more recent impact of reciprocal tariffs. Cost inflation cycles are not new to Hubbell. We have successfully dealt with them before, and we have a playbook in place with several levers at our disposal to drive continued profitable growth under a range of scenarios.

[Gerben Bakker, Chairman, President & CEO at Hubbell]

From a market standpoint, while the macroeconomic environment has become more dynamic over the last several months, we see no net change to our prior near term and long term views. We believe the current environment warrants caution and continued proactive cost management, but strong recent order trends and favorable end markets support our forward growth expectations. Additionally, our markets are not only bolstered by near and long term growth megatrends, but has also proven to be more resilient during periods of economic uncertainty. We are maintaining our full year 2025 outlook this morning and remain confident in our ability to achieve our financial and strategic commitments. With that, let me turn it over to Bill.

[William Sperry, Executive VP & CFO at Hubbell]

Thanks very much, Gurman. Good morning, everybody. Appreciate you taking time to be with us. We're quite aware it's a busy morning. I'm going to start my comments on page four, and I'll be using the slides that you hopefully found.

[William Sperry, Executive VP & CFO at Hubbell]

So the first quarter results for Hubbell were strong performance from the Electrical segment, strong performance from Grid Infrastructure, some headwinds from Grid Automation as they faced a very difficult prior year comparison. And I would say that first quarter performance sets itself up now for normal ramped up seasonality and for us to deliver and support the full year target and expectations that we have. On the cost side, we had some incremental headwinds from higher raw material prices and tariffs. We're going to talk about tariffs more robustly in a little bit. We're lumping in raw material inflation just because we think about it as what we need to offset with price and productivity.

[William Sperry, Executive VP & CFO at Hubbell]

And I think we're going to provide slightly unique challenge for you all in our LIFO based income statement. We're recognizing these cost increases as they happen. The FIFO reporters will be a quarter or so down the road before they start recognizing those costs. So we're going to really be showing you a little bit of that gap. And but we've got, as Gurbin highlighted, actions to offset those and able to hold on to our initial targets.

[William Sperry, Executive VP & CFO at Hubbell]

So on page four on the left column, you see sales of $1,365,000,000 The decrease largely driven by the divestiture of residential lighting, quite flat otherwise, where the growth we experienced in the Electrical segment as well as in Grid Infrastructure was essentially offset by the decline in Grid Automation as they faced a tougher compare. We like to look at the sales sequentially as well, not just year over year and up 2% with strong orders. And we'll talk more about that as we look forward to the balance of the year. But really, those are the order books supporting a strong seasonal ramp up. The second column, see operating profit.

[William Sperry, Executive VP & CFO at Hubbell]

And you see the OP down to $264,000,000 margins down 40 basis points. That includes a point of positive price and then some headwind from the material costs creating about a $10,000,000 drag of price and productivity against material inflation, tariffs and other inflation. Absent these $10,000,000 drag, you would have seen margins expand nicely. And I make that comment just because we're going to be offsetting that drag in the second half of the year. So the durable margins underlying that would have been up, and we think that's a good sign.

[William Sperry, Executive VP & CFO at Hubbell]

I'm going to now unpack performance by segment. And starting on page five, we'll start with Utility Solutions. You see the sales of $857,000,000 down 4% from prior year. That's comprised of low single digit growth on the infrastructure side and a 15% contraction on grid automation. Infrastructure side accounts for about three quarters of the segment.

[William Sperry, Executive VP & CFO at Hubbell]

And the markets are continuing in good shape in the transmission and substation side, double digit growth by us. We feel very good about our strong positioning and differentiated solutions in fast growing market here. That's being driven by grid modernization and electrification trends. And that's got nice momentum and has been growing strongly expected to continue. Distribution was down in the quarter.

[William Sperry, Executive VP & CFO at Hubbell]

But again, importantly, sales and orders up sequentially. As Gurman had mentioned, the customer and channel inventory normalization had really been a nagging headwind in 2024 for the grid infrastructure business unit, particularly for distribution products and telecom portion of enclosures. We would say that by the sequential and orders, we would say that normalization period, by the end of the quarter here, we've reached it. And the period of destocking is now behind us, we're happy to say. So we're looking forward to seeing kind of a book and bill to demand.

[William Sperry, Executive VP & CFO at Hubbell]

The orders across all of grid infrastructure up double digits and up sequentially. And that's really a broad based trend where we're seeing that in all three areas of transmission, substation, distribution and telecom. On the grid automation side, you see that business being down teens and that mid teens that compares to a prior year comp of up 30%. So certainly a tough compare. The sales are flattening sequentially from the fourth quarter.

[William Sperry, Executive VP & CFO at Hubbell]

And we're seeing the large project roll offs being backfilled by smaller projects and MRO activity. So I think we see grid automation now in kind of a steadier environment rather than being consistent downdraft. We think it's nice, steady based on these smaller projects and MRE. The margins in utility, you see $180,000,000 of operating profit, a decline of 80 basis points of margin. This is really where you see a lot of the price cost productivity headwind that we described.

[William Sperry, Executive VP & CFO at Hubbell]

Our utility segment has a higher mix of LIFO units than does our electrical segment. And so we're seeing those costs hitting the P and L sooner here in utility, which is dragging those margins down just a little bit. Talking about electrical on Page six, another strong quarter for the Electrical segment. You see mid single digit growth when we net out the M and A impact of the divestiture of residential lighting. We have finally now lapped that.

[William Sperry, Executive VP & CFO at Hubbell]

So we won't have to continue to torture you by kind of manually pulling that out to make same store sales comparisons for you. Strong margin expansion of 5% growth, 70 basis point improvement in margin. Likewise, if you pull the Lighting results out of the prior year to make it comparable, you'd see something closer to double digit growth. So strong quarter for the segment. If we look at the 5% sales growth, data centers was our largest contributor.

[William Sperry, Executive VP & CFO at Hubbell]

We had double digit growth in the balance of systems, which are products like our connectors and grounding product, wiring devices and the like. Good momentum in that space, healthy growth. And our PCX business, strong growth there as well. So big contribution from data centers to the segment. Ex data center, results are slightly more mixed where on the light industrial side, which is where our Birdie brand is, We saw strong growth.

[William Sperry, Executive VP & CFO at Hubbell]

We're benefiting there from mega projects. Think of large industrial factories like chip plants, as well as a general trend of industrial reshoring, helping in light industrial. On the heavy side, a little bit more mixed performance where oil and gas was a good contributor. On the non res side, we saw some softness, which is consistent with the past few quarters. We're pleased that we got good results from our vertical market strategy.

[William Sperry, Executive VP & CFO at Hubbell]

That led to some contributions from new product development, as well as some customer conversions as our newly aligned sales force is proving to be effective in the marketplace. On the OP side, you see 70 basis points of margin expansion, 5% growth to $84,000,000 of OP. And that's driven really by the volume growth, efficiency gains from our Compete Collectively initiatives and some price cost productivity headwinds, little bit less impactful than utility as they have a higher FIFO mix. But nonetheless, a drag from that in the electrical segment. We thought it would be helpful on page seven to break down the tariff exposure and be clear that we're including in tariff exposure the inflationary pressure on raw materials that those tariffs are influencing, even if they're not direct tariffs.

[William Sperry, Executive VP & CFO at Hubbell]

And we're hoping that page seven helps shine the light here. So you see, as Gurman had mentioned, a US centric company but with a global supply chain. Mexico being about mid teens of mix, China mid single digits, and the rest of world less than five. We find it most useful to separate the effects into two different buckets. And the first category on the left is really the effects in the first quarter from tariffs that were implemented in February and March.

[William Sperry, Executive VP & CFO at Hubbell]

But also you see we're including higher raw material costs. So even if we're not paying tariff on student owned aluminum, those commodities have experienced inflation. And the way we calculate this $135,000,000 impact on 2025 from a cost perspective, about half of that is just these raw material costs and the balance being tariffs. And we've got a set of initiatives that Gurman gave you a little insight to leading with price. We've been in communications with our customers with letters.

[William Sperry, Executive VP & CFO at Hubbell]

We have enacted those price increases. They're effective in mid April. And we've now been taking orders at those new prices. And the stick rate gives us confidence on this call, even though it's a little early to let you know that we will neutralize that 135 impact within calendar year 2025. The second column is the reciprocal tariffs that were enacted in April.

[William Sperry, Executive VP & CFO at Hubbell]

We too will neutralize these effects using price and productivity levers. And those mitigation actions are underway. We've been in contact with our customers. Those price increases are not yet fully implemented. They're expected to go in later this month.

[William Sperry, Executive VP & CFO at Hubbell]

And so we don't know about stick rates as well. And so while we're confident we'll offset and neutralize these, it's not fully clear yet that that will happen within calendar year 'twenty five, given the LIFO lag and the fact that we'll be recognizing these costs immediately. So you'll see when we get to the outlook page. We've given you a little bit of a sensitivity. We're targeting to get all of this offset and neutralized within calendar year.

[William Sperry, Executive VP & CFO at Hubbell]

But it's possible it takes till the first quarter of next year, and we'll certainly keep you updated as those impacts become a little more clear. So our outlook is on page eight. And you see that we are maintaining our 2025 adjusted EPS outlook range. And that involves organic growth of 6% to 8%. We believe that the markets are intact.

[William Sperry, Executive VP & CFO at Hubbell]

And so about half of that, or 3% to 4%, we think is going to come from volume. And the balance of 3% to 4% will be coming from price. And so price those price actions, again, confident that we'll be offsetting that first phase of the first quarter tariffs and inflation on materials. And you can see that illustrated by the red and green bars offsetting each other, getting back to the original range. The second set of reciprocals, we're targeting neutral, but we wanted to highlight a $0.50 sensitivity just in case the LIFO accounting recognizes a little more cost before the price can hit.

[William Sperry, Executive VP & CFO at Hubbell]

And we'll be able to update you certainly next quarter on how that's going. So guidance is intact. Free cash flow, you saw on the opening page a little bit down quarter over quarter, but certainly in line to hit our target of 90% or greater of net income on the free cash flow. You'll see on the right some comments on modeling considerations, and we can talk about as much of that at Q and A as you want. But essentially, we're anticipating a ramp, And that's going to allow us to get some growth good growth in the second quarter.

[William Sperry, Executive VP & CFO at Hubbell]

We wanted to end that's obviously guidance is around '25. We wanted to end on page nine with some comments that maybe extend beyond '25 into '26 and beyond. And I wanted to talk about the balance sheet, which we think is in great shape. It's very poised to support an active level of investment as well as returns to shareholders. You can see in the graph we're depicting for the three year period of 'twenty five to 'twenty seven about $3,500,000,000 of operating cash flow.

[William Sperry, Executive VP & CFO at Hubbell]

Burden that with CapEx gets to about $3,000,000,000 of free cash flow with dividends and not anti dilutive share repurchases, we get to about $2,000,000,000 of cash generation. That excludes and ignores the borrowing capacity inherent in the balance sheet, which would more than double that number. And our bias is to deploy that into acquisitions. We think acquisitions give us the best way to improve the depth and breadth of our product positioning, continue to deepen our importance to our customers, add critical technologies, as well as provide very attractive rates of return on capital. But we also have flexibility on the share repurchase side.

[William Sperry, Executive VP & CFO at Hubbell]

And just to remind everybody, our authorization on that side had been increased earlier this year. Order of magnitude of $600,000,000 of availability. We did buy $125,000,000 for the shares in Q1. We believe at attractive valuations and certainly the share repurchase lever is available to us as you can see the balance sheet and capital deployment here. I wanted Gurbin to comment on the left hand side.

[William Sperry, Executive VP & CFO at Hubbell]

Certainly, the T and D core business is critical both to us achieving our 25 guide, but also to success beyond that. So ask Irvin to comment on that, please.

[Gerben Bakker, Chairman, President & CEO at Hubbell]

Great. Thanks, Bill. And before we turn the call over to Q and A, let me provide some more context on T and D trends as we are beginning to see evidence of acceleration in areas of the portfolio which face customer inventory normalization throughout 2024. Grid infrastructure orders were up double digits year over year in the first quarter, and up solidly versus the fourth quarter. And order trends were strong across each of the end markets.

[Gerben Bakker, Chairman, President & CEO at Hubbell]

More importantly, underlying end market dynamics are strong, and forward outlooks for major customers have recently increased. On average over the past six months, multi year capital plans from a representative group of our top investor owned utility customers have revised upwards by approximately 10% from prior multi year plans. As we have previously communicated, we believe T and D markets are at the early stages of a long term investment cycle, underpinned by secular trends in grid modernization electrification. We are confident that we are emerging from the recent period of customer inventory normalization, with leading positions, solutions and service levels that will enable Hubbell to effectively capitalize on this visible long term opportunity. And to conclude this morning's prepared remarks and turning my comments back to all of Hubbell, we are confident in our ability to execute through near term uncertainties and deliver on our financial commitments in 2025.

[Gerben Bakker, Chairman, President & CEO at Hubbell]

We are focused as a management team to drive the needed actions to navigate this dynamic environment, and we view it as our obligation to manage the short term. We have a demonstrated track record over the last several years of executing effectively through a wide range of macroeconomic and inflationary environments, and we will continue to do so moving forward. But we are also not losing sight of the long term opportunities ahead of us, and we are increasingly confident that our utility and electrical customers will do significantly more business with Hubbell over the next several years. This confidence is underpinned by our unique leading positions in market, supported by visible megatrends, as well as recent customer insights and order trends. We anticipate that our attractive long term growth outlook combined with structural opportunities in our operating model and capital deployment levels will continue to drive consistent shareholder value creation.

[Gerben Bakker, Chairman, President & CEO at Hubbell]

With that, let me turn the call over to Q and A.

[Operator]

Thank

[Operator]

Our

[Operator]

Our first question comes from Jeffrey Sprague with Vertical Research. Your line is open.

[Jeffrey Sprague, Founder and Managing Partner at Vertical Research Partners]

Hey, thank you. Good morning, everyone. Maybe just to start on guidance,

[Jeffrey Sprague, Founder and Managing Partner at Vertical Research Partners]

if we could.

[Jeffrey Sprague, Founder and Managing Partner at Vertical Research Partners]

Coincidentally, your guide range is $0.50 right? And you're talking about this $0.50 kind of sensitivity. Just to be totally crystal clear, you're suggesting a negative outcome here relative to your plan is a year that looks like $16.85 to $17.35.00 $50 on the top and bottom.

[Gerben Bakker, Chairman, President & CEO at Hubbell]

Yeah, I think that's correct, Jeff.

[Jeffrey Sprague, Founder and Managing Partner at Vertical Research Partners]

Okay. And then just on Q2, Bill, it'd be really great if you could give us some additional help here. Obviously, you don't guide quarters. Maybe this is the exception to the rule this quarter with all this LIFO hit likely to be coming through, right, and your price actions delaying. So you told us the top line will be strong, a seasonal lift.

[Jeffrey Sprague, Founder and Managing Partner at Vertical Research Partners]

But just help us think about really what's going to happen with the margins and sort of the cost mitigation in the quarter.

[William Sperry, Executive VP & CFO at Hubbell]

Yes. So without giving guidance, I do think we can give you some insights that we have, Jeff, that hopefully would be helpful. On the top line, a typical seasonal sequential would be in the high single digits. And certainly, we'll have some price being pulled in there. And so I think thinking of getting sales growth year over year in that mid single digit range is certainly a valid expectation.

[William Sperry, Executive VP & CFO at Hubbell]

I think, to your point on the LIFO lag, we're anticipating an order of magnitude of $20 ish million. Again, that's going into a recovery bucket in the second half. But the timing of that, we would have $10,000,000 of that in the first quarter and $20,000,000 in the second, Jeff. So I think those are the kind of primary drivers of the quarter.

[Gerben Bakker, Chairman, President & CEO at Hubbell]

And Jeff, if I may make a comment back to your first question. I think you're correct to interpret both sides of the guidance to be down point $50 I would say, though, that this at this point is merely a sensitivity analysis rather than a guide. And the actions that we have in place are to neutralize this. And there's a lot of uncertainty still, even on the tariffs, right? There's a lot of discussions about are these tariffs gonna be pulled back?

[Gerben Bakker, Chairman, President & CEO at Hubbell]

We're starting to action. We're early in this action in the market, I would say, in announcing that we're going to go. But a lot can change here, and this is why we wanted to merely provide some sensitivity around it that we'll continue to update you on rather than this should be assumed in the guide at this point.

[Jeffrey Sprague, Founder and Managing Partner at Vertical Research Partners]

Great, I appreciate that.

[Jeffrey Sprague, Founder and Managing Partner at Vertical Research Partners]

And then, Gertam, just a follow-up on how you're thinking about utilities. Would you expect you talked about their budgets, right? The budgets will be what they'll ultimately be. But do you expect just then a shift within their budgets between price and volume or are they determined volumetrically to get certain things that would suggest maybe there's some upside here actually, as they need the volume and then we'll have to deal with the price because it is what it is.

[Gerben Bakker, Chairman, President & CEO at Hubbell]

Yeah, yeah. And it's probably a little above Jeff, because that's indeed the tension that you have, right? If you have budgets, you have CapEx budgets, are you limited by the spend, and then you're going to just buy less to do it? I would say, on the one hand, there's pressure to do the work, both on the need for hardening, load growth to support. So, I think that puts the tension to it.

[Gerben Bakker, Chairman, President & CEO at Hubbell]

The price are higher, you have to spend more to still get the same work done. But I'm sure there'll be some decisions made. The other thing that you tell the customer, because they can shift work between CapEx and OEM, they can focus on grid hardening versus expansion. So I would say it's really hard to call truthfully, but we feel good that utilities are spending more, budgets are going up, and that's just good for us, right? And then could it be better for us?

[Gerben Bakker, Chairman, President & CEO at Hubbell]

Perhaps. We feel pretty good about utility. It's resilient. And even in a more challenged macroeconomic environment, history will have proven that utilities tend to be more resilient.

[Jeffrey Sprague, Founder and Managing Partner at Vertical Research Partners]

Great, thank you. I'll leave it there.

[Operator]

One moment for our next question. Our next question comes from Charles Tusa with JPMorgan. Your line is open.

[Steve Tusa, Managing Director at JP Morgan]

Hey, good morning.

[William Sperry, Executive VP & CFO at Hubbell]

Good morning, Steve.

[Steve Tusa, Managing Director at JP Morgan]

Sorry, I think I've got problem with like my auto fill on these registrations this morning. I got several different names called out. The pricing in 2Q, like how do you expect that to kind of feather into 2Q on the way to it being half for the year on an organic basis?

[Gerben Bakker, Chairman, President & CEO at Hubbell]

Yes, I think we're expecting nice sequential price realization based on the actions we implemented. I think it'll probably come a little bit quicker in electrical, just given there's a shorter backlog there and it's a little bit more book and ship. So I think you'll see a couple of points of incremental contribution from 1Q to 2Q on that.

[Steve Tusa, Managing Director at JP Morgan]

And then I assume with your commentary around the sequential increase that you're seeing a pretty good April. Any signs of pre buys or pull forwards that you guys have seen in your shorter cycle businesses?

[William Sperry, Executive VP & CFO at Hubbell]

Yes. So I think it's a good question. We talk to our customers, meaning channel customers, everybody's got anecdotes where it's happened here or there, but no one sees it as a trend. When we talk to end customers, they tell us they're not doing it. When we start slicing and dicing skew data, see some volatility.

[William Sperry, Executive VP & CFO at Hubbell]

So I think, Steve, it would be logical to assume there has to be some happening. But I wouldn't say we see evidence that it's a trend or affecting the trends. But logic would say there has to be some people doing it.

[Steve Tusa, Managing Director at JP Morgan]

And just one last thing back to Jeff's point. So basically what you're doing with the sensitivity is just saying but you're just identifying that the difference between the high and the low end of the range is the tariff dynamic, right? Is that basically what you're saying?

[William Sperry, Executive VP & CFO at Hubbell]

No. We're trying to say that the second the reciprocal tariffs, we know we're going to offset and neutralize. The question is for guidance, can we get all of it into 2025? And we think we can. So we're describing that as target.

[William Sperry, Executive VP & CFO at Hubbell]

We just have no we just thought it was responsible to say that with the LIFO lag, there just could be a sensitivity. But we're targeting to not have it. And we just wanted to introduce that to you. That's all.

[Steve Tusa, Managing Director at JP Morgan]

Right. So the range reflects fundamentals. And if the fundamentals are weaker and they're at the lower end the range and you can't cover this tariff, then that's downside to the lower end of the range effectively.

[William Sperry, Executive VP & CFO at Hubbell]

Yes. Those two things if those both of those happen, you'd be below. Yes.

[Steve Tusa, Managing Director at JP Morgan]

Yes. Okay. Great.

[Steve Tusa, Managing Director at JP Morgan]

Thanks a lot guys.

[Operator]

One moment for our next question. Our next question comes from Nigel Coe with Wolfe Research. Your line is open.

[Nigel Coe, Managing Director at Wolfe Research, LLC]

Thanks guys. So just wanted to maybe home in on the second quarter. If we're taking the $20,000,000 of PTP headwinds in 2Q, does that suggest that EPS is sort of flat to slightly down year over year, Bill?

[William Sperry, Executive VP & CFO at Hubbell]

I think it would be in like if all that played out, you'd be in a comparable range, I think, yes.

[Nigel Coe, Managing Director at Wolfe Research, LLC]

So flattish overall. Yeah. Okay. And then how do you think about price elasticity? Maybe just broaden that out into kind of the feedback from the customers on the price increases announced so far.

[Nigel Coe, Managing Director at Wolfe Research, LLC]

Some companies are factoring in elasticity. I don't think you are, but just curious kind of what the reaction has been. And then when you think about the mix between surcharging versus price increases, I think historically you've gone with price increases, but any sort of merit on surcharging just given the volatility in these tariffs?

[Gerben Bakker, Chairman, President & CEO at Hubbell]

Yes, maybe I'll start Bill and fill in. I would say for the first round of tariff, this has been much more inflationary across the broader portfolio. Indicated more than half of it is actually the commodity steel, copper, aluminum, which is more broadly used. And we provide more broad implemented more broad pricing actions and the early evidence of that, and it's early as in a couple of weeks now, looking at the order rate is that that's sticking pretty good. So I would say, low elasticity in that.

[Gerben Bakker, Chairman, President & CEO at Hubbell]

The second round of tariffs, which is all primarily China driven, that then becomes more targeted to certain product lines. And I'd say in certain product lines, we're probably slightly disadvantaged and other product lines were slightly advantaged. But there too, and we're not only taking price increases, we're doing a lot of work negotiating with suppliers, realigning supply chains where we can, other cost actions to offset. And then, of course, the magnitude of these tariffs pricing as well. So we're still planning for this, and we expect to get the price.

[Gerben Bakker, Chairman, President & CEO at Hubbell]

But I'd say this one is a little more targeted to certain product line. And so, could there be some elasticity in certain product line? There could be, and we're thinking through that, I'd say. But I'd say overall, we're not disadvantaged in the broad picture to our peers, we believe.

[William Sperry, Executive VP & CFO at Hubbell]

So I would answer, Nigel, that we did factor in price elasticity into this guide. As Gurman said, we're not expecting a lot in the first bucket. Second bucket does contemplate some, and that's what's embedded in driving some of the sensitivity. As far as your surcharging point, I think you're right to point out that we have stayed away from that in the past and relied on price increases. One of the reasons we like and I think we'd stick with that.

[William Sperry, Executive VP & CFO at Hubbell]

And a good example would be we're facing higher steel and aluminum costs even though we're not paying tariffs. And that's general so in a surcharge, there's not a tariff there, so you wouldn't get it versus can you just price for that? Things like freight inflation, wage inflation, you get you can just pick up other drivers. And so I think we've thought of it more in the price increase than in the surcharge.

[Nigel Coe, Managing Director at Wolfe Research, LLC]

Okay. And

[Nigel Coe, Managing Director at Wolfe Research, LLC]

just one quick follow-up there. Gerben, you mentioned you don't think you're disadvantaged. I would have thought the other way around actually. So I'm just curious, especially in the electrical SKUs, I would think you're still seeing a lot of imported products, some of the more, I don't know, lower value commoditized SKUs. So I'm just curious if you see opportunity to gain share from some of that imported products.

[Gerben Bakker, Chairman, President & CEO at Hubbell]

Yeah, I'd say broadly, probably not. Certainly we know some product lines where we are. And that's also something we're considering in this whole, we're thinking around how to mitigate this, only by the specific product line, but broadly by action across the portfolio. I wouldn't say broadly. As a company, I'd say we're relatively in line with others, what our exposure is offshore supply chains.

[Gerben Bakker, Chairman, President & CEO at Hubbell]

But there's pockets of advantages.

[Nigel Coe, Managing Director at Wolfe Research, LLC]

Okay. Thanks, Kevin. Cheers.

[Operator]

One moment for our next question. Our next question comes from Chris Snyder with Morgan Stanley.

[Operator]

Your line is open.

[Chris Snyder, Executive Director at Morgan Stanley]

Thank you. I just wanted to ask about the price cost dynamics. So it seems like in the first half of the year, the company will be about $30,000,000 price cost negative. And it seems like you guys see a chance to be price cost neutral for the year if zero of that $0.50 sensitivity comes through. So I mean, is that implying that you guys are actually price cost positive in the back half to offset the negative $30,000,000 in the first half?

[Chris Snyder, Executive Director at Morgan Stanley]

And what would that mean about the exit rates as we kind of think about that into 'twenty six? Thank you.

[William Sperry, Executive VP & CFO at Hubbell]

Yeah, Chris, you've got that correct. We're anticipating having a surplus that offsets the deficit in the second half versus the first. And as you've seen us come through inflationary environments before, as the LIFO reporter, you tend to have this lag period where it's in your it's a

[William Sperry, Executive VP & CFO at Hubbell]

headwind for a couple of quarters.

[William Sperry, Executive VP & CFO at Hubbell]

And then I think what you're suggesting is you get the advantage of a tailwind as that moderates out and we would agree with that analysis.

[Chris Snyder, Executive Director at Morgan Stanley]

Thank you. I appreciate that. I guess maybe just on the second point, sometimes I feel like there's confusion in the market around who you guys are competing against. So could you just maybe kind of talk about who are the main competitors, whether it's utility T and D, I guess

[Chris Snyder, Executive Director at Morgan Stanley]

most specifically. Anything else just

[Chris Snyder, Executive Director at Morgan Stanley]

to call out on just who is the competitive base here?

[William Sperry, Executive VP & CFO at Hubbell]

Yeah,

[William Sperry, Executive VP & CFO at Hubbell]

would say, Chris, in terms of utility T and D, the Cooper division of Eaton is a head to head competitor. Thomas and Betts, which is now inside of ABB, is a direct competitor. And those are the big public company players. There's a private company in Chicago called McLean Power Systems. And I would say those are the main T and D competitors.

[Chris Snyder, Executive Director at Morgan Stanley]

Thank you. I appreciate that.

[Operator]

One moment for our next question. Our next question comes from Julian Mitchell of Barclays. Your line is open.

[Julian Mitchell, Equity Research Analyst at Barclays Investment Bank]

Hi, good morning. Just wanted to morning. Just wanted to push a little bit more on the sort of volume assumption dialed into the organic sales guide for the year. So it looks like on Slide eight, you've got sort of 3% plus volumes growth dialed in for the year. And it seems like the first half is sort of guided for flattish volume, down a bit Q1, up a bit Q2.

[Julian Mitchell, Equity Research Analyst at Barclays Investment Bank]

So it's a pretty strong volume growth in the second half. And so just maybe help us understand that a little bit. There is some elasticity aspect that you mentioned already, but also easier comps. So maybe help us understand the confidence in that volume acceleration, please.

[William Sperry, Executive VP & CFO at Hubbell]

Yes. Think you're pointing out, Julian, the intersection between kind of sequential and VPY analysis, right? So if we start with the sequential and look at orders, we think that kind of indicates where the volume will be and when you do it again. So first of all, we agree with your first half analysis that you're talking about. And so you've got to get double the three to four basically in the second half.

[William Sperry, Executive VP & CFO at Hubbell]

It's driven by strong order book, supporting strong seasonal ramp and having easier comps that allow that sort of mid to higher single digit growth rates in the back half.

[Julian Mitchell, Equity Research Analyst at Barclays Investment Bank]

That's helpful. Thank you. And then

[Julian Mitchell, Equity Research Analyst at Barclays Investment Bank]

just my second one Maybe

[William Sperry, Executive VP & CFO at Hubbell]

just yeah, maybe two. Just as there are a couple of inflection points that really help this too, right? So the distribution side of T and D has returned to growth. Them, they really start to help. And as well, the absence and I hate to bring it up again, but telecom enclosure declines, turning from contraction to growth.

[William Sperry, Executive VP & CFO at Hubbell]

So there's a couple of products in there that they're inflecting up that also just help with what feels like a back half loaded, gee, I might be skeptical of that, when you just turn it into math, you realize that's going to be what happens.

[Julian Mitchell, Equity Research Analyst at Barclays Investment Bank]

That's great. Thank you. And just a follow-up around the adjusted sort of margin outlook. So I think in the sort of prior or initial guide construct for the year, it looked like you had sort of maybe flat, slightly up operating margin dialed into the guide midpoint. Is it now sort of down, call it, I don't know, a few tens of basis points for the year, kind of similar to the Q1 margin progression?

[Julian Mitchell, Equity Research Analyst at Barclays Investment Bank]

And any sort of big divergence across the two segments you'd highlight on margins?

[William Sperry, Executive VP & CFO at Hubbell]

Yes. So you're right that in the original guide, it was up a little bit. And what happens when you add price across in the 3% to 4% range, but hold OP dollars flat. In other words, if all you do is capture dollars back through price, it does create a slightly dilutive effect. But the underlying gross product line profitability is kind of the same.

[William Sperry, Executive VP & CFO at Hubbell]

So but I think you're right to point out it causes a slight headwind to the OP margins when you do that.

[Julian Mitchell, Equity Research Analyst at Barclays Investment Bank]

Great. Thank you.

[Operator]

One moment for our next question. Our next question comes from Tommy Moll with Stephens. Your line is open.

[Tommy Moll, Managing Director at Stephens Inc]

Good morning, and thank you for taking my questions.

[William Sperry, Executive VP & CFO at Hubbell]

Good morning, Tommy.

[Tommy Moll, Managing Director at Stephens Inc]

I appreciated the insight and commentary on the long range outlooks for the big IOU budgets. And to some extent, the message there could be characterized as reaffirming what we've all kind of known and heard from you for a while. My question today is whether anything has changed or whether you're learning anything. So ideas that come to mind would just be, what are you hearing on the relative priorities across transmission versus distribution versus generation even? What are you hearing about the step ups into the latter part of the decade?

[Tommy Moll, Managing Director at Stephens Inc]

Are we we pulling forward some of the dollars, pushing out some of the dollars? I think it's a five year range you gave. So there's some flex there. Or just anything else that does seem different now, whether better or worse?

[Gerben Bakker, Chairman, President & CEO at Hubbell]

Maybe I'll start and Bill, feel free to chime in. But I would say it's definitely encouraging that the budgets are going up. And again, what we provided for you was 10 large I. But they represent a good portion, and they're pretty spread geographically. So we believe this is representative of what we're seeing.

[Gerben Bakker, Chairman, President & CEO at Hubbell]

Certainly, as we've communicated, I'd say transmission and substation, particularly strong. We continue to see that both with the interconnections that are being made, as well as new substations that are supporting data centers and other load that's coming up. But distribution is, in our view, also good. You see hardening projects within that step up happening as well. As far as the timing and what we tend to see with these, and we saw this in transmission spend as well, that you see a few years where it shows up, and then it kind of flattens, and you even see it come down.

[Gerben Bakker, Chairman, President & CEO at Hubbell]

And our experience in transmission at least was that as these budgets get revised every few years, that peak tends to continue to move to the right, that you in essence don't see that decline in the transmission. Actually we started to see this in I think, 2012 or something, and that still continued to ramp this long, and it really shows the need to invest in this infrastructure. So we're encouraged that it's elevated, we're encouraging that they're increasing it. And the other thing I would say, whether they shift that a little bit between one and the other, our portfolio broadly supports the spend wherever they may take it. So I think we're good, well positioned either way.

[Tommy Moll, Managing Director at Stephens Inc]

Thank you, Gurbin. And Bill, I wanted to talk about the M and A environment here. You reminded us of the upsized budget that you've established, I at the Investor Day, last Investor Day. So a lot of dollars to deploy there. Your preference is clearly M and A.

[Tommy Moll, Managing Director at Stephens Inc]

But in this particular environment, I'm just curious what your discussions look like given the uncertainty.

[William Sperry, Executive VP & CFO at Hubbell]

Yeah, it's interesting, Tommy. I'd say the pipeline is reasonably active. And we continue to pursue actively a number of situations. Each one is different. And there is an interesting question of these long term trends, which, as you said, we're just reminding each other of versus is there some general volatility around higher interest rates and potential inflation and the news of a first quarter contraction in GDP.

[William Sperry, Executive VP & CFO at Hubbell]

We're not sort of feeling that uncertainty. I don't see it. It hasn't been creating any chill in our type of M and A market. I think maybe large scale public to public MOE type stuff it probably does. But in sort of these kind of things that we're looking at, I think, Tommy, a lot of conversations are continuing actually.

[Tommy Moll, Managing Director at Stephens Inc]

Great, thank you, Bill. I'll turn it back.

[Operator]

One moment for our next question. Our next question comes from Joe O'Dea with Wells Fargo. Your line is open.

[Joseph O'Dea, Managing Director at Wells Fargo]

Hi, good morning. I wanted to start on kind of first half, second half organic growth dynamic just in terms of it seems like for the total company that might be kind of around 10% growth in the back half of the year. But when you see a little bit more of the tariff pressure tied to the utility side, just any color on how we think about that between the segments and whether that would be low double digits utility in the back half and high single digits electrical or if the spread might be wider based on that tariff exposure?

[Gerben Bakker, Chairman, President & CEO at Hubbell]

Yes, I think the math you're doing imply a ramp up in the second half certainly, Joe, and part of that's again price realization kicking in. Again, that takes a little bit longer on the utility side, just given the backlog. I wouldn't say the tariff exposure is more utility weighted, though it's a little bit more electrical weighted when you look at it that way. I think both sides will sort of see a similar kind of price contribution.

[Joseph O'Dea, Managing Director at Wells Fargo]

And therefore, somewhat similar back half of the year organic growth rates based on the framework you have?

[Gerben Bakker, Chairman, President & CEO at Hubbell]

Yes, I mean, again, volume will be a little bit different that sort of ramps up as utility progresses throughout the year.

[Joseph O'Dea, Managing Director at Wells Fargo]

Okay, got it. And then could you expand a little on the sourcing from China in terms of I don't know if it includes any raws or if it's all components, what kind of verticals you would be sort of sourcing in terms of the end markets that you serve and where China would be a good source today? And then what you're evaluating in terms of that mid single digit exposure and how you think about that moving forward and alternatives?

[William Sperry, Executive VP & CFO at Hubbell]

Yeah, Joe, I think I'm glad you kind of asked about how we think about it going forward. So it's worth noting probably that we've cut our exposure to China in about half over the last several years. And that's been a function of a couple of businesses that we sold and as well some on shoring or reshoring supply chain kind of redundancy work that we had done. And I wouldn't be surprised if that exposure continues to get managed downward. Right now, get some components.

[William Sperry, Executive VP & CFO at Hubbell]

There's not a lot of PFR, but mostly more components and things coming in we can figure out, I think, over time how to diversify that supply chain ultimately.

[Gerben Bakker, Chairman, President & CEO at Hubbell]

Tim, maybe the only thing I'd add, it's mostly components, and then we do some manufacturing in China as well. The actions again that we're taking is negotiating with suppliers right now, it's cost sharing. We're working with some of our supplier partners who are moving air production out of China to other areas. We've moved some the source, and particularly during COVID, we worked a lot on resiliency back then for a different reason, to create multiple suppliers, and we're doing work right now to move more of that volume to where it's most beneficial. So there's plenty of action taken, but again, reminding you that it's at the end still a very small percentage of our overall cost of goods sold, so manageable.

[Joseph O'Dea, Managing Director at Wells Fargo]

Thank you.

[Operator]

One moment for our next question. Our next question comes from Nicole DeBlase with Deutsche Bank. Your line is open.

[Nicole Deblase, Lead Analyst at Deutsche Bank]

Yes, thanks. Good morning,

[Gerben Bakker, Chairman, President & CEO at Hubbell]

Good morning, morning, Nicole.

[Nicole Deblase, Lead Analyst at Deutsche Bank]

Just kind of piggybacking on, I think it was Julian's question earlier about margins for the full business, and you guys kind of acknowledged like probably down year on year. Is that the case in both segments? Because Electrical still saw a little bit of margin expansion in the first quarter despite the tariff headwinds. Curious if that can kind of continue throughout the year.

[William Sperry, Executive VP & CFO at Hubbell]

Yeah, I think, Nicole, because the you're right to say underlying the margins going up, but this effect of having price that's basically just offsetting cost is what would create the headwind. And I think electrical would experience that as well.

[Nicole Deblase, Lead Analyst at Deutsche Bank]

Okay, understood. And then I know it's a small part of the business, but obviously pretty volatile in recent years. What are you guys seeing in telecom now? Has that actually improved to growth? Or is that something that you expect to see as we kind of move through the year?

[William Sperry, Executive VP & CFO at Hubbell]

Yeah. We're seeing the sales decline flatten and the order book growing, and the compares getting easier to grow against. And so that actually, Nicole, feels like it's inflected to us.

[Nicole Deblase, Lead Analyst at Deutsche Bank]

Thank you. I'll pass it on.

[Operator]

Next

[Operator]

question comes from Brett Linzey with Mizuho. Your line is open.

[Brett Linzey, Executive Director at Mizuho Financial Group, Inc.]

Hey, good morning all.

[William Sperry, Executive VP & CFO at Hubbell]

Good morning, Chris.

[Brett Linzey, Executive Director at Mizuho Financial Group, Inc.]

Hey, I

[Brett Linzey, Executive Director at Mizuho Financial Group, Inc.]

wanted to come back to grid automation. So down 15%, I guess, how did that track versus the internal expectation? And then implicitly, the utility meters business was down much more than that. You had guided that business down high singles for the year. How has the outlook changed relative to the original expectation?

[William Sperry, Executive VP & CFO at Hubbell]

Yes, I'd say the quarter for that was softer than we had anticipated. But I do think there's encouraging signs of smaller project wins and the MRO portion of the business is starting to create, Bret, a floor where they can kind of operate at a level now and not be, for example, some kind of falling knife. And so we're actually encouraged as thinking about the sequentials actually flattening now and being able to kind of run it from here, but a little more modest probably than we originally thought as the year started.

[Gerben Bakker, Chairman, President & CEO at Hubbell]

Yeah, maybe the additional context on that is, as Bill said, a little softer, but offset by stronger T and D than we had initially anticipated. These both of these are embedded in our guide for the full year.

[Brett Linzey, Executive Director at Mizuho Financial Group, Inc.]

All right. Yes, that's helpful. Thanks. And then just one more on utility distribution. So the strong orders up double digits, guess, are there any other indicators or anecdotes from large utilities or inventory data from distributors that gives you more confidence that the destocking has really run its course here?

[William Sperry, Executive VP & CFO at Hubbell]

Yeah, would say all the above. Certainly dialogue with distributor customers, dialogue with end customers. It does suggest that inventories are much more in line with originally targeted. Mean, it's a slightly the topic has some tentacles. There's lots of SKUs, lots of customers, lots of geographies.

[William Sperry, Executive VP & CFO at Hubbell]

So there could be some pocket in a geography with a customer of a SKU where they still want to work it down. But we would argue that you won't see it. We'll be able to grow now to the extent and we just those little small things will be not visible. And we feel we're I mean, I know we've been begging your patience probably for the last five quarters or so, but we think we're here now and ready to grow Dee, and that's fantastic news.

[Brett Linzey, Executive Director at Mizuho Financial Group, Inc.]

Appreciate the insight.

[Operator]

And I'm not showing any further questions at this time. I'd like to turn the call back over to Dan for any closing remarks.

[Dan Innamorato, VP - IR & Corporate Strategy at Hubbell]

Great. Thanks, operator. Thanks, everybody, for joining us. I'll be around all day for follow ups.

[Operator]

Thank you, ladies and gentlemen. This does conclude today's presentation. You may now disconnect, and have a wonderful day.

Participants

Executives

• Dan Innamorato, VP - IR & Corporate Strategy
• William Sperry, Executive VP & CFO

Analysts

• Gerben Bakker, Chairman, President & CEO at Hubbell
• Jeffrey Sprague, Founder and Managing Partner at Vertical Research Partners
• Steve Tusa, Managing Director at JP Morgan
• Nigel Coe, Managing Director at Wolfe Research, LLC
• Chris Snyder, Executive Director at Morgan Stanley
• Julian Mitchell, Equity Research Analyst at Barclays Investment Bank
• Tommy Moll, Managing Director at Stephens Inc
• Joseph O'Dea, Managing Director at Wells Fargo
• Nicole Deblase, Lead Analyst at Deutsche Bank
• Brett Linzey, Executive Director at Mizuho Financial Group, Inc.