Thursday, September 20, 2018

Hubbell Looking To Self-Help And A Cyclical Boost

Later-cycle plays have gotten more attention as this year has gone on, and with that electrical product and lighting specialist Hubbell (HUBB) has closed some of its multiyear performance gap relative to industrials, with the stock actually outperforming the Industrial Select Sector SPDR ETF (XLI) over the past year as well as handily outpacing Acuity (AYI) as well. Add in the Aclara acquisition, ongoing restructuring efforts, and an apparent willingness to address the lighting business more directly, and I can see why these shares have done well in recent months.

As far as valuation goes, Hubbell is more of a lukewarm prospect to me now. I like the potential of what facility consolidation, automation, and supply chain improvements could bring, but margins have been weak for a while despite an ongoing effort to restructure. Likewise, while I like the diversification that Aclara brings, lighting remains a tough market. The perception of Hubbell as a late-cycle play should aid sentiment, and the shares do have some upside on an EV/EBITDA basis, but the overall long-term return potential looks more or less in line with most other industrial names.

Read more here:
Hubbell Looking To Self-Help And A Cyclical Boost

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