Good Progress On Cost Control And Strong T&D Markets Helping Hubbell

When I last wrote about Hubbell (HUBB) in May, I saw mixed prospects for this manufacturer of electrical and power products for utility, construction, industrial, and energy customers. I did think (and write) that the shares looked undervalued and that the company’s late-cycle exposure was the right mix for what I thought would be a weaker-than-expected short-cycle economy. On the other hand, I also liked Schneider (OTCPK:SBGSY) and Eaton (ETN) better.

Since then, short-cycle end-markets have indeed weakened more than the Street expected earlier in the year and Hubbell has benefited from its strong utility exposure, as well as its internal self-help efforts on costs (manufacturing, et al). Hubbell shares are up about 18% since then, beating the broader industrial sector, while Schneider has in fact performed better (about 10% better), though Eaton’s performance has been more of a “push”.

Looking at 2020, I like Hubbell’s utility exposure even more, as I see grid spending as one of the healthier markets out there. I’m more concerned about oil/gas, but I think Hubbell’s specific exposures may be better than the overall market, and I expect more progress on costs/margins (particularly in 2021). What I’m not so fond of is the valuation. Like so many industrials, and particularly those with better late-cycle exposure, the shares have been strong enough that I don’t see a compelling valuation, though I don’t find them overpriced either.

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Good Progress On Cost Control And Strong T&D Markets Helping Hubbell