Relative to ABB (ABB), Eaton (ETN), and Schneider (OTCPK:SBGSY), Hubbell’s (HUBB) electrical products business is more sensitive to short-cycle industrial demand, and the company also lacks the strong leverage to data center growth of those larger rivals. On the other hand, the company is doing well with its cost reduction efforts, and the company has significant leverage to a healthy transmission & distribution market (or T&D) as utilities upgrade their grid infrastructure.
I liked Hubbell three months ago, and the shares have done pretty well since then, with a 30% move that beat the industrial sector and peer nVent (NVT), but lagged those larger, more diversified players. At today’s valuation, Hubbell looks more like a hold than a clear buy. The total projected return is still decent, and Hubbell’s greater cyclicality could be an asset in a recovery, but I do have concerns about Hubbell’s leverage to oil/gas, as well as its leverage to commercial lighting and new construction, as opposed to the stronger retrofit opportunities I see with the likes of ABB, Eaton, and Schneider.
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Hubbell Feeling The Squeeze From Its More Cyclical Business Mix
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