Hubbell's Q3 2025: Contradictions Emerge on Order Strength, Utility Recovery, Tariffs, and Pricing

Date of Call: October 28, 2025

Financials Results

• Revenue: $1.5B, up 4% YOY
• EPS: Adjusted diluted EPS, up 12% YOY
• Operating Margin: Operating profit $358M, up 4% YOY; margins roughly comparable year-over-year

Guidance:

• Raised FY2025 adjusted EPS guidance to $18.10–$18.30 (midpoint $18.20), driven by a lower tax rate and stronger margins.
• FY2025 organic growth expected ~3%–4%; operating profit margins to expand 50–100 bps; free cash flow conversion targeted ~90% of adjusted net income.
• Q4 2025 expects 8%–10% organic growth with margin expansion as Grid Automation headwinds fade and data-center strength continues.
• DMC acquisition neutral to 2025 EPS, expected to contribute ~$0.20 adjusted EPS in 2026.
• Preliminary 2026 view: broad-based mid-single-digit organic growth aligned with long-term targets; 2025 tax benefit expected to normalize in 2026.

Business Commentary:

• Strong Electrification and Grid Modernization:
• Hubbell Inc. reported a double-digit adjusted earnings growth for Q3 2025, driven by strong, high single-digit organic growth in both Electrical Solutions and Grid Infrastructure segments.

• This growth was attributed to significant demand in utility infrastructure and grid modernization initiatives, with investments in grid interconnections and grid hardening.

• Pricing and Cost Management:

• Pricing actions were successful in offsetting cost inflation, leading to positive price/cost productivity, which contributed to a 4% increase in sales and 4% in operating profit for Q3.

• Cost inflation accelerated compared to the first half of the year as anticipated, but pricing strategies effectively mitigated these cost pressures.

• Data Center and Light Industrial Growth:

• The Electrical segment saw 10% sales growth and 17% OP growth, with 8% organic growth across end markets, led by data centers and light industrial segments.

• This growth was driven by strong demand for connectors, grounding solutions, and modular power distribution skid solutions in data centers, supported by strategic sales force realignment and vertical market specialists.

• Strategic Acquisitions and Market Expansion:

• Hubbell acquired DMC Power, contributing approximately $0.20 of adjusted earnings per share accretion in 2026, with expected 20% sales growth and 40%+ EBITDA margins.
• This acquisition is part of Hubbell's strategy to acquire high-growth, high-margin businesses in attractive markets, leveraging its strong sales force and product portfolio.

Sentiment Analysis:

Overall Tone: Positive

• Management: "Hubbell delivered double-digit adjusted earnings growth" and "we are raising our full year 2025 outlook." Also: "pricing and productivity actions have been successful in more than offsetting these costs" and "we anticipate a year of strong broad-based organic growth across the portfolio in 2026."

Q&A:

• Question from Jeffrey Sprague (Vertical Research Partners, LLC): On the Q3→Q4 exit rate and implications for 2026 — is Q4 unusually strong or did Q3 slip into Q4?
  Response: Management: Q4 benefits from easy comps and seasonality and could support a very strong 2026, but they will plan conservatively while capturing upside if it materializes.

• Question from Jeffrey Sprague (Vertical Research Partners, LLC): Can you elaborate on the September/October order strength and the rationale for bullish arrows on telecom and meters into 2026?
  Response: Management: Sep/Oct order pickup is broad-based in T&D; telecom and meters are bottoming after multiple quarters of contraction and should see modest returns.

• Question from Jeffrey Sprague (Vertical Research Partners, LLC): Is the lower 2025 tax rate sustainable into 2026?
  Response: Management: No—the lower rate is project-driven by an international acquisition restructuring and is expected to normalize next year.

• Question from Thomas Moll (Stephens Inc., Research Division): Was the reduction in organic guidance for the year entirely within Utility and did timing shift versus shape?
  Response: Management: Yes—reduction was within Utility and the recovery shape is as expected but timing shifted later.

• Question from Thomas Moll (Stephens Inc., Research Division): Is that true for the distribution piece as well?
  Response: Management: Yes—distribution showed a positive inflection in Q3.

• Question from Thomas Moll (Stephens Inc., Research Division): Can you clarify the organic earnings algorithm for 2026 (organic growth, incrementals, M&A)?
  Response: Management: Targeting 4%–6% organic revenue, ~25%–30% incrementals, plus inorganic M&A to drive to sustainable double-digit earnings growth.

• Question from C. Stephen Tusa (JPMorgan Chase & Co): What was the breakout of pricing by the two segments in the quarter/year?
  Response: Management: Year-to-date pricing ~3% with Q3 in line; pricing was reasonably balanced between Electrical and Utility segments.

• Question from C. Stephen Tusa (JPMorgan Chase & Co): Any puts and takes on margins for next year or movement on price/cost/productivity (PCP)?
  Response: Management: Deferred detailed margin guidance to January; restructuring is a recurring investment to drive productivity and they expect continued price/cost productivity with no material distortion.

• Question from C. Stephen Tusa (JPMorgan Chase & Co): How much visibility do you have on Aclara/Grid Automation bottoming and any crowding out from T&S spending?
  Response: Management: Grid Automation is becoming less lumpy and more MRO/public-power oriented (more predictable); they expect growth across transmission, substation and distribution and see no structural crowding-out risk to their positions.

• Question from Christopher Snyder (Morgan Stanley): Is the softer back-half utility growth due to Aclara, distribution, or something else?
  Response: Management: Not Aclara—it's a ~90‑day delay in T&D demand causing a steadier improvement; expecting a snapback into Q4.

• Question from Christopher Snyder (Morgan Stanley): Does pricing exit the year higher (e.g., ~5% exit) and are you seeing pushback or elasticity?
  Response: Management: Pricing has been implemented alongside tariff increases with good realization and limited pushback; stickiness has been strong.

• Question from Joseph O'Dea (Wells Fargo Securities, LLC): How does data-center investment differ behind-the-meter vs front-of-the-meter for your content opportunity?
  Response: Management: Electrical segment (connectors, grounding, PCX) captures behind‑the‑meter content directly while utility (front‑of‑meter) investments for interconnection also benefit Hubbell—company gains on both fronts.

• Question from Joseph O'Dea (Wells Fargo Securities, LLC): Grid Automation CAGR and Aclara's role—any synergy or underappreciated value?
  Response: Management: Grid Automation remains strategic despite underperformance; portfolio includes acquired and developed high-growth products and they are focused on improving individual business performance and margins.

• Question from Julian Mitchell (Barclays Bank PLC): Will restructuring (and accounting change) materially affect margin progression next year?
  Response: Management: Restructuring is treated as recurring investment to drive productivity and should not materially distort annual margins; the accounting change does not meaningfully alter margin percentages.

• Question from Julian Mitchell (Barclays Bank PLC): Commentary on nonresidential and heavy industrial into next year—why cautious?
  Response: Management: Exposure to nonresidential/heavy industrial has been reduced and results are mixed; cautious stance now but potential rebound will be detailed in January guidance.

• Question from Nigel Coe (Wolfe Research, LLC): Are Q3 results affected by storm activity and is DMC a very high‑margin business?
  Response: Management: No meaningful storm impact in Q3; DMC is an attractive, high‑margin substation-focused business with strong technical differentiation.

• Question from Nigel Coe (Wolfe Research, LLC): Is there a channel opportunity to sell systems/control‑house products into data centers?
  Response: Management: Yes—PCX targets control‑house for data centers, the company sees cross‑sell opportunities and is adding capacity to serve both utility and data‑center customers.

• Question from Christopher Glynn (Oppenheimer & Co.): Is data center the sole focus of HES vertical strategy or are other verticals contributing?
  Response: Management: Data centers are a major growth driver but other verticals (light industrial, etc.) and cross‑selling efforts also contribute materially to HES growth.

• Question from Christopher Glynn (Oppenheimer & Co.): Any D&A specifics for DMC and margin cadence?
  Response: Management: No detailed D&A provided on the call; indicated DMC expects ~20% sales growth and ~40% EBITDA margin today, with planned investments to ramp margins further under Hubbell ownership.

Contradiction Point 1

Order Strength and Market Recovery

It reveals differing perspectives on the timing and strength of market recovery and order strength, which are crucial for understanding the company's growth trajectory and investment decisions.

What are the details on September and October order strength, and what confidence do you have in the upward trends for telecom and meters? - Jeffrey Sprague (Vertical Research Partners, LLC)

2025Q3: The order strength is broad-based across T&D products. There's strong demand in telecom and meters, which have been flat or contracting but are building a better MRO base and repeatable business. - Gerben Bakker(CEO)

Does electrical distribution's mid-single-digit growth reflect underlying market growth and represent a steady-state growth rate? What growth expectations exist for Aclara beyond one-time adjustments? - Jeffrey Todd Sprague (Vertical Research Partners)

2025Q2: We do expect to see a -- an improvement in the second half, and we see the recovery starting probably towards the end of Q2 or early Q3. - Gerben Bakker(CEO)

Contradiction Point 2

Utility Segment Growth and Recovery Timing

It involves differing expectations regarding the timing of recovery in the Utility segment, which impacts revenue expectations and strategic planning.

Can you detail September and October order strength? How confident are you about growth in telecom and meters? - Jeffrey Sprague(Vertical Research Partners, LLC)

2025Q3: We're seeing a much better order trend in the Utility segment than we expected from 3 months ago. If you recall, we thought we might be down even 10% at some point, and it actually looks like we'll be flat to slightly up. - Gerben Bakker(CEO)

Does the $0.50 sensitivity imply a range of $16.85 to $17.35 for the year? - Jeffrey Sprague(Vertical Research)

2025Q1: T&D orders year-to-date are down low-double-digit, and we anticipate Utility segment volume to decline 8% to 10% in the first half with a recovery in the second half. - Gerben Bakker(CEO)

Contradiction Point 3

Impact of Tariffs on Margins

It highlights differing expectations regarding the impact of tariffs on margins, which is a critical financial consideration for investors and stakeholders.

What factors will impact margins next year? - C. Stephen Tusa (JPMorgan Chase & Co, Research Division)

2025Q3: Tariffs will impact margins through op neutrality. - William Sperry(CFO)

Can you clarify the operating margin expansion in the second half, including the impact of tariffs and R&D spending? - Julian C.H. Mitchell (Barclays Bank PLC)

2025Q2: We expect continued investment in restructuring and new initiatives. - William R. Sperry(CFO)

Contradiction Point 4

Pricing Strategy and Realization

It involves differing statements about the company's pricing strategy and success in price realization, which directly impacts financial performance and competitive positioning.

Could you provide pricing details by segment? - C. Stephen Tusa(JPMorgan Chase & Co, Research Division)

2025Q3: Pricing for the year is in the 3-point range and balanced between segments. - William Sperry(CFO)

How will Q2 pricing affect 2Q? - Charles Stephen Tusa(JPMorgan)

2025Q1: Guidance assumes broad-based pricing actions on both raw materials and finished goods. The vast majority of these have been taken, and we've seen some early order realization, especially in Electrical. - Daniel Innamorato(COO)