Hubbell's Q3 2025: Contradictions Emerge on Pricing, Utility Growth, and Telecom Outlook

Date of Call: October 28, 2025

Financials Results

• Revenue: $1.5B, up 4% YOY
• EPS: Adjusted diluted EPS up 12% (Q3); full-year adjusted EPS guidance $18.10–$18.30 (midpoint $18.20), +$0.30 vs prior outlook
• Operating Margin: Operating profit $358M, up 4% YOY; operating margin roughly comparable year-over-year

Guidance:

• Raised full-year adjusted EPS guidance to $18.10–$18.30 (midpoint $18.20, +$0.30 vs prior).
• Full-year organic growth expected 3%–4%; operating profit margins to expand 50–100 bps.
• Q4 organic growth visibility 8%–10% with margin expansion in both segments.
• DMC acquisition neutral to 2025 EPS and expected to add ~ $0.20 adjusted EPS in 2026.
• 2025 tax rate benefit is project-driven and expected to normalize in 2026.
• Free cash flow target ~90% of adjusted net income; balance sheet remains positioned for M&A and buybacks.

Business Commentary:

* Strong Financial Performance Across Segments: - Hubbell Inc. reported sales up 4% to $1.5 billion for Q3, and free cash flow up 34% to $254 million. - The growth was driven by high single-digit organic growth in Electrical Solutions and Grid Infrastructure, offsetting higher cost inflation.

• Strong Grid Infrastructure and Data Center Demand:
• The Grid Infrastructure segment grew by high single digits, contributing significantly to Hubbell's overall growth.

• The demand was particularly strong from utilities interconnecting new sources of load and generation on the grid, driving double-digit organic growth in this segment.

• Earnings and Margin Expansion:

• Adjusted diluted EPS increased by 12%, and operating profit rose 4% to $358 million.

• Margin expansion was driven by successful pricing and productivity actions, offsetting increased tariffs and restructuring spending.

• Strategic Acquisition and Future Outlook:

• Hubbell completed the acquisition of DMC Power, with anticipated $0.20 of adjusted earnings per share accretion in 2026.
• This acquisition aligns with Hubbell’s strategy of acquiring high-growth, high-margin businesses in attractive markets, positioning the company for future growth.

Sentiment Analysis:

Overall Tone: Positive

• Management raised full-year EPS outlook, cited double-digit adjusted earnings growth and high single-digit organic growth in key businesses, said pricing and productivity more than offset accelerating cost inflation, and expressed confidence in further improvement in Grid Infrastructure and strong 2026 setup.

Q&A:

• Question from Jeffrey Sprague (Vertical Research Partners, LLC): How should we think about Q3 vs Q4 utility exit rate and what that implies for 2026—could Q4 exit imply material upside for utility growth next year?
  Response: Management: Plan conservatively for 2026 despite strong exit dynamics; Q4 benefits from easy comps/seasonality and could boost 2026, but they will align costs to volumes and capture upside if it materializes.

• Question from Jeffrey Sprague (Vertical Research Partners, LLC): Can you elaborate on September/October order strength and rationale for telecom and meters returning to growth?
  Response: Management: September/October orders were broad-based across T&D; telecom and meters are recovering off low comps and expected to show modest growth as inventories normalize and MRO/muni business returns.

• Question from Jeffrey Sprague (Vertical Research Partners, LLC): Is the lower tax rate sustainable into 2026?
  Response: Management: The lower 2025 tax rate is project-driven by an international acquisition restructuring and is expected to normalize in 2026.

• Question from Thomas Moll (Stephens Inc., Research Division): Was the downward revision to organic guidance this year entirely within Utility and is the recovery timing shifted?
  Response: Management: Yes—the revision was driven by Utility timing; the shape of recovery is as expected but shifted later.

• Question from Thomas Moll (Stephens Inc., Research Division): Can you tighten up the organic earnings algorithm assumptions for 2026?
  Response: Management: Long-term framework is 4%–6% organic sales, ~25%–30% incrementals (driving high-single-digit organic earnings), plus inorganic M&A to reach sustained double-digit EPS growth.

• Question from C. Stephen Tusa (JPMorgan Chase & Co, Research Division): What was the breakout of pricing by segment in the quarter?
  Response: Management: Pricing for the year is roughly in the 3% range with Q3 in line and reasonably balanced between Electrical and Utility segments.

• Question from C. Stephen Tusa (JPMorgan Chase & Co, Research Division): Any puts and takes on margins for next year or changes from restructuring/accounting?
  Response: Management: Will provide detailed margin guidance in January; restructuring spend is treated as recurring investment for productivity and should not materially distort annual margins; long-term incrementals assume continued reinvestment.

• Question from C. Stephen Tusa (JPMorgan Chase & Co, Research Division): How confident are you that Aclara/Grid Automation and other infrastructure segments are bottoming?
  Response: Management: Grid Automation is moving from lumpy project roll-offs toward more MRO and public-power work—becoming more predictable; distribution remains strong and the portfolio is positioned to benefit across markets.

• Question from Christopher Snyder (Morgan Stanley, Research Division): Is the softer utility back half driven by Aclara or weaker T&D/distribution than expected?
  Response: Management: Not Aclara—it's a ~90-day delay in T&D snapback; T&D/T&D orders accelerated in Sept/Oct and should support a Q4 pickup.

• Question from Christopher Snyder (Morgan Stanley, Research Division): Is pricing expected to exit higher (toward ~5%) and are you seeing pushback/elasticity?
  Response: Management: Pricing has been implemented progressively to match tariff cost increases, stickiness has been strong, discussions constructive with channel and end customers, and limited pushback observed.

• Question from Joseph O'Dea (Wells Fargo Securities, LLC): How do data-center behind-the-meter vs front-of-meter investments translate to content opportunity for Hubbell across Electrical and Utility?
  Response: Management: Electrical (connectors, grounding, PCX) captures direct behind-the-meter data-center content; Utility benefits via interconnection/substation investments and EPC/IPP work—both create meaningful opportunities.

• Question from Joseph O'Dea (Wells Fargo Securities, LLC): Does Grid Automation (including Aclara) deliver broader strategic/synergy value despite underperformance?
  Response: Management: Yes—Grid Automation was strategically acquired for its components and control capabilities; roughly half the revenue now comes from newer/acquired products that are growing, and management is refocusing Aclara to improve performance.

• Question from Nigel Coe (Wolfe Research, LLC): Was Q3 impacted by storm activity and are DMC margins as attractive as suggested?
  Response: Management: No material storm impact in Q3; DMC is a highly attractive, high-margin business (about 40%-ish EBITDA) and highly complementary to Hubbell's connector portfolio.

• Question from Christopher Glynn (Oppenheimer & Co. Inc., Research Division): Is data center the primary vertical or are other verticals also meaningful under the vertical-market strategy?
  Response: Management: Data centers are a major growth driver in Electrical, but other verticals (light industrial, T&D) and focused sales/marketing efforts are also contributing meaningfully to growth.

Contradiction Point 1

Pricing Strategy and Realization

It involves the company's approach to pricing and price realization, which directly impacts revenue and operating margins.

Can you discuss quarterly pricing? - C. Stephen Tusa (JPMorgan Chase & Co, Research Division)

2025Q3: Pricing for the quarter was in line with the year's planned 3% range, balanced between segments. - William Sperry(CFO)

Could you detail the tariff impacts and pricing adjustments? - Jeffrey Todd Sprague (Vertical Research Partners)

2025Q2: We have a 3% increase in our pasado gross margin and also what we have identified on pricing in our guidance and we think that that's more than offset the volume piece. - William Sperry(CFO)

Contradiction Point 2

Utility Segment Growth and Order Visibility

It reflects differing perspectives on the growth and order visibility within the Utility segment, which plays a significant role in the company's overall performance.

What caused the lower organic growth? - Christopher Snyder (Morgan Stanley, Research Division)

2025Q3: We're seeing better order visibility now. - William Sperry(CFO)

How do you expect organic volume growth in the Utility segment for the second half? - Patrick Michael Baumann (JPMorgan Chase & Co)

2025Q2: The expectation is that the second half is going to look like the first half. - William Sperry(CFO)

Contradiction Point 3

Utility Spending and Order Growth

It involves differing expectations and explanations for utility spending and order growth, which are critical for understanding the company's revenue outlook.

Is the recovery trajectory for Utility as expected, despite the lower organic guidance this year? - Thomas Moll

2025Q3: We are confident about order growth in the second half, and it's coming together with the backlog. - William Sperry(CFO)

Could you clarify the volume assumptions for the year, particularly in the second half? - Julian Mitchell

2025Q1: We anticipate strong order growth and sequential increases, with the second half experiencing easy comps. Distribution and telecom enclosures are returning to growth, supporting our volume outlook. - William Sperry(CFO)

Contradiction Point 4

Telecom Business Growth

It involves differing perspectives on the growth trajectory of the telecom business, which is a significant component of Hubbell's revenue.

Can you explain the order strength in September and October, particularly in telecom and meters, and why these businesses are expected to grow? - Jeffrey Sprague

2025Q3: For telecom, it's off a lower level after being flat for multiple quarters. - William Sperry(CFO)

Can you provide details on margin guidance and the telecom business outlook? - Nicole DeBlase

2025Q1: Telecommunications sales declines have been stabilized, and order growth suggests a return to growth. - William Sperry(CFO)

Contradiction Point 5

Utility Growth and Market Recovery

It involves differing perspectives on the timing and shape of the utility growth recovery, which impacts investor expectations and strategic planning.

Is the Utility's recovery trajectory as expected, despite reduced organic guidance this year? - Thomas Moll (Stephens Inc., Research Division)

2025Q3: Yes, both points are accurate. The reduction in the utility guidance was within Utility, but the shape of the recovery is as expected with timing shifts. - William Sperry(CFO)

Can you clarify the utility growth outlook, especially regarding grid automation, meters, and AMI? - Julian Mitchell (Barclays Bank PLC, Research Division)

2024Q4: We continue to expect the utility market to grow around 1.5% in 2025. - Gerben Bakker(CEO)