Powell Industries (POWL, Financial) has seen impressive stock growth, climbing from around $150 in early September to approximately $245. This company supplies equipment for the distribution, control, and monitoring of electrical energy, catering to large industrial customers such as utilities, oil and gas producers, refineries, LNG facilities, and petrochemical plants.
- Powell specializes in low and medium voltage equipment, including switchgear and rectifiers, which are essential when electricity is stepped down from high voltage. This segment involves complex electrical configurations for switching, connecting, and distributing load.
- Several catalysts have propelled Powell's stock, including a strong Q3 report in late July and the U.S. Department of Energy's recent issuance of a key LNG export permit. LNG is a crucial market for Powell. The company is also expanding into the data center market. Additionally, the Federal Reserve's rate cuts are expected to encourage network upgrades.
- In the June quarter, Powell's revenue surged 50% year-over-year to $288 million, driven by strength across nearly all market sectors. Commercial activity remains robust as Powell approaches the close of FY24. A notable increase in gross margin to 28.4%, compared to 22.2% a year ago, contributed to a significant EPS beat.
- Powell booked $356 million in new orders during the quarter, the highest for FY24, with orders spread across key markets. The electric utility sector was a major contributor, and Powell secured a significant petrochemical order for a North American greenfield project.
- While Powell does not provide guidance, it reports healthy quoting activity. The fundamentals of the U.S. natural gas market remain favorable, and Powell sees continued strength in oil and gas, petrochemical markets, biofuels, carbon capture, and hydrogen projects, areas where it is experiencing increased activity. The commercial and industrial markets, including data centers, also remain attractive.
Overall, while Powell Industries may not be widely recognized, it is experiencing positive developments across various markets, from LNG to electric utilities and data centers. Despite the stock appearing overextended in the short term, the upcoming Q4 report in early December will provide further insights into the company's performance and market dynamics.
