Wrapping up Q1 earnings, we look at the numbers and key takeaways for the electrical systems stocks, including Sanmina (NASDAQ:SANM) and its peers.
Like many equipment and component manufacturers, electrical systems companies are buoyed by secular trends such as connectivity and industrial automation. More specific pockets of strong demand include Internet of Things (IoT) connectivity and the 5G telecom upgrade cycle, which can benefit companies whose cables and conduits fit those needs. But like the broader industrials sector, these companies are also at the whim of economic cycles. Interest rates, for example, can greatly impact projects that drive demand for these products.
The 11 electrical systems stocks we track reported a mixed Q1. As a group, revenues beat analysts’ consensus estimates by 1.7% while next quarter’s revenue guidance was 2.9% below.
Thankfully, share prices of the companies have been resilient as they are up 5.8% on average since the latest earnings results.
Sanmina (NASDAQ:SANM)
Founded in 1980, Sanmina (NASDAQ:SANM) is an electronics manufacturing services company offering end-to-end solutions for various industries.
Sanmina reported revenues of $1.98 billion, up 8.1% year on year. This print exceeded analysts’ expectations by 1%. Despite the top-line beat, it was still a slower quarter for the company with revenue guidance for next quarter missing analysts’ expectations significantly and a significant miss of analysts’ EBITDA estimates.
"We delivered solid financial results for the second quarter, with revenue at the high end and non-GAAP earnings per share exceeding our outlook. Our ability to adapt to the evolving environment is reflected in our consistent operating margin and strong cash generation," stated Jure Sola, Chairman and Chief Executive Officer.
Sanmina Total Revenue
The market was likely pricing in the results, and the stock is flat since reporting. It currently trades at $79.80.
Founded in 1961, Kimball Electronics (NYSE:KE) is a global contract manufacturer specializing in electronics and manufacturing solutions for automotive, medical, and industrial markets.
Kimball Electronics reported revenues of $374.6 million, down 11.9% year on year, outperforming analysts’ expectations by 10.8%. The business had an exceptional quarter with an impressive beat of analysts’ EPS estimates and a solid beat of analysts’ EBITDA estimates.
Kimball Electronics Total Revenue
Kimball Electronics achieved the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 22.5% since reporting. It currently trades at $18.05.
Credited with introducing the first automatic washing machine, Whirlpool (NYSE:WHR) is a manufacturer of a variety of home appliances.
Whirlpool reported revenues of $3.62 billion, down 19.4% year on year, falling short of analysts’ expectations by 1%. It was a softer quarter as it posted full-year EPS guidance missing analysts’ expectations.
Whirlpool delivered the slowest revenue growth in the group. Interestingly, the stock is up 3.1% since the results and currently trades at $80.06.
Protecting the things that power our world, Atkore (NYSE:ATKR) designs and manufactures electrical safety products.
Atkore reported revenues of $701.7 million, down 11.5% year on year. This number surpassed analysts’ expectations by 0.6%. Overall, it was a very strong quarter as it also recorded an impressive beat of analysts’ EBITDA estimates.
The stock is up 1.6% since reporting and currently trades at $67.96.
Formerly part of Emerson Electric, Vertiv (NYSE:VRT) manufactures and services infrastructure technology products for data centers and communication networks.
Vertiv reported revenues of $2.04 billion, up 24.2% year on year. This result topped analysts’ expectations by 5.2%. It was a very strong quarter as it also produced an impressive beat of analysts’ organic revenue estimates and full-year revenue guidance exceeding analysts’ expectations.
Vertiv pulled off the fastest revenue growth and highest full-year guidance raise among its peers. The stock is up 31.1% since reporting and currently trades at $94.05.
As a result of the Fed’s rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed’s 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump’s victory in the U.S. Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain, leaving much uncertainty around 2025.
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