Hubbell Incorporated (NYSE: HUBA, HUBB) posted a 7 percent sales increase during the third quarter. Company sales of $895.3 million for the quarter were up over the $835.9 million reported in the third quarter of 2013. Hubbell’s operating income was $142.8 million, or 15.9 percent of net sales, compared to $151.6 million, or 18.1 percent of net sales, for the comparable period of 2013.
Hubbell’s net income in the third quarter of 2014 was $89.6 million, a decrease of 7 percent compared to the $96.5 million reported in the third quarter of 2013. Earnings per diluted share were $1.51, a decrease of 7 percent compared to the $1.62 reported in the third quarter of 2013. Free cash flow (defined as cash flow from operations less capital expenditures) was $121.6 million in the third quarter of 2014 versus $103.0 million reported in the comparable period of 2013.
For the first nine months of 2014, Hubbell’s net sales were $2.5 billion, an increase of 6 percent compared to the same period last year. Operating income was $391.3 million, or 15.6 percent of net sales, compared to $381.4 million, or 16.0 percent of net sales, for the comparable period of 2013.
“Third quarter results were in line with our expectations for overall sales but were disappointing from a profitability perspective as we encountered a number of external and internal challenges,” said David G. Nord, chairman, president, and CEO, in a press release. “We reported a 7 percent sales increase reflecting improving organic demand and the contribution from acquisitions. Our operating margins in the quarter were a solid level of 15.9 percent, but below a very difficult comparison against the third quarter of 2013 and less than our expectations.”
While the power segment performed as planned, Nord said the current quarter was impacted by higher than normal legal and warranty related costs within the electrical segment. “These costs reduced operating margins by nearly a full point in the quarter,” he noted. “In addition, margins were negatively impacted by a less favorable business and product mix as well as higher costs.”
Hubbell’s electrical segment net sales in the third quarter of 2014 increased 7 percent to $641.6 million compared to $597.6 million reported in the third quarter of 2013. It’s power segment net sales were $253.7 million compared to $238.3 million reported in the third quarter of 2013. Sales related to distribution and transmission products increased modestly while unfavorable price realization reduced net sales by one percentage point in the quarter.
“We expect overall sales for 2014 to increase in the low end of the five to six percent range with balanced growth from acquisitions and organic volume,” said Nord, in the press release. “From a profitability standpoint, operating margins are expected to be lower than 2013 by 60 to 70 basis points as the less favorable product mix, lower than previously anticipated volume and costs issues that impacted the third quarter are expected to continue for the rest of the year. We are taking more aggressive actions, primarily in our lighting business, to further improve our cost structure. We estimate the total charges impacting the fourth quarter to be in the five to six million dollar range.”
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