Powell Shares Down on Q1 Earnings Miss (Revised)

Zacks

Powell Industries, Inc. (POWL) announced first quarter fiscal 2014 earnings of 60 cents per share, 11.8% lower than the Zacks Consensus Estimate of 68 cents. The bottom line was in line with the year-ago earnings.

The lower-than-expected earnings evoked a negative market reaction with the shares losing 1.05% to close at $59.28 yesterday.

Total Revenue

Total revenues at the end of the fiscal first quarter were $172 million, up 17.0% from the prior-year quarter.

The top line was boosted primarily by strong international performance. International revenue was driven by the expansion of the company’s Canadian operations and the timing of oil and gas construction projects.

Operational Update

Powell Industries’ selling, general & administrative (SG&A) expenses during the quarter were $21.6 million, up 9.9% from the comparable prior-year period. Research and development expenses followed the same trend, increasing 7.3% year over year to $1.83 million.

However, SG&A expenses in the reported quarter declined as a percentage of revenue from the comparable prior-year period. Accordingly, operating income increased 6.5% year over year to $11.2 million.

Interest expenses in the reported quarter increased 13.1% year over year to $69 million.

Financial Update

Powell Industries’ current assets as of Dec 31, 2013, were $0.32 billion, lower than $0.34 billion as of Sep 30, 2013.

Long-term debt and capital lease obligations as of Dec 31, 2013, were $2.8 million, lower than $3.2 million as of Sep 30, 2013.

Capital expenditure of the company in the quarter under review was $5.8 million versus $13.4 million in the year-ago period.

Guidance

Powell Industries expects fiscal 2014 revenues from continuing operations to range between $700 million and $750 million.

The company also raised its fiscal 2014 earnings per share expectation to a range of $2.85 to $3.35 per diluted share from the previous guidance of $2.75 to $3.25 per diluted share. The new guidance takes into consideration current year amortization of the deferred credit related to Powell's amended supply agreement of 8 cents per diluted share and excludes the discontinued operations of Transdyn, Inc.

Other Releases

Eaton Corporation (ETN) reported earnings of $1.08 per share in the fourth quarter, surpassing the Zacks Consensus Estimate by 1.9%.

Edison International (EMR) announced first quarter fiscal 2014 operating earnings of 67 per share, in line with the Zacks Consensus Estimate.

Our View

Several initiatives underway at Powell’s during the quarter are expected to boost results going forward. Significant among them is a four-year contract with General Electric (GE). This contract will ensure a steady revenue stream for the next few years.

However, we are concerned about the year-over-year decline in order booking and a depleting backlog. Management needs to be more proactive to fix this decline.  

Powell Industries currently has a Zacks Rank #5 (Strong Sell).

(We are reissuing this article to correct a mistake. The original article should no longer be relied upon.)
 

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