HUBB - Embedded Expectations Analysis - 2020 03 23
ï€ Hubbell Incorporated (HUBB:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 13.4x Uniform P/E. At these levels, markets are pricing in bearish expectations for the firm, and management may have concerns about their heavy industrial and lighting businesses, earnings growth, and costsï€ Specifically, management may be concerned about declines in their heavy industrial business, the volume mix between distribution and transmission, and AMI delays. Moreover, they may lack confidence in their ability to sustain earnings and natural gas business growth, strengthen their lighting business, and manage restructuring costs and pension obligations. Finally, they may be concerned about the sustainability of positive homebuilder start trends, and they may lack confidence in their ability to broaden their portfolio in order to smooth out revenue growth
Hubbell is primarily engaged in the design, manufacture and sale of electrical and electronic products for a range of non-residential and residential construction, industrial and utility applications. The company has two segments: Electrical, which comprised of businesses that sell stock and custom products including application wiring device products, electrical products, connector and grounding products, lighting fixtures and controls, components and assemblies, as well as other electrical equipment; and Power, which consists of operations for the design, manufacture and sale of transmission and distribution components primarily for the electrical utilities industry.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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