Shares of Powell Industries, Inc. POWL have lost 10.1% since it reported fourth-quarter fiscal 2024 (ended September 2024) results on Nov. 19. The company recorded sequential declines for both earnings and revenues in the quarter, with the latter falling short of the Zacks Consensus Estimate.

POWL stock’s decline appears to have been influenced by the company’s cautious near-term outlook, with management acknowledging its fiscal first quarter to be seasonally slower.

Notwithstanding the recent decline in its share price, Powell’s shares have skyrocketed 217.8% year to date compared with the industry’s 23.9% growth. The broader Zacks Industrial Products sector and the S&P 500 have climbed 21.7% and 25.3%, respectively, in the same timeframe.

The company has also outperformed other industry players like EnerSys ENS and Franklin Electric Co., Inc. FELE, which have declined 1.9% and increased 14.2%, respectively, over the same time frame.

POWL Outperforms Industry, Sector & S&P 500

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POWL stock is currently trading above its 50-day and 200-day moving averages, indicating strong investor confidence and a favorable market outlook.

Powell Shares Trade Above 50-Day & 200-Day SMA

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Let us delve deeper into Powell’s fiscal fourth-quarter results and long-term prospects before assessing whether to buy, hold or sell the stock.

Decoding Powell’s Fiscal Q4 Results

In the fiscal fourth quarter, revenues improved 32% year over year to $275.1 million but narrowly missed the Zacks Consensus Estimate of $277 million. However, its adjusted earnings of $3.77 per share surpassed the consensus estimate of $3.49 and increased 74% year over year. The year-over-year increase was primarily driven by strength across all sectors, including petrochemical, oil & gas and commercial & other industrial sectors.

In the quarter, revenues from the oil & gas sector amounted to $115.4 million, up 23% year over year. While it generated revenues of $50.4 million from the petrochemical sector, (up 112%), revenues from the commercial & other industrial sector totaled $48.3 million (up 66%).

Factors Favoring POWL

Several favorable trends across the oil, gas and petrochemical end markets, including growth in energy transition projects, such as biofuels, carbon capture and hydrogen, have been driving POWL’s performance. Also, significant project awards, supported by high investments in LNG, related gas processing and petrochemical processes, are acting as tailwinds.

The company has also been capitalizing on the global growth trends of electrification and digitalization. Its increased participation across the electrical power value chain has enabled it to generate solid bookings from the electric utility and commercial markets.

This has led to a strong backlog level, which was $1.3 billion while exiting the fiscal fourth quarter. Although new orders declined on a sequential basis, the metric totaled $267 million compared with $171 million in the year-ago quarter.

Powell’s facility expansion project at the product factory in Houston is expected to help it execute its current backlog and plan for modest future volume growth. It plans to spend approximately $11 million on the expansion project. The expansionary efforts, which are targeted to be completed by mid-fiscal 2025, will likely enhance the company’s customer offerings across data centers, hydrogen, carbon capture and other transitional energy markets. 

Given the strength across its businesses, the Zacks Consensus Estimate for POWL’s fiscal 2025 (ending September 2025) revenues is pegged at $1.1 billion, indicating 10% year-over-year growth. The consensus estimate for first-quarter fiscal 2025 (ending December 2024) revenues is $252.2 million, indicating year-over-year growth of 30%.

Better Returns Than Industry

Powell’s trailing 12-month return on equity (ROE) is indicative of its growth potential. ROE for the trailing 12 months is 35.68%, much higher than the industry’s 10.24%, reflecting the company’s efficient use of shareholders’ funds.

Image Source: Zacks Investment Research

Image Source: Zacks Investment Research

Return on assets is 17.35%, also ahead of the industry’s 5.74%, indicating that Powell has been utilizing its assets efficiently to generate returns.

Stock Valuation

With a forward 12-month price-to-earnings ratio of 20.35X, which is well below the industry average of 27.5X, POWL stock presents an attractive valuation for investors. Also, the stock is cheaper than its peer, Schneider Electric S.E. SBGSY.

Price-to-Earnings (Forward 12 Months)

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Northbound Earnings Estimates

Earnings estimates for Powell have been going up, reflecting analysts’ optimism. The Zacks Consensus Estimate for fiscal 2025 earnings is pegged at $14.06, indicating an increase of 13% over the past 60 days. The figure also indicates year-over-year growth of 14.4%.

Should You Buy POWL Stock Now?

Strong momentum across end markets, constant focus on project executions, capacity expansions and innovative product offerings position Powell favorably for robust growth in the quarters ahead.

POWL is well-positioned to deliver sustained growth and shareholders’ value with a favorable valuation compared with the industry and its peers and strong earnings projections. We believe that POWL stock is an ideal addition to investors' portfolio. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Schneider Electric SE (SBGSY) : Free Stock Analysis Report

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