Powell Industries, Inc.  POWL is scheduled to release first-quarter fiscal 2025 (ended December 2024) results on Feb. 6, after market close.

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The Zacks Consensus Estimate for fiscal first-quarter earnings is pegged at $2.83 per share, which has declined 6.6% in the past 60 days. The consensus mark implies growth of 42.9% from the year-ago actual. The Zacks Consensus Estimate for revenues is pegged at $244.2 million, indicating a 25.9% increase from the year-ago actual.

POWL Earnings Estimate Movement

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Powell has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 57.6%. In the last reported quarter, the company delivered an earnings surprise of 8%.

The electrical equipment manufacturer’s impressive performance is largely attributable to its strong foothold and improving conditions in the oil and gas and petrochemical markets. Also, the company’s growing presence across the data center and electric utility sectors, along with a solid backlog, has been a key catalyst behind its growth.

Earnings Whispers for POWL Stock

Our proven model does not conclusively predict an earnings beat for Powell this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here, as elaborated below.

Earnings ESP: Powell has an Earnings ESP of 0.00% as both the Zacks Consensus Estimate and the Most Accurate Estimate are pegged at $2.83. You can uncover the best stocks before they are reported with our Earnings ESP Filter.

Zacks Rank: POWL presently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors That Shaped POWL’s Quarterly Performance

Powell has been witnessing several favorable trends across its oil, gas and petrochemical end markets that include growth in energy transition projects, such as biofuels, carbon capture and hydrogen. Significant project awards, supported by high investments in LNG, related gas processing and petrochemical processes, are expected to have driven its fiscal first-quarter revenues.

Higher demand for electrical power from data centers in the United States has also been driving the demand for POWL’s products and solutions. Powell has been strengthening its participation across the electrical power value chain and benefiting from solid momentum in electric utility and commercial end markets.

This has led to impressive growth in the backlog level, which was $1.3 billion while exiting the fourth-quarter fiscal 2024 (ended September 2024). It is worth noting that POWL’s new orders consisted of a healthy volume of small and medium-sized awards, reflecting its well-balanced portfolio across markets. This is likely to have augmented its performance in the first-quarter fiscal 2025.

Powell’s facility expansion project at the Houston product factory is expected to have helped it execute its current backlog and realize volume growth in the fiscal first quarter. The expansionary efforts have been enabling the company to better serve its customers with enhanced offerings across data centers, hydrogen, biofuels, carbon capture and other transitional energy markets.

However, the company has been witnessing escalating costs of sales and operating expenses, which are likely to have weighed on its bottom-line performance. It’s worth noting that material costs represented 47% of its revenues in fiscal 2024 and 49% in fiscal 2023. Also, the company has been witnessing supply-chain constraints for specifically engineered components, which are anticipated to have inflated costs and delayed the delivery of products to its customers.

Given the company’s substantial international operations, foreign currency headwinds are likely to have marred its margins and profitability.

POWL Stock Price Performance & Valuation

Powell’s shares have exhibited an uptrend in the past year, outperforming its peers and the Zacks Manufacturing - Electronics industry. POWL’s shares have surged 193.9%, outperforming the industry’s and the S&P 500’s growth of 10.8% and 24%, respectively. The company’s peers Eaton Corporation plc ETN and Franklin Electric Co., Inc. FELE have gained 30.4% and 3.1% in the same period, respectively.

POWL Shares Outperform Industry, S&P 500 & Peers

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With a forward 12-month price-to-earnings of 17.03X, which is below the industry average of 24.60X, the stock presents a potentially attractive valuation for investors. However, it is overvalued compared with its peer, EnerSys ENS, which is trading at 9.69X.

Powell Price-to-Earnings (Forward 12 Months)

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Investment Thesis

Powell has been capitalizing on the growing opportunities in oil and gas and petrochemical end markets with a comprehensive and diversified product portfolio. Solid momentum across data centers, hydrogen, biofuels, carbon capture and other transitional energy markets bodes well for the company ahead of its fiscal first-quarter earnings.

To add to its strengths, the company's strong focus on innovation, robust backlog level and expansionary efforts at the Houston facility have improved its growth potential.

However, escalating operating costs and supply-chain constraints, specifically for engineered components, are expected to have been spoilsports for its margin performance in the to-be-reported quarter.

Final Thoughts

Despite being attractively valued and having strong fundamentals, Powell has been witnessing some near-term challenges. 

Investors should monitor the developments pertaining to the stock closely for a more appropriate entry point as an erroneous and hasty decision could affect portfolio gains. Therefore, it might be prudent to wait for POWL’s earnings report before making an investment decision.

However, those who already own this stock may stay invested as the company's strong estimates, robust share price returns and strength in its businesses offer solid long-term prospects.

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