Powell Industries, Inc. POWL stock has lost 23.5% in the year-to-date period, wider than the broader electronics manufacturing industry’s 6.3% decline. The stock has also underperformed the Industrial Products sector’s decline of 0.6% and the S&P 500’s growth of 2%.

POWL stock also shows a downside against its industry peers like ESCO Technologies Inc. ESE and EnerSys ENS, which have gained 19.3% and 9.2%, respectively, in the same period.

POWL Stock Price Performance

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Despite its recent downturn, POWL’s shares have gained 5% over the past year, outperforming the sector’s 1.8% growth and the industry’s 9.2% decline. The electrical equipment manufacturer holds a strong foothold amid improving conditions in the oil and gas and petrochemical markets. Also, its efforts to expand its presence beyond the oil, gas and petrochemical markets have enhanced its market share across the utility, commercial and other industrial markets.

Let us delve deeper into Powell Industries’ first-quarter fiscal 2025 (ended December 2024) results and long-term prospects before assessing whether to buy, hold or sell the stock.

Decoding Powell Industries' Fiscal Q1 Results

In the fiscal first quarter, revenues improved 24.4% year over year to $241.4 million but narrowly missed the Zacks Consensus Estimate of $244 million. However, its adjusted earnings of $2.86 per share surpassed the consensus estimate of $2.83 and surged 44.3% year over year. The year-over-year increase was primarily driven by strength across all sectors, including electric utility, oil & gas and commercial & other industrial sectors.

In the quarter, revenues from the oil & gas sector amounted to $95.7 million, up 14% year over year. While it generated revenues of $51.2 million from the electric utility sector, (up 26%), revenues from the commercial & other industrial sector totaled $44.3 million (up 80%).

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 first quarter. New orders totaled $269 million in the quarter, an increase of 36% from the year-ago quarter. This was driven by robust order activity in the oil & gas and electric utility sectors.

Powell Industries' 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.

POWL’s commitment to rewarding its shareholders through dividend payouts is also encouraging. In February 2025, it hiked its quarterly dividend by approximately 1% to 26.75 cents per share. The company’s strong liquidity position supports its shareholder-friendly activities. Exiting the fiscal first quarter, Powell Industries had cash equivalents of $325.6 million, higher than $315.3 million at the end of fiscal 2024.

POWL Stock Valuation

With a forward 12-month price-to-earnings ratio of 11.99X, which is well below the industry average of 22.16X, POWL stock presents an attractive valuation for investors. Also, the stock is cheaper than its peer, Schneider Electric S.E. SBGSY, which is trading at 23.71X.

POWL Price-to-Earnings (Forward 12 Months)

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Few Near-Term Concerns Prevail

Powell Industries has been dealing with the adverse impacts of high operating costs and expenses. For instance, in the first quarter of fiscal 2025, the company’s cost of sales climbed 24.8% year over year, while selling, general and administrative expenses rose 5.5% due to high raw material costs. The cost of sales, as a percentage of revenues, was 75.4% for the quarter.

In fiscal 2024, its cost of sales climbed 34% year over year, while selling, general and administrative expenses increased 7.7%. It’s worth noting that material costs represented 47% of the company’s revenues in fiscal 2024, 49% in fiscal 2023 and 51% in fiscal 2022.

The company utilizes a variety of raw materials, including steel, copper, aluminum and various engineered electrical components, in its businesses. The persistence of supply-chain constraints for specifically engineered components might continue to inflate costs and delay the delivery of products to its customers.

POWL Earnings Estimate Revision Trend

Amid these, the company’s earnings estimates for second-quarter fiscal 2025 (ending March 2025) have decreased 0.9% to $3.34 per share over the past 30 days. Earnings estimates for third-quarter fiscal 2025 (ending June 2025) have decreased 0.5% to $3.76 per share. Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

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Should You Invest in POWL Stock Right Now?

Despite strong fundamentals and an impressive dividend pay-out trend, certain challenges, including rising costs and supply-chain disruptions, are limiting this Zacks Rank #3 (Hold) company’s near-term prospects. While current shareholders should hold their positions, new investors should wait for the stock to retract some of its recent gains and provide a better entry point.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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