Hubbell Inc. (NYSE: HUBB) reported Q2 EPS of $1.97, $0.18 better than the analyst estimate of $1.79. Revenue for the quarter came in at $1.17 billion versus the consensus estimate of $1.12 billion.

"Second quarter results benefited from strong markets, higher price realization, our focus on cash flow, and the integration of Aclara," said David G. Nord, Chairman, President and Chief Executive Officer. "We delivered 5% organic sales growth in the quarter, with continued growth across all major market segments. Oil and Gas, as well as both light and heavy Industrial, were notably strong. The Electrical T&D market was also a standout, driven by transmission projects and system hardening initiatives. Our Power segment also benefited from build-outs in the outside plant telecommunications market. Lighting markets were mixed, with strength in residential and flat unit volumes and continued price pressure in C&I.

"As anticipated, operating margins were impacted by higher material costs in the quarter, however, price realization increased meaningfully from earlier in the year. Importantly, the net impact of price/material cost headwind was lower in the second quarter compared to the first quarter, a trend that we expect will continue to improve through 2018. Electrical operating margins overcame this headwind and expanded two points year-over-year in the quarter, supported by productivity in excess of cost increases, restructuring tailwinds, and incremental volume contribution." Mr. Nord continued, "Operating margins at Power declined year-over-year, primarily from the impact of the Aclara acquisition. Excluding Aclara, operating margins at Power declined approximately two points, primarily from material cost increases in excess of price.

"Another highlight of the quarter was that the company-wide focus on cash flow, specifically working capital, yielded positive results. Our cash performance in the first six months of 2018 was in line with historical trends, despite headwinds in the first quarter related to the Aclara transaction and taxes on our planned cash repatriation . Looking ahead, we expect our strong momentum to continue as we remain committed and on track to delivering free cash flow greater than net income in 2018.

"Our acquisition strategy continues to contribute meaningfully to our results and our ability to create value for our customers. Our acquisition of Aclara continues to perform well. Sales are tracking better than initial expectations, the markets remain robust and the integration process is on track. We believe that the combination of Hubbell and Aclara is a unique opportunity to accelerate the culture of innovation across both companies to better serve complementary customer bases and drive shareholder value."

SUMMARY & OUTLOOK

For the full year 2018, Hubbell now anticipates sales growth of 18% - 20% which represents a tightening of the original sales expectation range toward the high end. This range reflects 3% - 4% growth in end markets and approximately 15% growth from acquisitions completed to date, primarily Aclara. The end market outlook includes growth in the residential market of 5% - 6%, up from 2% - 4% previously. Other end market expectations have been raised to the higher end of our prior expectations: 6% - 7% growth for oil and gas markets, 3% - 4% growth for Electrical T&D and industrial markets, and 2% - 3% growth for non-residential markets.

The Company now expects 2018 reported diluted earnings per share in the range of $6.25 - $6.55, compared to prior expectations of $6.10 - $6.50, and adjusted diluted earnings per share ("adjusted EPS") in the range of $7.05 - $7.35 compared to prior expectations of $6.95 - $7.35 (1). Adjusted EPS excludes approximately $0.80 of acquisition-related and transaction costs of the Aclara acquisition. The Company believes adjusted EPS is an insightful measure of underlying financial performance and cash flow generation in light of the effects of the Aclara acquisition. These ranges include approximately $0.50 of legacy intangible asset amortization.

These ranges also now include the impact of Section 301 Tariff Lists 1 and 2, as currently interpreted, and related remediation actions.

The Company continues to expect free cash flow for the year to exceed net income.

"Given the strength of our first half results, we are raising and tightening our earnings expectations for 2018." Mr. Nord added, "We have consistently demonstrated our ability to mitigate headwinds through strong execution of our business strategy and believe that we are well positioned with quality brands, superior service, and long-standing customer relationships to capitalize on market growth. I am confident that Hubbell is positioned to continue delivering long-term, sustainable shareholder returns."

GUIDANCE:

Hubbell Inc. sees FY2018 EPS of $7.05-$7.35, versus the consensus of $7.08.

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