Franklin Electric (NASDAQ: FELE) reported Q1 EPS of $0.21, $0.19 worse than the analyst estimate of $0.40. Revenue for the quarter came in at $290.7 million versus the consensus estimate of $305.52 million.

Gregg Sengstack, Franklin Electric’s Chairman and Chief Executive Officer, commented:

“Our first quarter 2019 net sales results were meaningfully below our expectations and were the primary driver of our lower earnings in the quarter. The key factors that contributed to the lower than expected net sales included adverse winter weather conditions in North America that hurt all our operating segments, and weak international end markets primarily in Europe, the Middle East and Central America. Our operating income before restructuring expenses declined by about $9.5 million from the first quarter 2018 due in large part to the lower sales volume and adverse sales mix, resulting in lost leverage on our fixed cost base. Through our company wide focus on working capital reduction our operating cash flow improved by $24 million as compared to the first quarter of last year.

Despite the lower than expected demand in first quarter, we remain confident in the overall strength of the end markets in which we compete. Our Water Systems segment is positioned well to recover the declines in North America that resulted from adverse weather and we are encouraged by higher than expected net sales results in both Brazil and Asia Pacific during the first quarter. Although sales in our Pioneer branded dewatering equipment business and our Fueling Systems segment were also below expectations in the first quarter, we attribute this mostly to the timing of customer requested deliveries. As a result, we are reaffirming our 2019 earnings per share guidance of $2.37 to $2.47 per share.”

GUIDANCE:

Franklin Electric sees FY2019 EPS of $2.37-$2.47, versus the consensus of $2.40.

Commenting on the outlook for 2019, Mr. Sengstack said:

“As we look forward to the balance of 2019, the key question will be the recovery of net sales in North America in both our Water Systems and Distribution segments that we believe were delayed due to the poor weather during the first quarter. Our review with these businesses in the last several weeks confirms that the end market demand is still robust; however, the environment for equipment manufacturers will be even more competitive. Except for Europe and the Middle East, we think there is still opportunity for growth in the other international Water Systems businesses. Fueling Systems continues to capitalize on numerous market opportunities.

As a result, we continue to believe our previous growth guidance of 4 to 6 percent in 2019 is doable. We also continue to believe we can achieve our original earnings per share before restructuring charges guidance of $2.37 to $2.47 per share. In addition to some sales volume recovery, we are taking cost reduction actions in virtually all of our business units to make up portions of the earnings shortfall we experienced in the first quarter.”

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