Hubbell Incorporated Q2 FY2026 earnings call

• Overall Financial Performance: Management reported strong Q2 2026 results with double-digit growth in sales, adjusted operating profit, and adjusted earnings per share, as well as year-to-date performance through the first half of 2026. Strong demand from megatrends, particularly data center markets and utility transmission and distribution (T&D) load growth investment, has produced a strong order book that increases visibility for the second half of 2026.
• NSI Acquisition: Hubble closed the acquisition of NSI in early June 2026 for a $3 billion purchase price. NSI is a strategic fit that fills key product line gaps in the Electrical Solutions segment, adds high-growth, high-margin product lines, and enables deeper penetration into data center, datacom, and broadband markets. Management expects the acquisition to be accretive to adjusted earnings by ~$0.20 per share in 2026 and ~$0.80 per share in 2027, with 2-3% revenue synergies and 3-5% cost synergies expected over three years.
• Balance Sheet and Capital Allocation: Post-acquisition, pro forma net debt to EBITDA leverage is approximately 2.9x. Management plans to deleverage the balance sheet over 24-30 months, continue investing in high-return capacity expansion CapEx, grow dividends, execute modest share repurchases, and pursue additional accretive M&A in the future.
• Operational Execution: Management is effectively managing cost inflation through proactive pricing actions and productivity improvements. The company is proactively investing in capacity expansion to meet growing customer demand in high-growth end markets.

Hubble has two operating segments: Utility Solutions and Electrical Solutions. For the second quarter of 2026:

1. Utility Solutions: Generated net sales of $1.026 billion, a 10% increase year-over-year, consisting of 6% organic growth and 4% contribution from acquisitions. It delivered adjusted operating profit of $263 million, a 10% year-over-year increase, with adjusted operating margins up slightly year-over-year. This segment contributed 60% of Hubble's total second quarter net sales.
2. Electrical Solutions: Generated net sales of $686 million, a 25% increase year-over-year, consisting of 18% organic growth and 7% contribution from the partial-month NSI acquisition. It delivered adjusted operating profit of $146 million, an 18% year-over-year increase, with adjusted operating margins of 21.2% (down 130 basis points year-over-year). This segment contributed 40% of Hubble's total second quarter net sales.

Total company second quarter 2026 net sales were $1.712 billion, up 15% year-over-year (10% organic growth, 5% acquisition contribution). Total adjusted operating profit was $409 million, up 13% year-over-year, with an adjusted operating margin of 23.9%.

• Hubble raised its full year 2026 guidance, with total sales growth now expected to be 16% to 18% (up from a prior range of 8% to 11%), reflecting 9-11% organic growth (up from 6-9% prior) and 5 percentage points of acquisition contribution from NSI.
• Utility Solutions full year organic growth guidance was raised to 7% to 9%, reflecting strong order-driven visibility in T&D markets. Electrical Solutions full year organic growth guidance was raised to 12% to 14%, driven by an expectation of ~50% full year data center sales growth and stronger non-residential and light industrial markets.
• Full year adjusted operating margins are expected to be 23.1% to 23.4%, representing 40 to 70 basis points of year-over-year expansion, including margin accretion from NSI and the impact of $20 million in Q3 IEPA tariff refunds.
• Full year adjusted earnings per share guidance was raised to $20.25 to $20.55 (up from a prior range of $19.30 to $19.85), representing 11% to 13% year-over-year growth, with ~20% adjusted operating profit growth at the midpoint.
• 90% free cash flow conversion of adjusted net income is expected for full year 2026, reflecting elevated CapEx spending and acquisition-related costs.
• Full year net interest expense is expected to be $170 million, and the adjusted full year tax rate is expected to be 22.0% to 22.5%.

• Ongoing cost inflation creates pressure on margins, requiring continued pricing and productivity actions to offset rising input costs.
• Large transmission and substation projects have inherent quarter-to-quarter timing variability that can create near-term revenue volatility.
• Elevated CapEx and acquisition-related spending will reduce free cash flow conversion relative to historical levels over the next two to three years.

Q: What is driving the recent strength in utility distribution growth, what timing factors affect transmission substation results, and when will margin expansion occur in the back half of the year? / A: Distribution strength reflects strong underlying market demand driven by long-term grid hardening needs and easy year-over-year comparisons after multi-year industry destocking. Transmission and substation grew high single digits in the first half and is on track to grow double digits in the second half, with current quarterly fluctuations only reflecting normal project timing. Margin expansion in the back half will be front-loaded to Q3 due to the timing of IEPA tariff refunds, but management expects full back half margin expansion to meet guidance. (368 characters)

Q: Do you have visibility into 2027 demand, and what is the outlook for additional pricing actions in 2026 after the April increase? / A: Orders are already being booked for 2027 delivery, particularly for longer-cycle transmission and substation projects, driven by multi-year grid investment from data center load growth and grid hardening needs. After the April price increase that added ~1 percentage point of price for 2026, an additional July price increase is expected to add ~0.5 percentage points more in the back half, bringing full year 2026 pricing to 3-4 percentage points to offset ongoing inflation. (397 characters)

Q: What is driving increased content gains for Hubble in data center markets, and is the sequential strength in electrical solutions driven by unusual June strength or broader market improvement? / A: Content gains come primarily from aggressive capacity and inventory investment to meet short-cycle demand, which allows Hubble to capture market share when customers need rapid delivery. Additional incremental content comes from new product development for higher-capacity 800-volt data center infrastructure. Sequential strength in Q2 reflects broad-based accelerating growth across non-residential, light industrial, and data center markets rather than a one-time June spike, with non-residential demand showing steady improvement after multi-quarter project delays. (451 characters)

Q: How much of the full year 40 basis point expected operating margin increase comes from core operational improvements versus one-time impacts, and will electrical solutions return to year-over-year margin expansion in Q4 after the Q3 tariff benefit? / A: Of the 40 basis points of total expected margin expansion, 30 basis points comes from net tariff impacts and 40 basis points comes from NSI acquisition accretion. These gains are partially offset by higher planned growth investment, with core volume growth from electrical end markets contributing the remaining operational upside. The $20 million tariff benefit will be split evenly between electrical and utility, concentrated entirely in Q3, and management still expects electrical solutions to deliver year-over-year margin expansion in Q4 even excluding this one-time benefit. (438 characters)