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Powell Industries, Inc. (POWL - Snapshot Report) announced second quarter fiscal 2014 earnings of 58 cents per share, 26.6% lower than the Zacks Consensus Estimate of 79 cents.  However, the bottom line was ahead of the year-ago earnings of 52 cents per share by 11.5%.

Total Revenue

Total revenues in the fiscal second quarter were $162.3 million, up 11.1% from the prior-year quarter.

Total revenues in the reported quarter were however lower than the Zacks Consensus Estimate of $186 million by 12.7%.

Operational Update

Powell Industries’ selling, general & administrative (SG&A) expenses during the quarter were $22.1 million, up 5.2% from the comparable prior-year period. Research and development expenses followed the same trend, increasing 16.6% year over year to $2.15 million.

However, due to its cost-saving initiatives, total expenses in the reported quarter declined as a percentage of revenues by 70 basis points. Accordingly, operating income increased to $10.5 million from $6.29 million in the year-ago period.

New orders from continuing operations in the fiscal second quarter were $163 million versus $118 million in the second quarter of fiscal 2013.

Interest expenses in the reported quarter decreased 4.6% year over year to $41 million.

Financial Update

Long-term debt and capital lease obligations as of Mar 31, 2014, were $2.8 billion, lower than $3.2 billion as of Sep 30, 2013.

Capital expenditure of the company in the quarter under review was $2.7 million versus $19.9 million in the year-ago period.


Powell Industries expects fiscal 2014 revenues from continuing operations to range between $700 million and $750 million and earnings per share to come in a band of $2.85 to $3.35 per diluted share.

The guidance provided above excludes the discontinued operations of Transdyn, Inc. and the gain on sale of assets.

Other Releases

AO Smith Corp. (AOS - Snapshot Report) reported earnings of 54 cents per share in the first quarter 2014, surpassing the Zacks Consensus Estimate by 1.9%.

Eaton Corporation plc.’s (ETN - Analyst Report) first quarter earnings per share of $1.01 surpassed the Zacks Consensus Estimate by a penny.

Our View

In spite of missing the Zacks Consensus Estimate for both revenues and earnings, Powell Industries recorded year-over-year gains in both these metrics. The improvement was primarily due to process enhancements and cost saving initiatives.

Total backlog at the end of Mar 31, 2014 was $452 million versus $439 million at the end of the prior-year quarter. Though marginal, it shows the company’s ability to win regular contracts.

Powell Industries currently has a Zacks Rank #3 (Hold). A better ranked stock in the same space is Plug Power Inc. (PLUG - Snapshot Report). Plug Power carries a Zacks Rank #2 (Buy).

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