Powell Industries, Inc.  (POWL Quick QuotePOWL - Free Report) is scheduled to release fourth-quarter fiscal 2024 (ended September 2024) results on Nov. 19, after market close.

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The Zacks Consensus Estimate for fiscal fourth-quarter earnings is pegged at $3.49 per share, which has remained unchanged in the past 60 days. The consensus mark implies growth of 79% from the year-ago actual. The Zacks Consensus Estimate for revenues is pegged at $276.7 million, indicating a 32.6% increase from the year-ago actual.

POWL’s Estimate Movement

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Powell has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 69.9%. In the last reported quarter, the company delivered an earnings surprise of 78.8%.

The electrical equipment manufacturer’s impressive performance has been largely driven by its strong foothold and improving conditions in the oil and gas and petrochemical markets. Also, the company’s growing presence across the data center and electric utility sectors, along with a solid backlog, has been a key catalyst behind its growth.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Powell this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here, as elaborated below.

Earnings ESP: It has an Earnings ESP of 0.00% as both the Zacks Consensus Estimate and the Most Accurate Estimate are pegged at $3.49. You can uncover the best stocks before they are reported with our Earnings ESP Filter.

Zacks Rank: POWL presently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Likely to Have Shaped POWL’s Quarterly Performance

Powell has been witnessing several favorable trends across its oil, gas and petrochemical end markets that include growth in energy transition projects, such as biofuels, carbon capture and hydrogen. Also, significant project awards, supported by high investments in LNG, related gas processing and petrochemical processes, are likely to have driven its fiscal fourth-quarter revenues.

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 impressive growth in the backlog level, which was $1.3 billion while exiting the fiscal third quarter. It is worth noting that POWL’s new orders totaled $356 million in the fiscal third quarter, consisting of a healthy volume of small and medium-sized awards. This is likely to have augmented its performance in the fiscal fourth quarter.

Powell is expected to have benefited from its capacity expansion initiatives, particularly at the electrical products factory in Houston. The expansionary efforts have been enabling the company to better serve its customers with enhanced offerings across data centers, hydrogen, biofuels, carbon capture and other transitional energy markets.

However, POWL has been witnessing escalating costs of sales and operating expenses, which are likely to have weighed on its bottom-line performance. Also, the presence of supply-chain constraints specifically for engineered components are anticipated to have inflated the company’s costs and delayed the delivery of products to its customers.

Powell has considerable exposure to overseas markets. Given the company’s substantial international operations, foreign currency headwinds are also likely to have marred its margins and profitability.

Price Performance & Valuation

Powell’s shares have exhibited an uptrend in the past year, outperforming its peers and the Zacks Manufacturing - Electronics industry. POWL’s shares have surged 265.7%, outperforming the industry’s and the S&P 500’s growth of 32.7% and 33%, respectively. The company’s peers Eaton Corporation plc (ETN Quick QuoteETN - Free Report) and EnerSys (ENS Quick QuoteENS - Free Report) have gained 59.5% and 9.9%, respectively, in the same period.

POWL Outperforms Industry, S&P 500 & Peers

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With a forward 12-month price-to-earnings of 23.97X, which is below the industry average of 27.17X, the stock presents a potentially attractive valuation for investors. Also, POWL is trading below its peer, Franklin Electric Co., Inc. (FELE Quick QuoteFELE - Free Report) .

Price-to-Earnings (Forward 12 Months)

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Investment Thesis

With a comprehensive and diversified product portfolio, Powell has been capitalizing on the growing opportunities in oil and gas and petrochemical end markets. Robust demand across data centers, hydrogen, biofuels, carbon capture and other transitional energy markets bodes well for the company ahead of its fiscal fourth-quarter earnings.

However, escalating operating costs and supply-chain constraints specifically for engineered components are expected to have been spoilsports for its margin performance.

Summing Up

Despite being attractively valued and having strong fundamentals, Powell has been witnessing some near-term challenges. 

Investors should monitor the developments pertaining to the stock closely for a more appropriate entry point. Therefore, it might be prudent to wait for POWL’s earnings report before making an investment decision.

However, those who already own this stock may stay invested as the company's strong estimates, robust share price returns and strength in its businesses offer solid long-term prospects.