It’s been said many times that the stock market doesn’t always reflect the realities of current business conditions, and there’s no clearer example of that than the current run-up in the prices of many publicly traded electrical manufacturers, distributors and contractors. While even the most optimistic forecasters are calling for electrical sales growth that’s near the industry’s slow-but-steady historic range of 4%-6%, the majority of the electrical stocks that Electrical Marketing’s editors track are currently up well over 10%.
While the most recent U.S. Department of Commerce data shows that electrical manufacturers’ shipments were down slightly YTY through April (- 2.2%) and Electrical Wholesaling’s 2013 sales forecast is calling for a 4.4% increase, a surprising number of publicly held electrical companies clobbered the overall market averages during the first half of 2013.
Manufacturers lead the pack. Electrical manufacturers did the best, as 15 of the 30 publicly held manufacturers of electrical products beat the key market averages over the past six months, and nine manufacturers were up 20% or better YTD. Leading the pack were Coleman Cable Inc. (+111%); Cree Inc. (+64.8%); and Magnetek (+40.8%). Coleman Cable and Cree have been on quite a tear over the past year. The Waukegan, Ill.-based Coleman Cable was up 117.9% YTY through July 9, and the Raleigh-based Cree was up a whopping 183.1% over the same period. Other market leaders YTD were Generac (+95.2%) power quality product manufacturer SL Industries (+85%); and Eaton Corp. (+79.5%).
Distributor stocks lagging manufacturers’ stocks. The stocks of publicly traded distributors of electrical supplies, industrial distributors and electronics distributors as a whole hit 2013’s half-way mark much closer to the market’s overall averages. Only Genuine Parts Co. (+28.4%); W.W. Grainger (+26%); and Anixter International (+19%) are beating the Dow Jones, S&P 500 and Nasdaq Composite so far this year. On a year-to-year basis, these three companies are also leading all of the other publicly held distributors that EM tracks, with Anixter up 47.5% YTY; Genuine Parts up 42.4%; and Grainger up 41.3% through the market’s July 9 close. Wolseley (+31.4%); Houston Wire & Cable (+31%); and MSC Industrial Direct (+29.3%) are also up more than 20% YTY.
Contractor stocks looking strong, too. EMCOR and Pike Electric were also well above the overall stock market averages at the six-month mark, with EMCOR posting a 22% gain in share prices YTD and a 53.8% gain YTY and Pike Electric shares racing to a 45.4% gain YTD and a 31.1% gain YTY. Shares of Quanta Services lagged these contractors YTD (-2.7%) but posted a healthy YTY gain of 15.6%.
While run-up over the past six months in some electrical stocks is indeed impressive, you need to take a step back and take a longer look at the stock performance of some the companies in this chart. For instance, Cree is generating lots of excitement on Wall Street right now because many stock analysts seem to have suddenly discovered the potential LEDs have to revolutionize the lighting market. But it has been a wild ride for any long-time holders of this stock, which briefly topped $80 per share in mid-April 2010 before tumbling over the next two years to the $20 level, which is closer to its historical level for the past 10 years.
It’s tough to say any one electrical product niche is hot on Wall Street right now, although the price increases for Cree and Acuity Brands (up 23.5% YTD and 44.7% YTY) and the generally bullish reports by analysts on solid-state lighting would point toward the stocks of publicly held LED manufacturers with solid balance sheets. Another electrical stock that has been among the market leaders over the past few years is Littelfuse, which is up 32.8% YTD and 46.3% YTY.
On the flip side are Fastenal and WESCO, which are below the electrical group averages for the first six months of 2013, but over the past few years have been two of the hottest distributor stocks that EM tracks.