It’s earnings season, and executives from publicly held electrical manufacturers, distributors and contractors have been busy on teleconference calls with analysts discussing their 2Q financial results. The stock chart on page 2 offers some insight into share price movement for these companies through Aug. 4. The capsule summaries below offer some insight into what’s on the minds of senior executives from several of these companies.
EMCOR Group
Ticker Symbol: EME
Anthony Guzzi, chairman, president and CEO
According to the earnings call transcript posted on the Motley Fool’s website, Guzzi saw retrofit opportunities for EMCOR’s mechanical systems unit in improving buildings’ air quality. “We do a lot of this on newer buildings,” he said. “You are going to have to update the HVAC system and the control system because with indoor air quality (IAQ), the biggest part of it is bringing in more outside air.
“That’s the first thing you could do, and it’s actually one of the most effective things you can do. As you play this out over a two-year period, you are going to see the replacement market get stronger going from the middle of 2021 and beyond. It’s already a pretty good replacement market, because equipment is so much more variable and efficient today than it was even just 10 years ago.
“And then I think there will be added HVAC content and controls content in new builds. You are already seeing that. When you get to the healthcare space, we have had this issue around ICU beds, where ICUs in general are built to operate near 90% of the capacity all the time. They are very expensive. So, I think as you build new hospitals and retrofit hospitals, I think you are going to be putting in the ability to flex into more ICU space.
“Indoor air quality takes all kind of different flavors. I can put ultraviolet (UV) lights in. I can do enhanced filtering. I can do bipolar ionization. I can increase the airflow from outside. I can do all kind of things with a system, those things and more, but they could be actually built in into the system. In the longer term, it’s,‘How do I make my space as flexible as I can either in industrial setting, an office setting, or in healthcare setting, so I can adjust between different kinds of uses depending on something like this potentially happening again?”
GENERAC
Ticker symbol: GNRC
Aaron Jagdfeld, president and CEO
Generac is now expecting full-year 2020 sales growth to be +5% to +8% year-over-year, an increase from the -5% to -10% decline previously expected, according to its 2Q 2020 earnings release.
“Second-quarter revenue and earnings dramatically exceeded our expectations primarily driven by robust demand for home standby generators as a result of the heightened awareness of the need for backup power since the onset of the COVID-19 pandemic.” said Aaron Jagdfeld, president and CEO, in the release. “With power outages on the rise, concerns of utility shutoffs in California, an active hurricane forecast for the upcoming season, and Americans spending more time at home, demand for home standby generators is at an all-time high. However, as expected, the ongoing pandemic around the world has significantly impacted demand for C&I products.
“While there remains a high degree of uncertainty around the magnitude and timing of an economic recovery, demand for our residential products is clearly benefitting from the emerging ‘Home as a Sanctuary’ trend as the importance of having an uninterrupted supply of power has never been more evident. This trend, along with elevated concerns about future outages, is underpinning the significant increase we are now expecting in our full-year revenue and earnings outlook for 2020.”
ENCORE WIRE
Ticker symbol: WIRE
Daniel Jones, chairman, president and CEO
While the company’s 2Q 2020 net sales of $253.6 million were down significantly from its 2Q 2019 net sales of $336.9 million, Jones said net earnings are strong and he is optimistic about the future. “Despite the economic challenges we are facing in this country, the strong earnings posted in the second quarter ended June 30, 2020, attest to the ability of our business model to succeed in both good times and bad,” he said in the earnings release. “We continue to increase the strength of our balance sheet, ending with over $250.4 million of cash on hand at June 30th to fund future growth.
“Beginning late in the second quarter, we experienced a renewed optimism from our customers as order volumes have started to normalize and all states reopened for construction. Looking ahead, the duration and severity of the COVID-19 outbreak and its long-term impact on our business are uncertain at this time. Developments surrounding the COVID-19 global pandemic are changing daily.”
REXEL SA
Ticker Symbol: RXL.PA
Patrick Berard, CEO
Berard said despite the tough business environment in the most recent quarter, the company posted strong positive cash flow and resilient sales and profitability. “In the last months, Rexel demonstrated its ability to adapt and respond to a challenging business environment globally. Rexel was able to do so by taking advantage of all the investments it made in its network and digital transformation over the past three years,” he said in the earnings release.
In the United States, Rexel’s sales were down -22.8%. The release said, “The western part of the country (California and Northwest) were the first regions to lock down before gradually recovering. In regions like the Midwest or the Gulf, we anticipate activity to remain depressed in heavy industries (automotive, aerospace) and Oil & Gas. In the Northeast (New York area), the pandemic impact has been significant, and we are adjusting costs and taking the opportunity to adapt the organization. Recovery will largely depend on whether some regions see a second wave of lockdown.”
W.W. GRAINGER
Ticker symbol: GWW
DG Macpherson, chairman and CEO
The company reported 2Q 2020 sales of $2.8 billion in the quarter driven by significant share gains in the U.S. segment and said the MRO market declined between -14% and -15% in the U.S. Daily sales for the quarter decreased -1.9% as compared to the 2019 second quarter. The sales decline was driven by volume decreases including unfavorable product mix from heightened levels of pandemic-related sales, as well as decreased volume of non-pandemic products.
However, Macpherson said in the earnings release that Grainger “gained significant share in a down market, fueled by elevated levels of pandemic product sales and improving trends in non-pandemic product sales throughout the quarter.”
SIGNIFY NV
Ticker symbol:LIGHT.AS
Eric Rondolat, chairman of the board of management & CEO
The Thompson Reuters transcript of Signify’s 2Q 2020 call with investment analysts offers some interesting insight into the state of the connected lighting market. Rondolat said the company’s installed base of connected light points increased from 61 million in Q1 2020 to 64 million in the second quarter of 2020 and that LED-based sales represented 80% of the company’s total sales.
He also discussed Signify’s investment in UV-C lighting, which has been shown to help eliminate the COVID-19 coronavirus. Said Rondolat, “Signify is leveraging more than 35 years of expertise in UV-C lighting to address the growing global need for the disinfection of air, surfaces as well as objects. Our UV-C lighting is well-proven and trusted as an efficient disinfectant. This was recently validated in a laboratory test by Boston University showing the Signify UV-C light sources inactivate the virus that causes COVID-19 in a matter of seconds. To complement our portfolio, we have recently acquired the asset of Germicidal Lamps & Applications, also called GLA, a Netherlands-based company with upper room air disinfection luminaires. We have also expanded our portfolio with 12 new families of UV-C-based products for air, surfaces and objects for professional markets and are increasing our UV-C light and source production capacity by a factor of eight this year.”