Analyst Note| Joshua Aguilar |
Despite its stock’s sell-off during the trading day, nothing about narrow-moat Hubbell’s fourth-quarter 2020 results alters our long-term view of the stock. In fact, the company’s sales performed right in line with our fourth-quarter expectations, although we concede margins came in a bit lower than we were expecting. However, we’re unconcerned with these developments. Some of this variance, for instance, was due to the non-repeat of a benefit from tariff mitigation in electrical systems in the fourth quarter of 2019, which created a more difficult comp. While we’ve reset expectations, adding about 40 basis points in year-over-year top-line growth than we originally expected due to acquisitions and the time value of money more than offset these headwinds. Therefore, we raise our fair value estimate by $1 to $162 from $161. That said, we plan on re-evaluating our long-term assumptions further as we roll our model once Hubbell releases its form 10-K filing.