Executive Summary / Key Takeaways

• Hubbell is strategically positioned at the nexus of grid modernization and electrification, capitalizing on robust utility capital expenditures and surging demand from data centers and industrial reshoring. This focus underpins its consistent financial performance and long-term growth trajectory.
• The company's operational excellence, including proactive price/cost management and ongoing restructuring initiatives, has enabled strong margin expansion and double-digit adjusted earnings growth, effectively offsetting inflationary pressures and market headwinds.
• Hubbell's core technological differentiators, particularly in specialized utility connectors, modular power distribution, and advanced metering solutions, provide a significant competitive moat, driving superior product performance and customer loyalty in critical infrastructure applications.
• Recent strategic acquisitions, such as DMC Power, Ventev, and Nicor, are enhancing Hubbell's portfolio in high-growth, high-margin areas like substation and wireless network solutions, further strengthening its market position and contributing to future earnings accretion.
• Management's 2025 outlook anticipates mid-single-digit organic growth and continued adjusted operating margin expansion, with a preliminary 2026 view signaling broad-based organic growth across its Utility and Electrical Solutions segments, supported by a healthy balance sheet poised for strategic investments.

Hubbell's Enduring Foundation and Strategic Evolution

Hubbell Incorporated, founded in 1888, has evolved into a global powerhouse in electrical products and utility solutions, playing a critical role in energizing communities and enabling reliable infrastructure. The company strategically segments its operations into Utility Solutions and Electrical Solutions, addressing the entire energy value chain: "In Front of the Meter" (utility transmission and distribution), "on The Edge" (utility-owner/operator connections), and "Behind the Meter" (end-user energy consumption). This comprehensive approach allows Hubbell to capitalize on fundamental shifts in energy infrastructure.

The company's history is marked by strategic adaptations, notably the 2018 acquisition of Aclara, which significantly bolstered its capabilities in grid modernization, an area previously lacking depth in its portfolio. This move laid the foundation for the current Grid Automation business. More recently, Hubbell has actively reshaped its portfolio, divesting its residential lighting business in Q1 2024 to sharpen its focus on higher-growth, higher-margin opportunities. Concurrently, the 2023 acquisition of Systems Control and the recent October 2025 acquisition of DMC Power for approximately $825 million underscore a clear strategy to enhance its presence in the high-growth substation market. These actions align with Hubbell's overarching goal to complement organic growth with acquisitions that expand capabilities and product offerings in core and complementary markets, all while optimizing its cost structure.

The broader industry landscape is characterized by powerful secular tailwinds. Utility capital expenditures are accelerating, driven by the imperative of grid modernization, the need for hardening and resiliency against extreme weather, and the substantial load growth from new data centers and industrial reshoring. Multi-year capital plans from a representative group of Hubbell's top investor-owned utility customers have, on average, been revised upwards by approximately 10% over the past six months. This increased investment provides a robust backdrop for Hubbell's specialized offerings.

Competitive Landscape and Technological Edge

Hubbell operates within a competitive landscape populated by large, diversified industrial conglomerates and specialized players. Key direct competitors in the Utility T&D space include the Cooper division of Eaton Corporation , Thomas & Betts (now part of ABB Ltd. (ABBNY)), and MacLean Power Systems, a private entity. In the broader electrical and industrial solutions market, Hubbell also competes with companies like Schneider Electric and Siemens AG (SIEGY).

Hubbell's competitive advantage is deeply rooted in its specialized technology and strong customer relationships. The company's products are often a small but critical component of larger systems, where quality, service, and availability are paramount. This allows Hubbell to command strong specified positions and pricing power. For instance, in utility applications, Hubbell's connectors, insulators, and surge protectors are known for their durability and reliability in demanding environments. The recent acquisition of DMC Power, with its unique technical solution for crimping connectors onto conductors in substations, exemplifies Hubbell's focus on differentiated technology that offers significant efficiency and installation savings over traditional welding methods. This specialized expertise provides a qualitative lead in high-reliability segments, potentially enhancing market share and financial outcomes.

Compared to more diversified players like Eaton (ETN), Hubbell's focused expertise in utility infrastructure and specialized electrical products often translates into superior product performance for niche applications. While larger competitors may have broader R&D budgets for integrated digital solutions (like Schneider Electric's (SBGSY) IoT platforms), Hubbell's innovation is targeted at enhancing its core offerings, such as developing new products for higher amperages in data centers. The company's strategy to unify its Electrical Solutions segment and realign its sales force by geography and vertical market specialists is designed to improve cross-selling and customer response, allowing it to sell a broader basket of products more effectively. This approach helps Hubbell compete collectively and drive outgrowth in key vertical markets, even against larger rivals.

Hubbell's exposure to offshore supply chains, particularly China, has been significantly reduced, cutting its reliance by about half over the last several years through divestitures and reshoring efforts. This strategic move aims to mitigate risks from geopolitical tensions and tariffs, positioning Hubbell favorably compared to some peers with higher foreign sourcing.

Technological Differentiation and Innovation

Hubbell's investment thesis is inextricably linked to its technological prowess and continuous innovation, particularly in critical infrastructure. The company's core differentiated technologies span both its Utility and Electrical Solutions segments, providing tangible benefits that enhance performance, reliability, and efficiency for its customers.

In the Utility Solutions segment, Hubbell offers a comprehensive suite of products for transmission, substation, and distribution markets. Its advanced connectors, arresters, insulators, and enclosures are designed for extreme conditions, ensuring grid stability and longevity. The acquisition of DMC Power introduces a "unique technical solution" for utility substation and transmission markets, utilizing a specialized swage technology for crimping connectors onto conductors. This method offers a significant advantage over traditional welding, providing "efficiency in installation" and contributing to "really nice margin" for the business. Hubbell's Grid Automation segment, while facing recent headwinds, includes advanced metering infrastructure (AMI) networks and grid protection and control devices. The company's focus on repositioning its meters and AMI business with an "appropriate cost structure and a more focused strategy" aims to deliver growth at improving margin levels. Furthermore, the acquisition of Nicor, Inc. in Q3 2025 added water metering endpoint solutions, including polymer meter box lids and covers, integrating and optimizing AMI networks.

Within the Electrical Solutions segment, Hubbell's technological differentiators are evident in its offerings for "Behind the Meter" applications. The company is a strong player in data center infrastructure, providing specialized connectors, grounding balance-of-system products, and modular power distribution skid solutions through its PCX business. Hubbell is actively engaged in new product development (NPD) to support data centers with "higher amperages," addressing the evolving demands of this high-growth market. The Burndy brand is a leader in connectors for industrial applications, benefiting from the trend of industrial reshoring and mega-projects like chip plants. The Q1 2025 acquisition of Ventev further expanded the Electrical Solutions portfolio with a "complete ecosystem of solutions to power, protect, and connect wireless networks," enhancing Hubbell's capabilities in a rapidly growing area.

The "so what" for investors is clear: these technological advantages translate directly into a robust competitive moat and superior financial performance. By offering highly reliable, efficient, and specialized solutions, Hubbell secures strong customer loyalty and pricing power. The continuous investment in R&D, such as developing higher-amperage connectors for data centers or unique substation technologies, ensures Hubbell remains at the forefront of critical infrastructure needs. This technological leadership underpins its ability to achieve higher average selling prices (ASPs), maintain lower customer churn, and ultimately drive better margins and sustained long-term growth. The strategic integration of acquired technologies, like DMC Power's, into Hubbell's existing sales force and portfolio breadth is expected to "accelerate DMC's strong growth trajectory further over the long term".

Financial Performance: A Story of Resilience and Strategic Execution

Hubbell's financial performance in 2025 reflects a company adept at executing its strategy amidst dynamic market conditions, demonstrating resilience and a commitment to profitable growth. The company's recent shift in accounting method for certain U.S. inventory from LIFO to FIFO, retrospectively applied in Q2 2025, is a notable change. This move "provides a better matching of costs and revenues, conforms the Companys inventory to a single method of accounting and improves comparability with the Companys peers". The transition resulted in a $29 million decrease in Cost of Goods Sold (COGS) in Q2 2025 and a $20 million decrease for the first half of 2025.

For the third quarter ended September 30, 2025, Hubbell reported net sales of $1,502.40 million, an increase of 4.10% year-over-year. This growth was fueled by a 3.20% increase in organic sales volume, primarily driven by favorable price realization, and a 0.80% contribution from acquisitions. Operating income for the quarter stood at $330.60 million, with an operating margin of 22%. Adjusted operating margin expanded by 10 basis points to 23.90%, primarily due to operational productivity and favorable price realization, which more than offset material and other cost inflation, including tariff expenses. Net income attributable to Hubbell Incorporated increased by 13% to $255.50 million, leading to diluted earnings per share of $4.77, a 14% increase over the prior year.

Looking at the first nine months of 2025, net sales increased by 1.30% to $4,351.90 million, with organic net sales growing 1.60%. This was driven by a low single-digit increase in price realization, partially offset by a low single-digit decrease in volumes. Gross profit margin expanded to 35.40%, benefiting from improved operational productivity, favorable pricing, and lower acquisition-related intangible asset amortization, despite headwinds from material and other cost inflation.

Segment-wise, Utility Solutions reported net sales of $943.80 million in Q3 2025, a 1.20% increase, driven by a 0.50% organic sales increase and a 0.60% increase from acquisitions. The Grid Infrastructure unit, comprising about 75% of the segment, achieved high single-digit organic growth, with transmission up double-digits and distribution up double-digits, signaling the conclusion of the "channel destock" that had been a "nagging headwind in 2024". Grid Automation, however, saw an 18% decline in Q3 2025 due to large project roll-offs. The Electrical Solutions segment delivered robust performance, with net sales of $558.60 million in Q3 2025, a 9.60% increase, including 8.30% organic growth. This was primarily driven by strong demand in data centers and light industrial markets. The segment's operating margin expanded by 150 basis points to 19.90% in Q3 2025, reflecting favorable price realization, operational productivity, and higher unit volumes.

Hubbell's liquidity and capital resources remain robust. As of September 30, 2025, cash and cash equivalents stood at $666.80 million. Net cash provided by operating activities for the nine months ended September 30, 2025, was $582.30 million, an increase from the prior year, reflecting higher net income. The company's balance sheet is "poised for investment" even after the $825 million DMC Power acquisition. Hubbell also maintains significant financial flexibility with a new $1 billion committed unsecured revolving credit facility (undrawn as of September 30, 2025) and a total outstanding share repurchase authorization of approximately $535 million. Capital expenditures, which have doubled over the past three years, are strategically directed towards capacity expansion in high-growth areas and productivity initiatives, ensuring efficient use of capital.

Outlook and Growth Catalysts: Energizing Future Returns

Hubbell's outlook for 2025 and beyond is underpinned by confidence in its strategic positioning and operational execution. The company raised its full-year 2025 adjusted earnings per share outlook to a range of $18.10 to $18.30, a $0.30 increase at the midpoint from its prior guidance. This upward revision is primarily driven by a lower expected full-year tax rate, with operational performance expected to offset any impact from lower organic growth with stronger margins. The 2025 outlook implies 3% to 4% organic growth and adjusted operating margins expanding in the 50 to 100 basis point range, supported by "good pricing, good productivity initiatives". Free cash flow conversion is targeted at "90% adjusted income conversion" for the full year.

The fourth quarter of 2025 is anticipated to be particularly strong, with expectations of "8% to 10% organic growth with contributions from both segments". This acceleration is attributed to the fading headwinds in Grid Automation, incremental pricing actions, strong visibility into data center projects, new capacity in the Burndy business, and a "very substantial pickup in September and October in the transmission and distribution orders of the Utility segment". Margin expansion is also expected in both segments during Q4 2025.

Looking ahead to 2026, Hubbell anticipates a year of "strong broad-based organic growth across the portfolio".

• Utility Solutions: Management has "high visibility to robust project pipeline supporting continued strength in substation and transmission markets". Ongoing hardening and resiliency efforts will support distribution markets, and modernization initiatives are expected to drive "strong growth in grid protection and controls". A return to growth is also anticipated in the meters and AMI business, as well as telecom. The DMC Power acquisition is expected to contribute approximately $0.20 of adjusted EPS accretion in 2026.
• Electrical Solutions: Data center, light industrial, and T&D markets are expected to "remain strong". The company anticipates "mid-teens growth" in its data center business for the second half of 2025, driven by AI-accelerated build-outs. While nonresidential construction, heavy industrial, and renewables may see a more modest growth outlook due to macroeconomic uncertainty, Hubbell's strategy to compete collectively is expected to drive above-market growth and long-term margin expansion.

Hubbell's long-term financial framework targets 4% to 6% top-line organic growth, with incrementals in the 25% to 30% range, leading to high single-digit earnings growth. This is further buttressed by inorganic activities to achieve double-digit sustainable earnings growth. The company's balance sheet, with its strong cash position and undrawn credit facilities, is "poised to support an active level of investment", with a bias towards acquisitions that deepen product positioning and add critical technologies.

Risks and Challenges: Navigating a Dynamic Landscape

Despite a compelling growth narrative, Hubbell faces several pertinent risks and challenges that warrant investor attention.

• Material Costs and Inflation: While Hubbell has demonstrated success in offsetting inflation through pricing and productivity, material costs, which constitute approximately half of its cost of goods sold, remain a significant factor. Continued volatility in raw material prices, including copper, steel, and aluminum, alongside tariff expenses, could impact profitability if pricing actions cannot fully keep pace.
• Macroeconomic Conditions: Increases in interest rates and other measures by central banks could temper overall economic activity, potentially reducing customer demand for Hubbell's products and increasing borrowing costs. The company acknowledges that the macroeconomic environment has become "more dynamic".
• Geopolitical and Trade Tensions: International tensions and trade actions, particularly those involving China, Mexico, and Canada, could disrupt supply chains, increase manufacturing costs, and adversely affect demand. Hubbell has reduced its China exposure significantly and is prepared to act "with speed" on pricing to neutralize tariff impacts.
• Market Softness: While many markets are strong, the Grid Automation segment has experienced softness due to weak AMI and meter project activity. Although expected to return to growth, sustained weakness could impact the segment's overall contribution. Similarly, nonresidential construction and heavy industrial markets face a "more modest preliminary growth outlook".
• Acquisition Integration: Hubbell's strategy relies on successful acquisitions. The ability to "successfully manage and integrate acquired businesses" like Ventev, Nicor, and DMC Power, and to realize expected synergies, is crucial. Integration challenges could divert management attention and impact financial performance.

Conclusion

Hubbell Incorporated stands as a compelling investment opportunity, strategically positioned to capitalize on the profound secular trends of grid modernization and electrification. The company's disciplined approach to portfolio management, marked by targeted acquisitions and divestitures, has sharpened its focus on high-growth, high-margin segments. Its core technological differentiators in specialized utility and electrical solutions provide a robust competitive moat, driving superior product performance and strong customer loyalty in critical infrastructure markets.

Hubbell's consistent financial performance, characterized by expanding margins and double-digit adjusted earnings growth, underscores its operational excellence and effective price/cost management. With a strong balance sheet and a clear capital allocation strategy, the company is well-equipped to fund future growth initiatives and deliver attractive shareholder returns. While macroeconomic and geopolitical uncertainties present ongoing challenges, Hubbell's proven ability to execute through dynamic environments, coupled with a visible pipeline of opportunities in data centers, transmission, and substation markets, positions it for continued compounding growth in 2026 and beyond. Investors seeking exposure to the foundational shifts in global energy infrastructure will find Hubbell's narrative of strategic evolution, technological leadership, and disciplined execution highly attractive.