Summary of U.S. Machinery & Electricals Outlook 2026 Industry Overview - The report focuses on the machinery and electrical equipment industry, highlighting a cyclical recovery expected in 2026 after a challenging 2025, where estimates fell by 5-10% due to a downturn in core markets such as truck, agricultural, and construction equipment [1][12]. Key Points Cyclical Recovery - 2026 is anticipated to be a recovery year driven by aligned monetary and fiscal policies, which are expected to restart positive estimate revisions, with potential upside in low single digits to mid single digits [1][12]. - The recovery is not yet priced into the market, with current pricing reflecting a PMI of around 50, indicating stagnation [2][13]. Construction Equipment - Construction equipment is viewed as a tightly coiled spring, with looser monetary policy and strong fiscal impulses expected to impact the non-residential sector positively in 2026 [3][14]. - The supply/demand balance for construction equipment is tightening, with utilization rates and rental rates increasing, while inventories of used and new equipment are decreasing [3][14]. Truck and Agricultural Equipment - North American heavy-duty truck production is projected to decline by 6% year-over-year in 2026, with production expected to hit 225,000 units, which is 40,000 units below replacement levels [4][15]. - Agricultural equipment demand is expected to reach a 40-year low, declining by 10-15% year-over-year, but improving farmer profits and tighter inventories signal a potential trough [4][15]. Electrical Equipment - Demand for electrical equipment is expected to remain strong in 2026, with growth driven by data center capacity build-out, although regulatory obstacles and political factors may create friction [5][16]. - Four key factors to monitor include regulatory impacts on growth, shifts in utility capital expenditures, political implications of electricity price inflation, and the increasing importance of behind-the-meter solutions for data centers [5][16]. Investment Implications Top Stock Picks for 2026 - **United Rentals (URI)**: Top pick with a price target of $1,128, representing a 42% potential upside, driven by a cyclical recovery and business transformation [6][17]. - **Trimble (TRMB)**: Price target of $99, with a 25% potential upside, benefiting from low tech penetration in construction and expected earnings growth [6][18]. - **Hubbell (HUBB)**: Price target of $530, with a 23% potential upside, expected to benefit from organic growth and a cyclical recovery [6][19]. - **PACCAR (PCAR)**: Price target of $125, with a 12% potential upside, positioned to benefit from cyclical recovery in the truck market [6][22]. - **Eaton (ETN)**: Price target of $395, with a 25% potential upside, navigating growth challenges but set for recovery [6][23]. Valuation Insights - The report emphasizes that many stocks in the machinery and electrical sector are undervalued, trading at a discount compared to historical averages, suggesting significant upside potential as the market recovers [12][46]. Additional Insights - The report notes that the effects of tax reform could unlock $800 billion in fiscal stimulus, positively impacting non-residential construction and truck sectors [12][46]. - The cyclical recovery is expected to lead to a double-digit growth in estimates, driven by monetary policy and fiscal stimulus [12][46]. This comprehensive outlook indicates a significant potential for recovery in the machinery and electrical sectors, with specific stocks poised to benefit from the anticipated economic conditions in 2026.

Core Insights - The One Big Beautiful Bill Act, signed into law on July 4, will significantly impact markets starting in January, particularly benefiting cyclical sectors outside of tech and AI [1][2] - Société Générale's chief US equity strategist, Manish Kabra, has identified 30 stocks that are expected to benefit from the tax and regulatory breaks provided by the bill, focusing on financials, industrials, and consumer cyclicals [2] Beneficiary Sectors - Key sectors poised for growth include defense, small-caps, consumer, and energy, as they are expected to receive a boost from the new tax and regulatory policies [2] - The average forward price-to-earnings ratio for the identified stocks is 17x, with an expected earnings-per-share growth of 15% in 2026 and 2027 [3] Defense Beneficiaries - General Dynamics Corp (GD): Positioned for defense modernization funding [6] - L3Harris Technologies Inc (LHX): Benefits from investment in advanced systems [6] - Northrop Grumman Corp (NOC): Well-placed for missile defense and space programs [6] - Huntington Ingalls Industries (HII): Supported by naval modernization initiatives [6] Capex Incentive Beneficiaries - United Rentals Inc (URI): Set to gain from increased construction activity [6] - Jacobs Solutions Inc (J): Benefits from infrastructure upgrades and industrial investment incentives [6] - Trimble Inc (TRMB): Aligned with manufacturing investment push [6] - Caterpillar Inc (CAT): Benefits from accelerated depreciation and domestic production incentives [6] - Cummins Inc (CMI): Supported by R&D expensing and industrial investment [6] - Deere & Co (DE): Gains from capex incentives and domestic manufacturing support [6] - Nucor Corp (NUE): Benefits from industrial base expansion and construction demand [6] - Freeport-McMoRan Inc (FCX): Critical supplier for electrification and infrastructure projects [6] - Duke Energy Corp (DUK): Positioned for grid modernization under capex policies [7]

Core Insights - Hubbell Incorporated (HUBB) is a leading manufacturer in the electrical and utility infrastructure products sector, with a market capitalization of $23.3 billion [1][2] - The company plays a vital role in power transmission, grid modernization, and large-scale infrastructure development across North America and internationally [2] Financial Performance - In Q3, HUBB reported net sales of $1.5 billion, a 4.1% year-over-year increase, although it missed analyst estimates by 2% [5] - Adjusted EPS for the quarter rose 12.1% to $5.17, exceeding consensus estimates of $4.99 [5] - HUBB raised its fiscal 2025 adjusted EPS guidance to a range of $18.10 to $18.30, which has positively influenced investor sentiment [5] Stock Performance - HUBB's shares have declined 9.4% from their 52-week high of $484.26, reached on October 30 [3] - Year-to-date, HUBB's shares are up 4.7%, significantly trailing the State Street Industrial Select Sector SPDR ETF's (XLI) 16.8% return [4] - Over the past 52 weeks, HUBB's stock has decreased by 2.2%, while XLI has increased by 10.8% [4] - Despite recent challenges, HUBB has been trading above its 200-day moving average since late June and above its 50-day moving average since early December [4] Competitive Landscape - HUBB has underperformed compared to its competitor nVent Electric plc (NVT), which has seen a 45.1% increase over the past 52 weeks and a 58.4% rise year-to-date [6]

Core Insights - Artificial intelligence (AI) is identified as the greatest investment opportunity of the current era, with a strong emphasis on the urgent need for energy to support its growth [1][2][3] - A specific company is highlighted as a key player in the AI energy sector, owning critical energy infrastructure assets that are essential for meeting the increasing energy demands of AI technologies [3][7][8] Investment Landscape - Wall Street is investing hundreds of billions into AI, but there is a looming question regarding the energy supply needed to sustain this growth [2] - AI data centers, such as those powering large language models, consume energy equivalent to that of small cities, indicating a significant strain on global power grids [2] - The company in focus is positioned to capitalize on the rising demand for electricity, which is becoming the most valuable commodity in the digital age [3][8] Company Profile - The company is described as a "toll booth" operator in the AI energy boom, benefiting from the export of American LNG and the onshoring of manufacturing due to tariffs [5][6][7] - It possesses critical nuclear energy infrastructure assets and is capable of executing large-scale engineering, procurement, and construction projects across various energy sectors [7][8] - The company is noted for being debt-free and holding a significant cash reserve, which is nearly one-third of its market capitalization [8][10] Market Position - The company has an equity stake in another prominent AI venture, providing investors with indirect exposure to multiple growth engines in the AI sector [9] - It is trading at a low valuation of less than 7 times earnings, making it an attractive investment opportunity compared to other energy and utility firms [10][11] - The company is recognized for its ability to deliver real cash flows and hold critical infrastructure, positioning it well for future growth [11][12] Future Outlook - The ongoing AI infrastructure supercycle, combined with the onshoring boom and a surge in U.S. LNG exports, creates a favorable environment for the company [14] - The influx of talent into the AI sector is expected to drive continuous innovation and advancements, further solidifying the importance of energy infrastructure [12][13]

Core Thesis - Hubbell Incorporated (HUBB) is viewed positively due to its strong market position, consistent returns, and potential benefits from U.S. electrical grid modernization [3][6]. Company Overview - Hubbell is a dividend-paying industrial conglomerate specializing in electrical and utility solutions, with a diverse brand portfolio including Hubbell, Burndy, Bell, and Aclara [2]. - The company's shares were trading at $427.85 as of December 1st, with trailing and forward P/E ratios of 26.76 and 21.93 respectively [1]. Financial Performance - Hubbell's five-year annualized revenue growth was in the mid-single digits, which lagged behind the S&P 500, while recent revenue growth was only 1%, compared to the broader market's 18.2% [4]. - Despite slower revenue growth, the company maintained mid-double-digit profit margins and a return on equity that exceeded QVI's benchmark, although it was below the S&P 500's 49.2% [4]. Capital Allocation and Buyback - The company has a new $500 million buyback authorization through 2028, with $225 million repurchased in the first half of 2025, indicating disciplined capital allocation [5]. - Hubbell's return on invested capital (ROIC) surpassed its cost of capital, highlighting efficient capital deployment [5]. Market Position and Competitive Advantage - Morningstar assigns Hubbell a wide moat due to its ability to generate mid-teens returns on invested capital over two decades and its resilience during economic downturns [3]. - The company's competitive margin profile and durable market position are supported by its peers, such as Eaton and Schneider Electric [3].

Core Viewpoint - Hubbell (HUBB) has been upgraded to a Zacks Rank 2 (Buy), indicating a positive outlook based on rising earnings estimates, which significantly influence stock prices [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system emphasizes the importance of earnings estimate revisions, which are strongly correlated with near-term stock price movements [4][6]. - Institutional investors often adjust their valuations based on changes in earnings estimates, leading to buying or selling actions that affect stock prices [4]. Hubbell's Earnings Outlook - For the fiscal year ending December 2025, Hubbell is expected to earn $18.16 per share, with a 1.6% increase in the Zacks Consensus Estimate over the past three months [8]. - The upgrade reflects an improvement in Hubbell's underlying business, which is likely to drive the stock price higher as investors respond positively to this trend [5][10]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a strong historical performance, particularly for Zacks Rank 1 stocks, which have generated an average annual return of +25% since 1988 [7]. - The upgrade of Hubbell to a Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [9][10].

Company Overview - Hubbell Incorporated (HUBB) has a market cap of $21.6 billion and operates as a global designer, manufacturer, and seller of electrical and utility solutions, serving various markets including industrial, commercial, institutional, and utility [1] Stock Performance - Over the past 52 weeks, HUBB shares have decreased by 10.6%, while the S&P 500 Index has increased by 10.5%. Year-to-date, HUBB shares are down 2.6%, compared to an 11.2% gain for the S&P 500 [2] - HUBB has also underperformed the Industrial Select Sector SPDR Fund (XLI), which returned 5.6% over the same period [3] Recent Financial Results - In Q3 2025, HUBB reported revenue of $1.5 billion, which was weaker than expected. However, shares rose by 4.9% following the announcement due to an adjusted EPS of $5.17, which exceeded estimates. The company raised its full-year adjusted EPS guidance to a range of $18.10 - $18.30 [4] - Analysts project a 9.6% year-over-year growth in adjusted EPS for the fiscal year ending December 2025, estimating it to be $18.16. The company's earnings surprise history shows mixed results, with three out of the last four quarters exceeding consensus estimates [5] Analyst Ratings and Price Targets - Among 13 analysts covering HUBB, the consensus rating is a "Moderate Buy," consisting of six "Strong Buy" ratings and seven "Holds" [5] - Barclays raised its price target for HUBB to $456 while maintaining an "Equal Weight" rating. The mean price target of $488.90 indicates a 20% premium to current price levels, with the highest target at $530 suggesting a potential upside of 30.1% [7]

Core Viewpoint - Hubbell Incorporated has successfully priced an offering of $400 million in senior notes with a 4.80% interest rate, maturing in 2035 [1] Group 1: Offering Details - The offering is expected to close on November 14, 2025, pending customary closing conditions [2] - Net proceeds from the offering will be used to fully redeem the outstanding 3.350% Senior Notes due 2026, also amounting to $400 million, and to cover any premium and accrued interest [2] - BofA Securities, HSBC Securities, and J.P. Morgan Securities are acting as joint book-running managers for the offering [3] Group 2: Company Overview - Hubbell Incorporated is a leading manufacturer of utility and electrical solutions, with 2024 revenues reported at $5.6 billion [6] - The company is headquartered in Shelton, Connecticut, and focuses on enabling customers to operate critical infrastructure safely and efficiently [6]

Company Overview - Hubbell Incorporated is a significant player in the electrical and utility solutions industry, providing a variety of products and services such as electrical wiring devices, lighting fixtures, and power systems [1] - The company competes with industry leaders like Eaton Corporation and Schneider Electric, focusing on innovation and strategic growth to maintain its market position [1] Financial Performance - On October 29, 2025, Seaport Global set a price target of $515 for Hubbell, indicating a potential price increase of approximately 9.53% from the current trading price of $474.48 [2][5] - The stock has experienced a trading day range between $458.96 and $474.95, with a current price reflecting a 4.20% increase today, equivalent to a $19.14 rise [2][5] - Hubbell's market capitalization is approximately $25.21 billion, showcasing its substantial presence in the market [4][5] - Over the past year, the stock has seen a high of $481.35 and a low of $299.43, indicating volatility in its stock price [4] Earnings Call Insights - The recent Q3 2025 earnings call, led by President, CEO, and Chairman Gerben Bakker, along with Executive VP and CFO William Sperry, provided valuable insights into the company's financial health [3] - Analysts from major financial institutions, including JPMorgan Chase & Co., attended the call, emphasizing the significance of Hubbell's strategic direction and financial performance [3]

Financial Performance - Net income for the three months ended September 30, 2025, was $256.7 million, an increase of 12.7% compared to $227.8 million for the same period in 2024[9]. - Comprehensive income attributable to Hubbell Incorporated for the three months ended September 30, 2025, was $259.5 million, up from $246.2 million in 2024, reflecting a growth of 5.4%[9]. - For the nine months ended September 30, 2025, net income reached $666.7 million, representing a 13.9% increase from $585.3 million in 2024[10]. - Basic earnings per share for the three months ended September 30, 2025, were $4.80, up from $4.46 in the same period of 2024, reflecting a growth of 7.6%[19]. - Net income attributable to Hubbell Incorporated for the three months ended September 30, 2025, was $255.5 million, compared to $226.2 million for the same period in 2024, representing an increase of 12.9%[76]. - Basic earnings per share for the three months ended September 30, 2025, was $4.80, up from $4.21 in 2024, reflecting a growth of 14.0%[76]. - Nine-month net income available to common shareholders for 2025 was $661.8 million, compared to $579.7 million in 2024, marking an increase of 14.2%[76]. Assets and Liabilities - Total assets as of September 30, 2025, amounted to $7,526.9 million, a significant increase from $6,847.7 million at the end of 2024[13]. - Total liabilities as of September 30, 2025, were $3,833.9 million, up from $3,437.1 million at the end of 2024, reflecting a rise of 11.5%[13]. - Total current assets as of September 30, 2025, were $2,790.0 million, with total liabilities of $3,833.9 million[20]. - Total current liabilities increased significantly to $2,054.3 million from $1,274.2 million, reflecting a 61.0% rise[13]. - Long-term debt decreased to $1,044.8 million from $1,442.7 million, a reduction of 27.6%[13]. - The carrying value of long-term debt as of September 30, 2025, was $1,444.5 million, slightly up from $1,442.7 million on December 31, 2024[96]. - Non-current liabilities increased to $734.8 million as of September 30, 2025, compared to $720.2 million at December 31, 2024, reflecting a rise of 2.9%[68]. Cash Flow and Operating Activities - The company reported a net cash provided by operating activities of $582.3 million for the nine months ended September 30, 2025, compared to $558.8 million in 2024, indicating a 4.2% increase[15]. - The company reported a net cash provided by operating activities of $558.8 million for the nine months ended September 30, 2024[20]. - The company reported a net cash used in financing activities of $42.6 million for the nine months ended September 30, 2025, significantly improved from $476.4 million in 2024[15]. Acquisitions and Investments - The company made acquisitions totaling $129.1 million during the nine months ended September 30, 2025, compared to a net cash inflow of $5.9 million from acquisitions in 2024[15]. - The company acquired Alliance USAcqCo 2, Inc. (Ventev) for approximately $73 million, recognizing intangible assets of $34.5 million and goodwill of $40.0 million[29]. - In the third quarter of 2025, the company acquired Nicor, Inc. for approximately $56 million, with recognized intangible assets of $18.6 million and goodwill of $26.4 million[30]. - The company completed the acquisition of DMC Power for approximately $825 million on October 1, 2025, financed through a $600 million unsecured term loan and commercial paper[34][35]. Inventory and Accounting Changes - The change in inventory accounting method from LIFO to FIFO resulted in a cumulative effect adjustment increasing inventory by $167.1 million as of January 1, 2024[19]. - Total inventories increased to $1,053.7 million as of September 30, 2025, up from $1,010.4 million at December 31, 2024, representing a growth of approximately 4.3%[61]. Equity and Dividends - The company’s total equity as of September 30, 2025, was $3,693.0 million[20]. - Total equity increased to $3,681.3 million as of September 30, 2025, up from $3,396.2 million at December 31, 2024, indicating a growth of 8.4%[70]. - Cash dividends declared per share were $2.64 for the nine months ended September 30, 2025, totaling $141.2 million[70]. Segment Performance - Total net sales for the three months ended September 30, 2025, were $1,502.4 million, an increase from $1,442.6 million in the same period of 2024, representing a growth of 4.2%[46]. - Utility Solutions segment net sales for the three months ended September 30, 2025, were $943.8 million, slightly up from $933.1 million in 2024, while Electrical Solutions segment net sales increased to $558.6 million from $509.5 million[46]. - The Company reported a gross profit of $544.3 million for the three months ended September 30, 2025, compared to $506.0 million in 2024, reflecting a gross margin improvement[58]. - Operating income for the three months ended September 30, 2025, was $330.6 million, up from $312.7 million in the same period of 2024, indicating a year-over-year increase of 5.0%[58]. Pension and Benefits - The net periodic benefit cost for pension and other benefits for the nine months ended September 30, 2025, was $14.4 million, compared to $10.6 million in 2024, indicating a rise of 36.0%[78]. - The net periodic benefit cost for pension and other benefits for Q3 2025 was $4.7 million, an increase from $3.4 million in Q3 2024, indicating a 38.2% rise[78]. - Interest cost for pension benefits increased to $26.4 million for the nine months ended September 30, 2025, compared to $25.0 million in 2024[78]. - The company contributed $20.0 million to its U.S. qualified plans and $1.4 million to foreign pension plans during the nine months ended September 30, 2025[79]. Legal and Contingencies - The Company recognized a liability for contingencies that are probable of occurrence and can be reasonably estimated, reflecting ongoing legal proceedings[97].