Powell Industries (POWL) that provides custom-engineered equipment and systems for the management, distribution, and control of electrical energy.
After breaking out earlier this year, POWL has seen some volatility but mostly traded sideways. More recently, the stock has made another push higher after a strong quarter and now looks to take out all-time highs.
About the Company
Powell Industries was founded in 1947 and is headquartered in Houston, Texas. The company’s primary focus is on serving the energy, utilities, transportation, and industrial markets.
Powell designs and manufactures a range of products, including power control rooms, electrical enclosures, switchgear, and motor control centers, which are used in applications like power generation, distribution, and automation. The company serves customers globally, offering solutions that help ensure electrical systems are reliable, safe, and efficient, particularly for mission-critical infrastructure in industries such as oil and gas, utilities, and transportation.
The stock has Zacks Style Scores of “B” in both Growth and Value. The company has a market cap has a market cap of $2.3 billion and a Forward PE of 16. The stock also pays a small dividend of half a percent.
Q3 Earnings Beat
In late July, Powell posted a strong quarter, beating estimates by 79%. EPS came in at $3.79, which was up from $1.52 last year. Revenues came in at $255.1M v the $171.4M last year.
Net new orders were $235M, which was higher by 19%. The company had a backlog of $1.3B in the prior quarter and was able to keep that number at $1.3B after expanding its capacity. Management commented that excellent project execution improved gross margins by 510 basis points.
Investors loved the numbers and took the stock higher by over 25%. The stock did give most of the gains back during the early August market sell-off but has since made post-earnings highs.
Powell Industries, Inc. Price and EPS Surprise
Estimates Spike Higher
After the earnings report, analysts were quick to lift numbers.
For the current quarter, estimates have gone from $2.19 to $3.49. This is a 60% jump in just the last month. For the current year, estimates have been taken 33% higher, going from $9.04 to $12.01.
Looking longer term, estimates are pointing strongly higher. Over the last 90 days, numbers have been taken from $2.26 to $2.30, or 38%.
The Technicals
The stock broke higher, moving from $75 to $100, after reporting earnings in late January. It never looked back, powering its way up to the $200 level before pulling back to the $125 level.
That $125 spot happened to be the 61.8% retracement, which started a rally into another strong quarter that took the stock to new highs at $209.
Once again, the stock pulled back in July to that $125 level, which happened to be the 200-day MA this time around.
The latest quarter brought the buyers back and the stock looks to take out the $209 high.
For those looking at Fibonacci levels, the 161.8% extension drawn from all-time highs to recent lows is $258. That target is another 40% higher than current trading levels.
Those looking for a pullback can focus on the 21-day moving average at $168 or the 50-day MA at $154.
Bottom Line
Powell Industries is an under-the-radar small-cap stock that is just getting started.
The company is hitting on all cylinders on the fundamental side and the chart looks great after the bulls took out the post-earnings highs.
While waiting for a pullback makes sense for some investors, the bulls seem to have strong momentum. POWL should hit all-time highs before its next earnings report and if they can repeat this quarter’s performance, we should see a very strong finish into the end of the year.
— Jeremy Mullin
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Source: Zacks