Yahoo Finance Franklin Electric Co Inc (FELE) Q1 2024 Earnings Call Transcript Highlights: Navigating ...
Revenue: First-quarter 2024 consolidated sales were $460.9 million, a decrease of 5% year-over-year.
Net Sales Decrease Factors: Decrease due to lower volumes in water systems and fueling systems, partially offset by sales from 2023 acquisitions.
Gross Margin: Improved to 35.5% in Q1 2024, up 200 basis points from 33.5% in Q1 2023.
Net Income: Operating income was $47.9 million, down 9% from $52.6 million in Q1 2023.
Earnings Per Share (EPS): Fully diluted EPS was $0.70 in Q1 2024, compared to $0.79 in Q1 2023.
Free Cash Flow: Cash flow improved by approximately $10 million in Q1 2024 compared to the prior year.
Water Systems Segment: Sales down 12% in the US and Canada; operating income $47.1 million, down 4%.
Fueling Systems Segment: Sales decreased 15% to $62.1 million; operating income was $18.8 million, down from $20.8 million.
Distribution Business: Sales increased 3% to $147 million; operating income was $1.8 million, down from $4.7 million.
Inventory Levels: March inventory balance at $532 million, close to $70 million lower than the same period in the prior year.
SG&A Expenses: Increased to $115.6 million in Q1 2024 from $109.5 million in Q1 2023.
Share Repurchases: Approximately 78,000 shares repurchased for about $7.4 million during Q1 2024.
Dividend: Quarterly cash dividend announced at $0.25 per share, payable on May 16.
Full-Year Guidance: Maintaining 2024 sales guidance at $2.1 billion to $2.17 billion; EPS between $4.22 and $4.40.
Release Date: April 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you provide more details on how orders trended through the quarter and into Q2, and the main factors influencing the reiterated full-year guidance? A: (Jeffery Taylor - CFO, VP) Orders followed a normal seasonal profile, starting slow in January and strengthening by March. The main unexpected factor was unusually wet weather in the US, particularly in the western regions, which impacted business more than anticipated. Additionally, ongoing commodity price pressures, especially for pipe, have continued to affect the business.
Q: Could you discuss the trends in the fueling systems segment, particularly the growth in critical asset monitoring during the quarter? A: (Jeffery Taylor - CFO, VP) The grid solutions business, which includes critical asset monitoring, saw a decline similar to the broader fueling systems segment due to customers adjusting their inventory levels. Despite this, the segment is expected to grow strongly in double digits moving forward.
Q: How confident are you about achieving the full-year guidance given the slightly weaker than expected first quarter? A: (Jeffery Taylor - CFO, VP) The guidance remains unchanged as the first quarter was generally in line with expectations despite being slightly below. Key factors for maintaining guidance include no anticipated recession, higher sustained interest rates, and expected normal business progression throughout the year.
Q: Can you provide insights into the integration of Action Manufacturing and the current M&A pipeline? A: (Gregg Sengstack - Chairman, CEO) The integration of Action Manufacturing is progressing well, with significant advancements such as ERP system integration. The M&A environment is active, with increased deal flow in manufacturing assets and potential acquisitions focused on larger pumping systems and critical asset monitoring capabilities.
Q: What are the expectations for the fueling systems segment now that destocking has ended? A: (Jeffery Taylor - CFO, VP) With the end of destocking, the fueling systems segment is expected to normalize. Discussions with customers indicate a return to more typical buying patterns, which should lead to a steady performance throughout the year.
Q: How did the water systems and distribution segments perform in the US and Canada, particularly in residential versus agricultural markets? A: (Jeffery Taylor - CFO, VP) In the first quarter, residential water systems saw a slight decline, while agricultural systems experienced a mid-single-digit decline, both primarily due to adverse weather conditions. The distribution segment is showing positive signs, especially with the recent acquisitions contributing to growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
