Monday - Deutsche Bank has initiated coverage on electrical and electronic products manufacturer Hubbell (NYSE:HUBB) with a Hold rating on the stock and a price target of $427.00. The firm anticipates that Hubbell's organic growth will likely pick up pace throughout 2024, similar to expectations for NVT, as channel inventory destocking concludes.
The analyst notes that while growth prospects are on the rise, Hubbell's margin expansion could be limited due to increased restructuring expenditures within its Electrical business. The company is expected to ramp up its restructuring spending to approximately $20 million in 2024, compared to $5 million in 2023.
This increase in costs is projected to constrain the potential for positive earnings revisions when compared to its major peers in the electrical systems and products sector.
Hubbell's stock is currently trading at around 24 times its next twelve months' (NTM) price-to-earnings (P/E) multiple. Deutsche Bank considers this valuation reasonable when assessing the company's key performance indicators (KPIs) against those of its industry counterparts. The price target of $427 is based on a 24x multiple of the firm's forecasted NTM P/E, projected for a 12-month period.
Given the modest 11% upside from Hubbell's present share price to the target price, Deutsche Bank has decided to start with a Hold rating. This assessment reflects a balanced view of the company's growth potential against the anticipated restructuring costs and current market valuation.
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