nVent Reports. Flat to Low Single Digit Market?

nVent shared its 2019 Q1 earnings report and, while positive, seemed to be underwhelming or perhaps a harbinger of the industry’s performance in Q1.

nVent encompasses the businesses of Erico, Hoffman and there is a Thermal Management business.

From their press release, earnings slides and their 10-Q:

• Reported sales of $538M, albeit flat.  Grew 3% organically with the difference due to currency benefits.
  • Hoffman Enclosures, $256M, up 1%
    • $180.4M in the US and Canada
    • Of the $256M, $155.1M (60.6%) is industrial, $22.6M (8.8%) is commercial / residential
  • Electrical & Fastening Solutions (Erico & Caddy), $137M, flat
    • 70% of this business is in the US (so, Erico and Caddy are about $97M, so maybe a $400M business?)
    • The business mix is:
      • 58% of the business is commercial and residential
      • 20% is the industrial market
      • 13% is infrastructure, and
      • 9% is in the Energy segment
  • Thermal Management, $145M, down 2%
• Claims “off to a good start” and “making steady programs in goals and margin expansion in Enclosures segment.
• So, Enclosures are 45.6% of the business, E&FS is 25.5% and Thermal Management is 27.5% of the business
• nVent’s strategy is termed “One nVent” and seems to be a “mom and apple pie” strategy in the sense they are seeking to do everything that would be expected:
  • Focus on attractive verticals
  • Accelerate Innovation and Connection Solutions
  • Grow Globally and in Developing Regions
  • Drive Productivity and Velocity
  • Pursue Targeted Bolt-on Acquisitions

The question becomes, to reps and distributors, “are they delivering on these?”  Is there “a focus on One nVent”? “Are there vertical sales and marketing initiatives with focused resources?”

• For Q2, estimating
  • Sales 0-2% (2-4% on organic basis)
  • Projecting sales of $543M (and can assume the same business mix)
• For the full year
  • Projecting Enclosures up 2-4%
  • EFS up 2-4%
  • Thermal Management up 2-6%
  • Overall organic sales up 2-4%

So, some takeaways:

• The Enclosure and fastener markets must be pretty flat / nominal growth / low single digit growth given the visibility and share of these divisions within the company. With nVent’s low performance and price increases, essentially they had no growth.
• The question becomes, is the overall market a little higher based upon other product categories (for example, our Pulse of Lighting report projecting 4.5%)?
• And then there is the question of, “Are larger, publicly traded companies, holding, growing or losing market share within the industry?” Feedback from mid-sized companies is that they are growing more than low single digit growth.