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Powell Industries (POWL) has been "electric" for investors in recent months and especially over the last month when it traded from around $150 in early September to around $245 now. As such, we wanted to take a closer look. This supplier of equipment which is used for the distribution, control and monitoring of electrical energy serves large industrial customers such as utilities, oil & gas producers, refineries, LNG facilities, petrochemical plants etc.

• Powell focuses on low and medium voltage, it does not operate in high voltage. When electricity leaves the high voltage line, it gets stepped down to medium voltage. That's where POWL plays as its products include switchgear (including circuit breakers) and rectifiers. There is a high degree of electrical complexity and configuration in this segment in terms of switching and connecting and distributing load.
• In terms of catalysts, the company's impressive Q3 (Jun) report in late July has gotten the stock moving. Another positive has been the US Dept of Energy recently issuing a key LNG export permit, its first since a pause in January. LNG is a key end market for Powell. The company also said on its Q2 call that it continues to qualify more products for the burgeoning data center market. Also, the Fed lowering rates was a good sign and should push more customers into upgrading their networks.
• Revenue in JunQ jumped 50% yr/yr to $288 mln, driven by strength across nearly all of its market sectors. Powell said that commercial activity remains strong, providing a tailwind as it closes out FY24 next quarter. A metric that really jumped out and explains the huge EPS beat was a big jump in margins in JunQ. Gross margin surged to 28.4%, its highest level in over a decade, vs 22.2% a year ago and 24.6% in Q2 (Mar). This was driven by the higher volume levels across all manufacturing facilities.
• POWL booked $356 mln of new orders in the quarter, the highest quarterly total of FY24 and orders were spread broadly across key end markets. POWL saw a significant increase driven by its electric utility sector, further underscoring the strength POWL is seeing in that market. POWL was also awarded a notable petrochemical order for a greenfield project to be located in North America.
• Powell does not guide, but it says quoting activity remains very healthy and balanced. Within the oil & gas LNG market, the fundamentals of the US natural gas market remain favorable. Powell sees continued strength in oil & gas and petrochemical markets, which includes biofuels, carbon capture, and hydrogen, areas where Powell has not historically participated, but where Powell is seeing a substantially higher volume of project activity. Commercial and other industrial markets also remain attractive, which includes activity within the data center market.

Overall, Powell is not a name most people are familiar with but a lot of good things are happening in its various end markets, from LNG to electric utilities to data centers. The stock does look a bit overextended in the near term, so some caution makes sense. We look forward to its Q4 (Sep) report, likely in early December. We would like to get Powell's take on the DoE's action on LNG, the progress being made in data centers and an update on strong demand from utilities.