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Electrical Marketing - December 20, 2024
Electrical Marketing's Key Economic Indicators
Electrical Marketing’s editors heard the howls of rage from investors over the 14% drop in Cree’s stock price last month, so we thought it was a good time to see what’s happening with the stocks of other publicly held electrical manufacturers, distributors and contractors over the past year.
Cree’s stock price got pummeled after a June 2015 announcement that it was engineering a major corporate restructuring. The LED lighting manufacturer’s stock price had been declining steadily during June, but dropped sharply in the two days after the press statement, which said in part, “Due to recent LED market trends that have resulted in higher LED average selling price erosion than previously forecast and the continued under-utilization of Cree’s LED factory, the company has decided to restructure the LED Products business to reduce excess capacity and overhead to improve the cost structure moving forward.
“Additionally, the company is increasing LED reserves to reflect the more aggressive pricing environment experienced in the current quarter, and to factor in a more conservative pricing outlook for fiscal year 2016. The restructuring charges are targeted to be approximately $85 million.”
Investors in Cree’s stock are used to a pretty wild ride. Over past five years, the company has taken two separate round trips from approximately $20 per share all the way up to the $70 a share neighborhood. The company’s shares were selling for as high as $69.90 on July 1, 2010, 65% higher than this week’s stock price.
The current slump in Cree’s stock price would appear to be disconnected from the reality that the company is considered to be one of the leading players in the fast-changing LED space. The company has a strong presence with lighting distributors, a major presence at the largest lighting shows, and a five-year partnership with Home Depot to sell LEDs in the retail space.
Not all publicly held manufacturers of LED lighting have seen their stock price drop into the doldrums. Acuity Brands Inc. (AYI), which offers broad array of LED lighting systems, has seen its shares increase 30.7% YTY (year-to-year) and 28.9% YTD (year-to-date), and Osram (OSR.DE) is up 28.9% YTD and 19.2% YTY.
Outside of the LED space, the other publicly held electrical companies enjoying recent double-digit gains in their stock companies were HD Supply (HDS), Legrand (LR.PA), and Wolseley (WOS.L). These gains are particularly impressive when you consider the generally sluggish nature of the 2015 stock market, and how easily these stocks topped the gains of the three major stock indices — the Dow Jones, S&P 500 and NASDAQ. The Dow Jones is up 4.7% YTY and down 1.2% YTD; the NASDAQ is up 13.1% YTY and 5.5% YTD: and the S&P 500 is up 5.2% YTY and 0.2% YTD.
As you can see in the chart on this page, the nation’s two largest home centers have also enjoyed some impressive growth over the past year. Shares of both Home Depot (HD) and Lowe’s (LOW) have grown 40% since June 30, 2014. Big Orange is beating the market indices so far this year with shares increasing 8.6% YTD, while the shares of Lowe’s are down a fraction of a percent YTD.
Some electrical stocks that have rewarded investors with double-digit gains over the past few years are way off these marks and in some cases are now down double digits YTD and YTY. Along with Cree (down -47.9% YTY and -18.8% YTD) other electrical stocks suffering with double-digit declines through June 30 include Generac (down -18.4% YTY and -14.3% YTD), Anixter (AXE) (down -34.9% YTY and -26.1% YTD; and Houston Wire & Cable (HWCC) (down -16.6% YTY and -14.9% YTD).
Two other distributor stocks that have been perennial winners on Wall Street in recent years are also down in this year — W.W. Grainger (GWW), down -5.2% YTY and -6.4% YTD, and WESCO International (WCC), down -20.5% YTY and -9.8% YTD.
Generac Holdings Inc. (GNRC) has also fallen from grace, with a -18.4% YTY decline and -14.3% YTD drop. The drop in Generac’s stock price is particularly dramatic because over the past few years the company had one prettiest stock charts in the industry, with a steady climb to a high of $60.47 in March 2014. Despite the current decline, according to www.splithistory.com, a patient investor who parked $10,000 in the company’s stock when the company went public in Feb. 2010 at $12.84 per share and reinvested his or her dividends is doing well. Today, they might be bragging about a sweet 271.8% total return (27.55% average annual return over the past five years) and be sitting pretty with $37,186.47 in the company’s stock.
