Franklin Electric Reports Third Quarter 2024 Results

Rhea-AI Summary

Franklin Electric reported Q3 2024 financial results with net sales of $531.4 million, down 1% year-over-year. The company's Water Systems and Distribution segments saw modest growth of 2% and 1% respectively, while Fueling Systems declined 10%. Operating income was $73.5 million with a 13.8% margin, and EPS reached $1.17, down from $1.23 in Q3 2023. Due to macro pressures and weather impacts, the company lowered its full-year 2024 guidance to approximately $2.00 billion in sales and adjusted EPS to $3.75-$3.85.

Positive

• Water Systems achieved record Q3 sales of $302.2 million
• Distribution segment operating income increased to $12.2 million from $10.7 million YoY
• Water Systems operating income reached record Q3 level of $52.8 million

Negative

• Overall net sales decreased 1% to $531.4 million
• Operating income declined to $73.5 million from $78.1 million YoY
• EPS decreased to $1.17 from $1.23 YoY
• Fueling Systems sales dropped 10% to $69.7 million
• Company lowered full-year 2024 sales and EPS guidance

Insights

Financial Analyst

Franklin Electric's Q3 2024 results indicate a challenging quarter with mixed performance across segments. Net sales declined -1% to $531.4 million, while EPS dropped to $1.17 from $1.23 year-over-year. The Water Systems segment showed resilience with 2% growth, while Fueling Systems faced headwinds with a -10% decline.

The company's reduced guidance, now targeting $2.00 billion in sales and EPS of $3.75-$3.85, reflects ongoing macro pressures from slower housing activity and weather impacts. However, stable margins demonstrate effective cost management. The Distribution segment's improved operating income, up $1.5 million year-over-year, highlights successful integration of recent acquisitions and operational efficiency.

Market Research Analyst

The housing market slowdown and adverse weather conditions are creating near-term headwinds for Franklin Electric's core business. However, the company's strategic diversification across water systems, distribution and fueling segments provides some resilience. The record performance in Water Systems, despite challenging conditions, demonstrates strong market positioning in essential infrastructure.

The normalized demand environment following recent record sales suggests a market correction rather than fundamental weakness. The company's focus on cost management and operational efficiency positions it well for margin preservation during this transitional period. The flexible balance sheet mentioned by management indicates potential for strategic acquisitions to drive future growth.

Third Quarter 2024 Highlights

• Consolidated net sales of $531.4 million, a decrease of 1% to the prior year
• Water Systems and Distribution net sales increased 2% and 1%, respectively, while Fueling Systems net sales decreased 10%
• Operating income was $73.5 million with operating margin of 13.8%
• GAAP fully diluted earnings per share (EPS) was $1.17

FORT WAYNE, Ind., Oct. 29, 2024 (GLOBE NEWSWIRE) -- Franklin Electric Co., Inc. today announced its third quarter financial results for fiscal year 2024.

Third quarter 2024 net sales were $531.4 million, compared to third quarter 2023 net sales of $538.4 million. Third quarter 2024 operating income was $73.5 million, compared to third quarter 2023 operating income of $78.1 million. Third quarter 2024 EPS was $1.17, versus EPS in the third quarter 2023 of $1.23.

“Our third quarter results were softer than expected due to continued macro pressure from lower home sales and starts, along with weather being wetter than normal. However, the demand environment remains healthy across our key end markets, which has normalized following record levels of sales in recent years. Margins remained stable due to our disciplined cost management, and we are actively pursuing opportunities to further reduce expenses across the enterprise,” commented Joe Ruzynski, Franklin Electric’s CEO.

“As we close out the year, we expect tempered order activity in-line with seasonal patterns. That said, having spent time with our incredible global team members over the past few months, I am energized by the potential of Franklin Electric. With our wide range of capabilities, strategic footprint, and flexible balance sheet, we have the ability to drive differentiated growth and accelerate productivity for years to come,” concluded Mr. Ruzynski.

Segment Summaries

Water Systems net sales were $302.2 million, a new third quarter record, an increase of $6.4 million or 2 percent compared to the third quarter 2023. The sales increase was driven by higher sales of groundwater products, all other surface products and water treatment products. The sales increase was partially offset by lower sales of large dewatering pumps, which had a record quarter last year. Water Systems operating income in the third quarter 2024 was $52.8 million, a new third quarter record. Third quarter 2023 Water Systems operating income was $52.7 million.

Distribution net sales were $190.8 million, an increase of $1.6 million or 1 percent compared to the third quarter 2023. Sales increases were driven by sales from a recent acquisition. The Distribution segment operating income in the third quarter 2024 was $12.2 million. Third quarter 2023 Distribution operating income was $10.7 million.

Fueling Systems net sales were $69.7 million in the third quarter 2024, a decrease of $8.0 million or 10 percent compared to the third quarter 2023. Sales decreases were driven by lower volumes. Fueling Systems operating income in the third quarter 2024 was $24.1 million. Third quarter 2023 Fueling Systems operating income was $25.8 million.

2024 Guidance

The Company is lowering its sales guidance for full year 2024 to be approximately $2.00 billion and reducing its EPS guidance for full year 2024 to be in the range of $3.75 to $3.85 which incorporates the Company’s first nine months performance and its outlook for the fourth quarter.

Earnings Conference Call

A conference call to review earnings and other developments in the business will commence at 9:00 am ET. The third quarter 2024 earnings call will be available via a live webcast. The webcast will be available in a listen only mode by going to:

https://edge.media-server.com/mmc/p/cp5pmtx9

For those interested in participating in the question-and-answer portion of the call, please register for the call at the link below.

https://register.vevent.com/register/BIa5e3e952cc2d47c28144fef8683c97e0

All registrants will receive dial-in information and a PIN allowing them to access the live call. It is recommended that you join 10 minutes prior to the event start (although you may register and dial in at any time during the call).

A replay of the conference call will be available from Tuesday, October 29, 2024, through 9:00 am ET on Tuesday, November 5, 2024, by visiting the listen-only webcast link above.

Forward Looking Statements

"Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein, including those relating to market conditions or the Company’s financial results, costs, expenses or expense reductions, profit margins, inventory levels, foreign currency translation rates, liquidity expectations, business goals and sales growth, involve risks and uncertainties, including but not limited to, risks and uncertainties with respect to general economic and currency conditions, various conditions specific to the Company’s business and industry, weather conditions, new housing starts, market demand, competitive factors, changes in distribution channels, supply constraints, effect of price increases,  raw material costs, technology factors, integration of acquisitions, litigation, government and regulatory actions, the Company’s accounting policies, future trends, epidemics and pandemics, and other risks which are detailed in the Company’s Securities and Exchange Commission filings, included in Item 1A of Part I of the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2023, Exhibit 99.1 attached thereto and in Item 1A of Part II of the Company’s Quarterly Reports on Form 10-Q. These risks and uncertainties may cause actual results to differ materially from those indicated by the forward-looking statements. All forward-looking statements made herein are based on information currently available, and the Company assumes no obligation to update any forward-looking statements.

About Franklin Electric

Franklin Electric is a global leader in the production and marketing of systems and components for the movement of water and energy. Recognized as a technical leader in its products and services, Franklin Electric serves customers around the world in residential, commercial, agricultural, industrial, municipal, and fueling applications. Franklin Electric is proud to be named in Newsweek’s lists of America’s Most Responsible Companies and Most Trustworthy Companies for 2023 and America’s Climate Leaders 2023 by USA Today.

Franklin Electric Contact:

Jeffery L. Taylor
Franklin Electric Co., Inc.
InvestorRelations@fele.com 

FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
	Third Quarter Ended								Nine Months Ended
	September 30, 2024				September 30, 2023				September 30, 2024				September 30, 2023
Net sales	$	531,438			$	538,431			$	1,535,596			$	1,592,163
Cost of sales		341,775				352,178				982,556				1,055,164
Gross profit		189,663				186,253				553,040				536,999
Selling, general, and administrative expenses		115,998				107,687				352,290				324,651
Restructuring expense		139				462				139				735
Operating income		73,526				78,104				200,611				211,613
Interest expense		(1,556	)			(2,984	)			(4,980	)			(10,309	)
Other (expense) income, net		(181	)			277				709				1,865
Foreign exchange income (expense), net		88				(2,483	)			(5,228	)			(8,098	)
Income before income taxes		71,877				72,914				191,112				195,071
Income tax expense		16,983				14,746				43,795				39,167
Net income	$	54,894			$	58,168			$	147,317			$	155,904
Less: Net income attributable to noncontrolling interests		(298	)			(370	)			(663	)			(1,181	)
Net income attributable to Franklin Electric Co., Inc.	$	54,596			$	57,798			$	146,654			$	154,723
Earnings per share:
Basic	$	1.19			$	1.25			$	3.18			$	3.34
Diluted	$	1.17			$	1.23			$	3.14			$	3.29

FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
	September 30, 2024				December 31, 2023
ASSETS
Cash and cash equivalents	$	106,273			$	84,963
Receivables (net)		272,003				222,418
Inventories		524,647				508,696
Other current assets		39,560				37,718
Total current assets		942,483				853,795
Property, plant, and equipment, net		226,072				229,739
Lease right-of-use assets, net		62,694				57,014
Goodwill and other assets		575,994				587,574
Total assets	$	1,807,243			$	1,728,122
LIABILITIES AND EQUITY
Accounts payable	$	173,935			$	152,419
Accrued expenses and other current liabilities		124,865				104,949
Current lease liability		17,963				17,316
Current maturities of long-term debt and short-term borrowings		76,402				12,355
Total current liabilities		393,165				287,039
Long-term debt		11,581				88,056
Long-term lease liability		43,484				38,549
Income taxes payable non-current		-				4,837
Deferred income taxes		31,128				29,461
Employee benefit plans		30,781				35,973
Other long-term liabilities		23,219				33,914
Redeemable noncontrolling interest		1,179				1,145
Total equity		1,272,706				1,209,148
Total liabilities and equity	$	1,807,243			$	1,728,122

FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Nine Months Ended
(In thousands)
	September 30, 2024				September 30, 2023
Cash flows from operating activities:
Net income	$	147,317			$	155,904
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization		41,825				39,582
Non-cash lease expense		15,223				12,664
Share-based compensation		10,127				8,449
Other		5,178				10,894
Changes in assets and liabilities:
Receivables		(51,440	)			(20,427	)
Inventory		(18,760	)			2,537
Accounts payable and accrued expenses		17,218				4,376
Operating leases		(15,700	)			(12,847	)
Income taxes-U.S. Tax Cuts and Jobs Act		(3,870	)			(2,902	)
Other		3,968				399
Net cash flows from operating activities		151,086				198,629
Cash flows from investing activities:
Additions to property, plant, and equipment		(28,897	)			(30,155	)
Proceeds from sale of property, plant, and equipment		704				-
Acquisitions and investments		(1,151	)			(6,641	)
Other investing activities		37				26
Net cash flows from investing activities		(29,307	)			(36,770	)
Cash flows from financing activities:
Net change in debt		(12,477	)			(87,653	)
Proceeds from issuance of common stock		5,269				9,010
Purchases of common stock		(56,989	)			(29,888	)
Dividends paid		(35,442	)			(31,315	)
Deferred payments for acquisitions		(348	)			(448	)
Net cash flows from financing activities		(99,987	)			(140,294	)
Effect of exchange rate changes on cash and cash equivalents		(482	)			(4,848	)
Net change in cash and cash equivalents		21,310				16,717
Cash and cash equivalents at beginning of period		84,963				45,790
Cash and cash equivalents at end of period	$	106,273			$	62,507

Key Performance Indicators: Net Sales Summary

	Net Sales
	United States			Latin			Europe, Middle			Asia			Total
(in millions)	& Canada			America			East & Africa			Pacific			Water			Fueling			Distribution			Other/Elims			Consolidated
Q3 2023		$182.0			$45.5			$48.7			$19.6			$295.8			$77.7			$189.2			($24.3	)		$538.4
Q3 2024		$183.6			$43.5			$53.4			$21.7			$302.2			$69.7			$190.8			($31.3	)		$531.4
Change		$1.6			($2.0	)		$4.7			$2.1			$6.4			($8.0	)		$1.6			($7.0	)		($7.0	)
% Change		1	%		-4	%		10	%		11	%		2	%		-10	%		1	%					-1	%
Foreign currency translation *		($0.3	)		($4.4	)		($0.3	)		$0.0			($5.0	)		$0.1			$0.0						($4.9	)
% Change		0	%		-10	%		-1	%		0	%		-2	%		0	%		0	%					-1	%
Acquisitions		$4.5			$0.0			$0.0			$0.0			$4.5			$0.0			$4.7						$9.2
% Change		2	%		0	%		0	%		0	%		2	%		0	%		2	%					2	%
Volume/Price		($2.6	)		$2.4			$5.0			$2.1			$6.9			($8.1	)		($3.1	)		($7.0	)		($11.3	)
% Change		-1	%		5	%		10	%		11	%		2	%		-10	%		-2	%		29	%		-2	%
*The Company has presented local currency price increases used to offset currency devaluation in the Argentina and Turkey hyperinflationary economies within the foreign currency translation, net row above.

Key Performance Indicators: Operating Income and Margin Summary

Operating Income and Margins
(in millions)	For the Third Quarter 2024
	Water			Fueling			Distribution			Other/Elims			Consolidated
Operating Income / (Loss)	$	52.8		$	24.1		$	12.2		$	(15.6	)	$	73.5
% Operating Income To Net Sales		17.5	%		34.6	%		6.4	%					13.8	%
Operating Income and Margins
(in millions)	For the Third Quarter 2023
	Water			Fueling			Distribution			Other/Elims			Consolidated
Operating Income / (Loss)	$	52.7		$	25.8		$	10.7		$	(11.1	)	$	78.1
% Operating Income To Net Sales		17.8	%		33.2	%		5.7	%					14.5	%

FAQ

What were Franklin Electric's (FELE) Q3 2024 earnings per share?

Franklin Electric reported earnings per share (EPS) of $1.17 for Q3 2024, compared to $1.23 in Q3 2023.

How did Franklin Electric's (FELE) Water Systems segment perform in Q3 2024?

Water Systems achieved record Q3 sales of $302.2 million, up 2% year-over-year, with operating income of $52.8 million.

What is Franklin Electric's (FELE) revised guidance for full-year 2024?

Franklin Electric lowered its full-year 2024 guidance to approximately $2.00 billion in sales and adjusted EPS guidance to $3.75-$3.85.

How did Franklin Electric's (FELE) Fueling Systems segment perform in Q3 2024?

Fueling Systems net sales decreased 10% to $69.7 million, with operating income of $24.1 million compared to $25.8 million in Q3 2023.