Wednesday, electrical components manufacturer Thomas & Betts Corp. (TNB) reported earnings that fell sharply from a year ago, on lower sales that reflected the weaker demand for electrical products and the impact of the stronger US dollar. Further, the company cut its full-year earnings outlook which is below current analyst's view.
Dominic Pileggi, chairman and chief executive officer, commented, "2009 has proven to be considerably more challenging than anticipated, with continued pressure in all of our key markets."
Second-quarter net income plunged to $22.66 million or $0.43 per share from $147.84 million or $2.54 per share in the prior-year period. On average, six analysts polled by Thomson Reuters expected the company to earn $0.60 per share for the quarter.
The Memphis, Tennessee-based company said its year-ago earnings included unusual items, which, on a net basis, contributed $1.63 per share. These items included a $1.74 per share gain on the sale of the company's minority interest in Leviton Manufacturing Company, a $0.13 benefit from a legal settlement, and a $0.24 non-cash tax charge.
Gross margin was 28.6% for the quarter, compared to 31.2% a year ago, primarily reflecting the impact of lower production volumes.
Quarterly sales fell 28.1% to $460.99 million from $641.32 million a year ago. Analysts consensus revenue estimate was $513.40 million.
Thomas & Betts said the significant year-over-year sales decrease reflected weaker demand for electrical products used in construction, industrial maintenance and power distribution as well as commercial heating products. In addition, the stronger U.S. dollar negatively impacted sales by approximately $38 million or 6% when compared to last year.
Electrical segment sales declined 30.4% to $383.4 million year over year, while foreign currency contributed approximately $36 million or 7% to the sales decline. Sales in the Steel Structures segment were $55.0 million, down slightly year over year. HVAC segment sales slipped to $22.7 million from $34.1 million in the comparable period last year. Thomas & Betts first half net earnings were $48.7 million or $0.92 per share, down from $186.1 million or $3.20 per share. For the first six months ended June 30, 2009, net sales fell 25.6% to $920.83 million from $1.24 billion in the comparable period a year ago.
Pileggi noted, "Our key markets - construction, industrial and utility - remain under significant pressure as a result of the continued credit crunch and lack of effective government-stimulus activity."
Considering these factors and the belief that markets will not show meaningful improvement in the second half of the year, Thomas & Betts now expects full-year earnings per share to be in the range of $2.10 per share to $2.40 per share. Earlier, the company had predicted earnings of approximately $3.00 per share. Analysts are currently looking for earnings of $2.54 per share.
TNB is currently trading at $26.11, down $2.71 or 9.40%, on a volume of about 1.0 million shares.
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