Wrapping up Q2 earnings, we look at the numbers and key takeaways for the electrical systems stocks, including Napco (NASDAQ:NSSC) and its peers.

Like many equipment and component manufacturers, electrical systems companies are buoyed by secular trends such as connectivity and industrial automation. More specific pockets of strong demand include Internet of Things (IoT) connectivity and the 5G telecom upgrade cycle, which can benefit companies whose cables and conduits fit those needs. But like the broader industrials sector, these companies are also at the whim of economic cycles. Interest rates, for example, can greatly impact projects that drive demand for these products.

The 15 electrical systems stocks we track reported a mixed Q2. As a group, revenues beat analysts’ consensus estimates by 1.8% while next quarter’s revenue guidance was 2.1% below.

Inflation progressed towards the Fed's 2% goal recently, leading the Fed to reduce its policy rate by 50bps (half a percent or 0.5%) in September 2024. This is the first cut in four years. While CPI (inflation) readings have been supportive lately, employment measures have bordered on worrisome. The markets will be debating whether this rate cut's timing (and more potential ones in 2024 and 2025) is ideal for supporting the economy or a bit too late for a macro that has already cooled too much.

Thankfully, electrical systems stocks have been resilient with share prices up 5.1% on average since the latest earnings results.

Napco (NASDAQ:NSSC)

Napco Security Technologies, Inc. (NASDAQ:NSSC) is a leading manufacturer and designer of high-tech electronic security devices, cellular communication services for intrusion and fire alarm systems, and school safety solutions.

Napco reported revenues of $50.33 million, up 12.7% year on year. This print was in line with analysts’ expectations, but overall, it was a mixed quarter for the company with a narrow beat of analysts’ earnings estimates.

Richard Soloway, Chairman and CEO, commented, "Fiscal 2024 concluded with record revenue and net income for both the 4th quarter and the full fiscal 2024 year ending June 30, 2024."

Unsurprisingly, the stock is down 29.7% since reporting and currently trades at $38.99.

Is now the time to buy Napco? Access our full analysis of the earnings results here, it’s free.

Best Q2: Powell (NASDAQ:POWL)

Originally a metal-working shop supporting local petrochemical facilities, Powell (NYSE:POWL) has grown from a small Houston manufacturer to a global provider of electrical systems.

Powell reported revenues of $288.2 million, up 49.8% year on year, outperforming analysts’ expectations by 29.7%. The business had an incredible quarter with an impressive beat of analysts’ earnings estimates.