Shares of Preformed Line Products Company PLPC have gained 22.4% since reporting earnings for the fourth quarter of 2024. This compares with the S&P 500 index’s 2.7% growth over the same time frame. Over the past month, the stock has risen 8.7% against the S&P 500’s 7.3% decline.

Strong Q4 Performance Amid Market Challenges

For the fourth quarter of 2024, Preformed Line Products reported net sales of $167.1 million, reflecting a 15% increase from $145.6 million in the same quarter last year. The company also saw a 65% surge in diluted earnings per share (EPS) to $2.13, up from $1.29 in the fourth quarter of 2023. Gross profit as a percentage of net sales improved by 30 basis points to 33.3%, driven by higher sales volumes and a favorable product mix.

Despite the robust quarterly results, 2024 revenue fell 11% year over year to $593.7 million from $669.7 million in 2023. This decline was attributed primarily to a slowdown in U.S. energy and communications end-market spending, inventory de-stocking, and delays in Broadband Equity, Access, and Deployment Program stimulus funding. Consequently, full-year diluted EPS dropped 41% to $7.50 from $12.68 in 2023.

Preformed Line Products Company Price, Consensus and EPS Surprise

Preformed Line Products Company price-consensus-eps-surprise-chart | Preformed Line Products Company Quote

Other Key Business Metrics

Operating income for the fourth quarter was $17.5 million, more than doubling from $6.9 million a year earlier. This improvement was driven by strong revenue growth and lower operating expenses. The company’s free cash flow stood at $20.6 million in the fourth quarter of 2024, representing a 197% free cash flow conversion of net income. For the full year, the free cash flow amounted to $56.2 million, helping the company reduce its total debt by $33.7 million.

From a geographic perspective, U.S. sales were affected by ongoing customer inventory reductions, while international markets provided some stability. The energy segment, which represents the largest share of PLPC’s business, saw a 12% year-over-year sales increase in the fourth quarter of 2024. The communications segment followed with an 18% rise, reflecting improved market conditions after a prolonged de-stocking phase.

Management Commentary

Rob Ruhlman, executive chairman, noted that the strong fourth-quarter performance suggests the company is approaching the end of inventory de-stocking in its primary end markets. He acknowledged the challenges faced throughout 2024 but expressed confidence in the company's ability to navigate industry fluctuations.

“Our cost reduction activities, along with reduced capital expenditures, limited acquisition activity, and lower borrowing costs in 2024, resulted in strong cash generation, enabling a $33.7 million reduction in debt,” Ruhlman said. He also highlighted the importance of the company's international subsidiaries in offsetting weakness in the U.S. business.

Factors Influencing Results

The company’s fourth-quarter revenue growth was supported by a recovery in demand from the energy and communications sectors, particularly as customers resumed purchasing after prolonged de-stocking. However, the full-year revenue decline reflected a more cautious spending environment in the U.S. due to higher borrowing costs and delays in government funding programs.

The gross margin contraction for the year (down 310 basis points to 32%) largely resulted from lower sales volumes and changes in the product mix. To mitigate the impacts, PLPC prioritized cost-containment measures throughout the year, achieving an $11.6-million reduction in expenses.

Guidance & Outlook

While PLPC did not provide explicit forward-looking guidance, management expressed optimism about continued improvement in market conditions, particularly as inventory normalization progresses. The company’s strong cash position and lower debt levels provide flexibility to invest in product innovation, facility modernization and potential acquisitions.

Other Developments

PLPC continued its disciplined approach to capital allocation, reducing capital expenditure and limiting acquisition activity in 2024. The company maintained its quarterly dividend at 20 cents per share.

Looking ahead, management remains focused on leveraging its global footprint to drive growth while maintaining financial discipline. As market conditions stabilize, the company is positioned to capitalize on demand recovery in key infrastructure sectors.

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This article originally published on Zacks Investment Research (zacks.com).

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