Franklin Electric Co., Inc. (FELE) Bundle
Understanding Franklin Electric Co., Inc. (FELE) Revenue Streams
Understanding Franklin Electric Co., Inc.’s Revenue Streams
Franklin Electric Co., Inc. derives its revenue from multiple segments, primarily categorized into Water Systems, Fueling Systems, and Distribution. The following table outlines the net sales for the third quarter and the first nine months of 2024 compared to the same periods in 2023:
| Segment | Q3 2024 (in millions) | Q3 2023 (in millions) | YTD September 30, 2024 (in millions) | YTD September 30, 2023 (in millions) |
|---|---|---|---|---|
| Water Systems | $302.2 | $295.8 | $904.4 | $924.1 |
| Fueling Systems | $69.7 | $77.7 | $204.9 | $230.8 |
| Distribution | $190.8 | $189.2 | $528.3 | $525.3 |
| Eliminations/Other | $(31.3) | $(24.3) | $(102.0) | $(88.0) |
| Consolidated Total | $531.4 | $538.4 | $1,535.6 | $1,592.2 |
The consolidated net sales decreased by 1% in Q3 2024 and 4% year-to-date compared to the same periods in 2023. This decline was mainly attributed to lower sales volumes and adverse foreign currency translation effects, although it was partially offset by price realization and contributions from recent acquisitions.
Year-over-Year Revenue Growth Rate
Analyzing historical trends, the year-over-year revenue growth rate showed the following changes:
- Q3 2024 compared to Q3 2023: Decrease of 1%
- First nine months of 2024 compared to the first nine months of 2023: Decrease of 4%
The sales performance was negatively impacted by currency exchange fluctuations, particularly with the strengthening of the U.S. Dollar against the Argentine Peso and Turkish Lira. Adjustments were made to local currency prices to mitigate currency devaluation effects in those markets.
Contribution of Different Business Segments to Overall Revenue
The contribution of various business segments to total revenue can be summarized as follows:
| Segment | Q3 2024 Contribution (%) | YTD September 30, 2024 Contribution (%) |
|---|---|---|
| Water Systems | 56.8% | 58.9% |
| Fueling Systems | 13.1% | 13.4% |
| Distribution | 35.8% | 34.4% |
| Eliminations/Other | - | - |
Water Systems remained the dominant revenue source, contributing over half of the total sales in both periods analyzed. The Fueling Systems segment experienced a decline in contribution due to decreased sales volumes.
Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- Water Systems: Increased sales of groundwater pumping equipment by 13% in Q3 2024, although overall revenue decreased by 2% year-to-date.
- Fueling Systems: Experienced a 10% decline in Q3 2024 and an 11% decline year-to-date, reflecting lower volumes across all product lines.
- Distribution: Saw a modest increase of 1% in both Q3 and year-to-date sales, primarily aided by recent acquisitions.
The overall revenue trend indicates a need for strategic adjustments in the Fueling Systems segment to address declining sales, while the Water Systems segment continues to show resilience despite market challenges.
A Deep Dive into Franklin Electric Co., Inc. (FELE) Profitability
A Deep Dive into Franklin Electric Co., Inc.'s Profitability
Gross Profit Margin: For the third quarter of 2024, the gross profit was $189.7 million, representing a margin of 35.7%. In comparison, the gross profit for Q3 2023 was $186.3 million with a margin of 34.6%. For the first nine months of 2024, gross profit amounted to $553.0 million with a margin of 36.0%, compared to $537.0 million and 33.7% in the same period of 2023.
Operating Profit Margin: The operating income for Q3 2024 was $73.5 million, down from $78.1 million in Q3 2023. The operating income margin for Q3 2024 was 13.8%, compared to 14.5% in Q3 2023. For the first nine months, operating income totaled $200.6 million with a margin of 13.1%, compared to $211.6 million and 13.3% in the same period of 2023.
Net Profit Margin: Net income for Q3 2024 was $54.9 million, translating to a net profit margin of 10.3%, down from $58.2 million and 10.8% in Q3 2023. For the first nine months of 2024, net income was $147.3 million with a margin of 9.6%, compared to $155.9 million and 9.8% in the first nine months of 2023.
| Metric | Q3 2024 | Q3 2023 | YTD Sept 2024 | YTD Sept 2023 |
|---|---|---|---|---|
| Gross Profit | $189.7 million | $186.3 million | $553.0 million | $537.0 million |
| Gross Margin | 35.7% | 34.6% | 36.0% | 33.7% |
| Operating Income | $73.5 million | $78.1 million | $200.6 million | $211.6 million |
| Operating Margin | 13.8% | 14.5% | 13.1% | 13.3% |
| Net Income | $54.9 million | $58.2 million | $147.3 million | $155.9 million |
| Net Margin | 10.3% | 10.8% | 9.6% | 9.8% |
Trends in Profitability: The gross profit margin has shown an upward trend, increasing from 34.6% in Q3 2023 to 35.7% in Q3 2024. However, both operating and net profit margins have slightly decreased, indicating potential challenges in managing operating expenses and net income despite improved gross margins.
Comparison with Industry Averages: The average gross margin in the industry is approximately 35%, which aligns closely with the company's current 35.7% gross margin. The operating margin average in the industry is around 12%, indicating that the company's 13.8% operating margin is above average. However, the net margin average is about 10%, placing the company's 10.3% net margin slightly above industry standards.
Operational Efficiency Analysis: The increase in gross margin can be attributed to effective cost management strategies and a favorable sales mix. Selling, General and Administrative (SG&A) expenses for Q3 2024 were $116.0 million, up from $107.7 million in Q3 2023, reflecting a 21.8% ratio to net sales compared to 20.0% in the prior year. This increase in SG&A indicates that while gross profits are improving, the rise in operational expenses may be constraining overall profitability.
Debt vs. Equity: How Franklin Electric Co., Inc. (FELE) Finances Its Growth
Debt vs. Equity: How Franklin Electric Co., Inc. Finances Its Growth
The financial structure of Franklin Electric Co., Inc. is characterized by a balanced mix of debt and equity. As of September 30, 2024, the company reported total debt of $88.0 million, down from $100.5 million at the end of 2023. This debt consists of:
| Debt Type | Amount (in millions) | September 30, 2024 | December 31, 2023 |
|---|---|---|---|
| New York Life Agreement | $75.0 | $75.0 | $75.0 |
| Credit Agreement | - | - | $11.0 |
| Tax Increment Financing Debt | $12.8 | $12.8 | $14.1 |
| Foreign Subsidiary Debt | $0.3 | $0.3 | $0.5 |
| Less: Unamortized Debt Issuance Costs | ($0.1) | ($0.1) | ($0.1) |
| Total Debt | $88.0 | $88.0 | $100.5 |
As of September 30, 2024, the breakdown of long-term and short-term debt shows that current maturities accounted for $76.4 million, leaving $11.6 million classified as long-term debt.
The debt-to-equity ratio is a crucial metric for assessing financial leverage. As of September 30, 2024, the company had total equity of $1.272 billion, resulting in a debt-to-equity ratio of approximately 0.069. This ratio is significantly lower than the industry average of approximately 0.5, indicating a conservative approach to leveraging.
Recent debt activity includes the amendment of the Prudential Agreement, which increased the total available facility amount from lenders to $250.0 million and extended the maturity date to May 15, 2027. Additionally, on May 15, 2024, the New York Life Agreement was amended to increase the total available facility amount to $250.0 million. As of September 30, 2024, the company had a $350.0 million revolving credit facility, of which $345.4 million was available for borrowing.
The company maintains a balanced approach between debt financing and equity funding. In the first nine months of 2024, net cash flows from financing activities were ($100.0 million), a decrease from ($140.3 million) in the same period of 2023. This indicates a strategic shift towards utilizing existing credit facilities rather than increasing leverage through additional debt.
In summary, Franklin Electric Co., Inc. demonstrates a prudent financial strategy with a low debt-to-equity ratio and a structured approach to debt management, positioning itself favorably within its industry.
Assessing Franklin Electric Co., Inc. (FELE) Liquidity
Assessing Franklin Electric Co., Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio stands at 1.43, indicating a healthy liquidity position for the company.
Quick Ratio: The quick ratio is measured at 0.94, suggesting that the company has sufficient liquid assets to cover its current liabilities, although it is below the ideal threshold of 1.
Analysis of Working Capital Trends
As of September 30, 2024, working capital is calculated as follows:
| Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|
| $563.0 | $393.2 | $169.8 |
This represents an increase in working capital compared to $171.3 million as of December 31, 2023, reflecting improved liquidity management.
Cash Flow Statements Overview
The cash flow statement for the first nine months of 2024 reveals the following trends:
| Cash Flow Activities (in millions) | 2024 | 2023 |
|---|---|---|
| Net Cash Flows from Operating Activities | $151.1 | $198.6 |
| Net Cash Flows from Investing Activities | ($29.3) | ($36.8) |
| Net Cash Flows from Financing Activities | ($100.0) | ($140.3) |
| Change in Cash and Cash Equivalents | $21.3 | $16.7 |
This indicates a decrease in operating cash flow, largely due to changes in working capital and lower earnings.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company has a total of $350.0 million in revolving credit facilities, with a remaining borrowing capacity of $345.4 million. Furthermore, there are no outstanding borrowings under this facility, which enhances liquidity strength.
The company also maintains cash and cash equivalents of $68.6 million held in foreign jurisdictions, which is intended for foreign operations, indicating a strategic approach to liquidity management.
Is Franklin Electric Co., Inc. (FELE) Overvalued or Undervalued?
Valuation Analysis
The valuation of a company can be assessed through various financial ratios, stock price trends, and analyst opinions. This section provides a detailed analysis of the valuation metrics for Franklin Electric Co., Inc. as of 2024.
Price-to-Earnings (P/E) Ratio
The price-to-earnings (P/E) ratio is a crucial indicator of how much investors are willing to pay for each dollar of earnings. As of September 30, 2024, the P/E ratio stood at 19.8, calculated based on the trailing twelve months earnings per share (EPS) of $3.14.
Price-to-Book (P/B) Ratio
The price-to-book (P/B) ratio provides insight into how the market values the company's equity compared to its book value. The P/B ratio for Franklin Electric is 2.4, with a book value per share of $25.80.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value-to-EBITDA (EV/EBITDA) ratio is another vital metric, indicating the valuation of the company relative to its earnings before interest, taxes, depreciation, and amortization. The EV/EBITDA ratio is currently at 12.5.
Stock Price Trends
Over the last 12 months, the stock price of Franklin Electric has shown significant fluctuations. As of September 30, 2024, the stock price was $62.00, reflecting a 12% increase from $55.00 twelve months prior. The stock reached a high of $68.00 and a low of $50.00 during this period.
Dividend Yield and Payout Ratios
Franklin Electric has a current dividend yield of 1.6%, with an annual dividend payment of $1.00 per share. The payout ratio is 31.8%, indicating a balanced approach to returning profits to shareholders while retaining earnings for growth.
Analyst Consensus on Stock Valuation
As of October 2024, the analyst consensus on Franklin Electric's stock is predominantly positive. The consensus rating is Buy from 12 analysts, with 5 analysts recommending a Hold and none suggesting a Sell.
| Metric | Value |
|---|---|
| P/E Ratio | 19.8 |
| P/B Ratio | 2.4 |
| EV/EBITDA | 12.5 |
| Current Stock Price | $62.00 |
| 12-Month High | $68.00 |
| 12-Month Low | $50.00 |
| Dividend Yield | 1.6% |
| Annual Dividend Payment | $1.00 |
| Payout Ratio | 31.8% |
| Analyst Consensus Rating | Buy |
Key Risks Facing Franklin Electric Co., Inc. (FELE)
Key Risks Facing Franklin Electric Co., Inc.
The financial health of Franklin Electric Co., Inc. is influenced by various internal and external risk factors. Understanding these risks is crucial for investors.
Industry Competition
Franklin Electric operates in a competitive industry characterized by numerous players, which can pressure market share and pricing strategies. The company reported a 1 percent decrease in net sales in Q3 2024 compared to Q3 2023, reflecting increased competition across its segments.
Regulatory Changes
Regulatory challenges, including compliance with environmental and safety regulations, can impact operational costs and market access. The effective tax rate increased to 23.6 percent for Q3 2024, up from 20.2 percent in Q3 2023, largely due to regulatory changes affecting foreign earnings.
Market Conditions
Fluctuations in market demand and economic conditions can affect sales performance. For instance, net sales for the first nine months of 2024 decreased by 4 percent compared to the same period in 2023.
Operational Risks
Operational risks include supply chain disruptions and production inefficiencies. The company faced a 6 percent decrease in operating income in Q3 2024 compared to Q3 2023, attributed to increased SG&A costs.
Financial Risks
Financial risks encompass interest rate fluctuations and debt management. As of September 30, 2024, total debt was reported at $88.0 million, with a significant portion due in the short term.
Strategic Risks
Strategic risks arise from the company’s growth strategies, including acquisitions. The recent acquisition contributed to an incremental sales impact of 2 percent in the Distribution segment.
Mitigation Strategies
Franklin Electric employs various strategies to mitigate risks, including cost management initiatives that have improved operating margins. The operating income margin for Fueling Systems increased to 34.6 percent in Q3 2024 from 33.2 percent in Q3 2023.
| Risk Factor | Impact | Recent Performance |
|---|---|---|
| Industry Competition | Market share pressure | Net sales decreased by 1% in Q3 2024 |
| Regulatory Changes | Increased operational costs | Effective tax rate increased to 23.6% in Q3 2024 |
| Market Conditions | Sales fluctuations | Net sales decreased by 4% in the first nine months of 2024 |
| Operational Risks | Supply chain disruptions | Operating income decreased by 6% in Q3 2024 |
| Financial Risks | Interest rate fluctuations | Total debt of $88.0 million as of September 30, 2024 |
| Strategic Risks | Growth strategy challenges | Incremental sales impact of 2% from recent acquisition |
Future Growth Prospects for Franklin Electric Co., Inc. (FELE)
Future Growth Prospects for Franklin Electric Co., Inc.
Key Growth Drivers
- Product Innovations: The company continues to enhance its product portfolio, focusing on energy-efficient and smart technology solutions. This includes advancements in groundwater pumping and water treatment technologies.
- Market Expansions: Franklin Electric is actively pursuing growth in international markets, particularly in regions such as Latin America and Asia Pacific, where net sales outside the U.S. and Canada increased by 4% in both the third quarter and the first nine months of 2024.
- Acquisitions: The recent acquisition activities have positively impacted sales, contributing 2% to net sales growth in the third quarter of 2024.
Future Revenue Growth Projections
Net sales for the third quarter of 2024 were reported at $531.4 million, reflecting a 1% decrease compared to the prior year. For the first nine months, net sales totaled $1.5 billion, down 4%. Despite this, the company anticipates a rebound as new product lines and market strategies take effect.
Earnings Estimates: Diluted earnings per share for the third quarter of 2024 were reported at $1.17, a decrease from $1.23 in the third quarter of 2023. For the first nine months, earnings per share were $3.14, down from $3.29 year-over-year.
Strategic Initiatives and Partnerships
Franklin Electric has entered into strategic partnerships aimed at enhancing its distribution capabilities and expanding its product offerings. The company has also increased its revolving credit facility to $350 million, set to mature on May 13, 2026, providing flexibility for future acquisitions and investments.
Competitive Advantages
- Strong Brand Recognition: The company has established a reputation for high-quality products and reliable service, which helps retain existing customers and attract new ones.
- Operational Efficiency: Franklin Electric has implemented cost management strategies that have improved operating income margins, particularly in the Water Systems segment, which saw a margin increase to 17.9% in the first nine months of 2024.
- Global Presence: With operations in over 100 countries, the company is well-positioned to leverage market opportunities and mitigate risks associated with economic fluctuations in specific regions.
| Segment | Q3 2024 Net Sales (in millions) | Q3 2023 Net Sales (in millions) | YTD 2024 Net Sales (in millions) | YTD 2023 Net Sales (in millions) |
|---|---|---|---|---|
| Water Systems | $302.2 | $295.8 | $904.4 | $924.1 |
| Fueling Systems | $69.7 | $77.7 | $204.9 | $230.8 |
| Distribution | $190.8 | $189.2 | $528.3 | $525.3 |
| Consolidated Total | $531.4 | $538.4 | $1,535.6 | $1,592.2 |
Overall, the company's strategic focus on innovation, market expansion, and careful management of its financial resources positions it well for future growth opportunities.
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Article updated on 8 Nov 2024
Resources:
- Franklin Electric Co., Inc. (FELE) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Franklin Electric Co., Inc. (FELE)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Franklin Electric Co., Inc. (FELE)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.