Franklin Electric Co Inc (FELE) Q3 2023 Earnings: Solid Performance Despite Challenges
Franklin Electric Co Inc (NASDAQ:FELE) reports Q3 2023 consolidated net sales of $538.4 million, a 2% decrease from the prior year.
Operating income stands at $78.1 million with a solid operating margin of 14.5%.
Water Systems sales increased by 1%, setting a third-quarter record for revenue and operating income.
Year-to-date cash flows from operating activities of $198.6 million increased $191.5 million over the prior year.
Franklin Electric Co Inc (NASDAQ:FELE) released its third quarter financial results for fiscal year 2023 on October 24, 2023. The company reported consolidated net sales of $538.4 million, a 2% decrease compared to the same period in 2022. Despite the decrease, the Water Systems segment set a third-quarter record for revenue and operating income, demonstrating strong global execution.
Financial Performance Highlights
The company's operating income for Q3 2023 was $78.1 million, slightly lower than the $80.0 million reported in Q3 2022. The GAAP fully diluted earnings per share (EPS) was $1.23, a slight decrease from the $1.24 EPS in Q3 2022. Despite the challenges, the company's year-to-date cash flows from operating activities significantly increased by $191.5 million over the prior year, reaching $198.6 million.
Segment Performance
Water Systems sales increased by 1%, setting a third-quarter record for both revenue and operating income. The segment's net sales were $295.8 million, an increase of $2.7 million compared to the third quarter of 2022. However, Fueling Systems and Distributions net sales decreased by 14% and 2%, respectively.
Company's Outlook
Franklin Electric Co Inc (NASDAQ:FELE) updated its guidance for full year 2023 sales to be in the range of $2.05 billion to $2.15 billion and full year 2023 EPS to be in the range of $4.07 to $4.17.
Financial Tables Summary
The company's condensed consolidated statements of income showed a net income attributable to Franklin Electric Co Inc of $57.8 million for Q3 2023, slightly lower than the $58.6 million in Q3 2022. The condensed consolidated balance sheets showed total assets of $1.73 billion as of September 30, 2023, an increase from $1.69 billion as of December 31, 2022. The condensed consolidated statements of cash flows showed net cash flows from operating activities of $198.6 million for the nine months ended September 30, 2023, a significant increase from $7.2 million for the same period in 2022.
CEO's Commentary
The third quarter, which is seasonally one of our stronger periods, was a solid quarter but more challenging than anticipated and our results were below our expectations as additional commodity price pressure in our Distribution business and further destocking impacted sales. Nevertheless, Water Systems set a third-quarter record for revenue and operating income on strong global execution. While underlying demand in our core markets remains solid, we continued to see customers extend project timelines and right-size inventory levels in response to improved supplier lead times. In addition, unfavorable weather lasted longer than expected during our busiest months, negatively impacting what is historically a strong quarter," commented Gregg Sengstack, Franklin Electrics Chairperson and Chief Executive Officer.
This article first appeared on GuruFocus.
