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Stock Of The Day: Powell Holds Key Level As This AI Business Helps Drive Growth
$ 516.00
IBD Stock Analysis
IBD Composite Rating
97/99
Industry Group Ranking
15/197
Emerging Pattern
Pullback
Powell Industries (POWL) is the IBD Stock Of The Day, as the industrial electrical distribution provider seems poised to extend a year-to-date gain of more than 60%.
The company provides specialized electrical gear and services for the oil & gas industry, an important sector in Powell’s Houston base. It accounts for about half the company’s revenue.
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It also works in mining, rail and other heavy industry projects. In the last decade or so, the company turned its focus to electric utilities, which grew to one-fourth of total revenue last year. But the most impactful growth areas are utilities and commercial development, where construction of AI data centers is exploding and driving demand for electricity.
In the most recent quarter, Powell’s backlog grew to about $1.6 billion. The commercial and industrial segment, which includes data centers, rose 22%. Data centers accounted for roughly 12% to 15% of the total, Chief Financial Officer Michael Metcalf said at a conference Wednesday.
The company added more than $100 million of data center work to its order book last quarter, Metcalf added, according to a transcript via FactSet.
The electric utility backlog rose 30%. Powell Industries says most of its markets are enjoying strong activity, and the $439 million in new orders were about 1.7 times sales of $251 million in the October-December quarter. That’s the largest book-to-bill ratio since the June 2023 quarter, according to a company presentation.
The U.S. accounts for nearly 80% of Powell’s revenue and Canada 14.2%, according to FactSet. Germany, France, Turkey, Saudi Arabia and other countries make up less than 1% each.
Powell Industries Stock Nearly Triples
Powell Industries has an IBD Composite Rating of 97, thanks largely to a near tripling in the stock price over the past 12 months.
Its fundamentals are improving, too. Earnings slowed from a triple-digit pace in 2024, but reaccelerated from 4% to 12% and 19% the past few quarters. Sales have ranged from a 1% decline to an 8% increase over the past four quarters.
Analysts polled by FactSet expect earnings to climb 10.9% in the fiscal year ending in September. Sales are seen rising 7.8%.
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Don’t be alarmed if Powell shares fall by two-thirds in a few weeks. That’s because Powell has set a 3-for-1 stock split that will become effective with the start of trading on April 6.
Stock splits tend to boost share prices at least temporarily, because the lower price makes the stock more accessible to smaller investors. Powell stock is currently trading around 515.
Powell Stock Finds Support
After climbing to an all-time high of 612.50 on Feb. 12, Powell stock pulled back to the 10-week moving average, where shares found support. The stock is trading near the 21-day exponential moving average.
A move above the March 18 high of 537.12 would offer an entry from the 50-day line.
If it continues in its current trend, the stock could have a cup base by the end of next week. The buy point would be 612.50.
Keep in mind, however, that market risk is higher than normal.
Shares fell modestly on Friday, but rose modestly for the week.
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Powell stock has a moderately high 21-day average true range (ATR) of 5.86%. The average true range, available on IBD MarketSurge, gauges the characteristic breadth of a stock’s behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
In February, the company raised its quarterly dividend to 27 cents per share, from 26.75 cents. It has an annualized yield of 0.2%, according to MarketSurge.
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