Electrical energy control systems manufacturer Powell (NYSE: POWL) fell short of the market’s revenue expectations in Q4 CY2025 as sales rose 4% year on year to $251.2 million. Its non-GAAP profit of $3.40 per share was 11.8% above analysts’ consensus estimates.

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StockStory’s Take

Powell’s fourth quarter results were met with a positive market response, as the company posted year-on-year sales growth and stronger-than-expected non-GAAP profit. Management attributed this performance to robust project execution, particularly in the electric utility and oil and gas sectors, and highlighted a record order intake that included major contracts in liquefied natural gas (LNG) and data centers. CEO Brett Cope emphasized the company’s “unique and advantaged position” supporting grid modernization, electrification, and domestic energy exports. CFO Michael Metcalf pointed to a “very strong quarter with respect to project closeouts,” which contributed to higher margins.

Looking ahead, Powell’s guidance is shaped by continued demand across its core end markets, especially data centers and LNG infrastructure. Management expects the commercial environment to remain positive, with a backlog now extending into 2028 and further capacity investments under evaluation. Cope noted, “The acceleration of order activity driven by data centers leaves us confident in our ability to continue to grow our presence in this dynamic market.” However, management acknowledged ongoing challenges around skilled labor and the need for disciplined execution as project complexity and backlog scale increase.

Key Insights from Management’s Remarks

Management cited strong project execution, an expanding backlog, and new order momentum in data centers and LNG as key factors influencing fourth quarter performance and future prospects.

• Record order intake: Powell secured $439 million in new orders, its highest quarterly total in over two years, highlighted by a $100 million LNG contract and a $75 million data center project. Management noted growing customer alignment and a shift toward larger and more complex engagements.

• Data center growth: The commercial and industrial market, especially data centers, accounted for nearly half of orders. Management described new data center projects as providing “design one, build many” opportunities, supporting a pivot toward higher-volume, repetitive manufacturing.

• Capacity expansion underway: To meet rising demand, Powell added leased facilities and is considering a $100 million new plant investment. These efforts aim to support production for both data centers and traditional utility customers, as well as to balance long- and short-cycle project needs.

• Stable pricing and input cost management: Management reported a steady competitive landscape and highlighted efforts to hedge volatile raw material prices and lock in costs for engineered components. Increased efficiency in repetitive builds is expected to offer potential margin upside.

• Remsdaq integration and technology adoption: The acquisition of Remsdaq Limited enabled Powell to introduce advanced control and protection solutions in the U.S. market, with early traction in high-voltage substation projects and data center applications. Management expects this to be accretive to margins and open new service opportunities.

Drivers of Future Performance

Powell’s outlook is shaped by sustained end-market demand, ongoing capacity investments, and execution on its record backlog.

• Expanding data center opportunity: Management anticipates continued acceleration in data center orders, with many projects phased for follow-on business. The shift toward repetitive manufacturing for these customers is expected to drive both revenue growth and improved productivity if execution remains disciplined.

• LNG and utility market resilience: The company foresees robust activity in LNG and electric utility markets, supported by large capital projects and grid modernization trends. Powell’s backlog is now more balanced across sectors, providing diversification and project visibility through 2028. Management cautioned that project cancellations remain a risk but sees current backlog as “very durable.”

• Capacity and labor constraints: To deliver on its backlog, Powell is evaluating significant capital investments and addressing skilled labor shortages, particularly in engineering. Management remains confident in resolving these challenges but acknowledges that execution risks will increase as the company scales and enters new technical domains.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will pay close attention to (1) Powell’s ability to ramp capacity and navigate skilled labor constraints as backlog converts to revenue, (2) the pace of data center order intake and the emergence of follow-on project phases, and (3) margin trends as the company balances long-cycle industrial projects with higher-volume, repetitive manufacturing. Progress with Remsdaq integration and further expansion in high-voltage solutions will also be key milestones.

Powell currently trades at $526.88, up from $453.24 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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