FELE - Franklin Electric: Tough Near-Term Prospects But The Second Half May Be Better

2024-03-26 14:54:52 ET

Summary

• Franklin Electric's growth prospects for the current year are mixed due to declining backlog, lower demand, and project delays.
• Margins are expected to be negatively impacted by volume deleverage and lower pricing benefits in the near term.
• The company's revenue decline is expected to bottom out in the second half of 2024, with potential recovery from easing comparisons and interest rate cycle reversal.

Investment Thesis

Franklin Electric’s ( FELE ) growth prospects remain mixed for the current year. Revenue should continue to see headwinds in the near term from a declining backlog due to lower demand, channel inventory destocking, and project delays by clients in a high-interest environment. Further, tough comparisons in 1H24, and the dissipating impact of price increases should also negatively impact revenue. This revenue decline should start bottoming in the second half of 2024 as the company benefits from easing comparisons in 2H24, and a potential interest rate cycle reversal helping project investments....

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