While there are plenty of examples of successful female CEOs and CFOs in the industrial world (UPS CEO Carol Tome and General Electric's CFO Carolina Dybeck Happe spring to mind), it's not often you come across a female CEO/CFO team in the industrial sector. However, nVent Electic's (NVT 1.75%) CEO Beth Wozniak and CFO Sara Zawoyski break the mold, and they also have a track record of delivering excellent returns for investors. Here's why they are a management team to watch.
Not your average CEO
According to Pew Research, 15% of engineering jobs in 2019 were held by women. That figure is up from 12% in 1990, but it's still significantly below potential. It's also below the 22% of female graduates in engineering as of 2018.
Still, it's safe to conclude that Wozniak's engineering background and wealth of experience at Honeywell, Pentair, and then nVent (after it was spun out of Pentair) make her an exception in the industrial world. However, Wozniak stands out because of the value she and Zayowski have generated for shareholders over the last three years. nVent stock is up 124% over that period compared to a 37.6% return for the S&P 500.
Image source: Getty Images.
Introducing nVent
This electrical connection and protection products company isn't a household name, but its solutions are integral to our world. You can't have industrial, commercial, infrastructural, or energy facilities without electrical installations, and you can't have electrical installations without the enclosures, electrical and fastening solutions, and thermal enclosures that nVent offers.
You can think of nVent as a pick-and-shovel play on the electrification-of-everything megatheme. The explosion of connected devices, the increasing adoption of digital technology (such as in industrial automation or smart buildings), and the growing use of electric technology, whether for smart grids, electric cars, electric trains, or the networks to connect renewable energy, is driving end demand at nVent.
Having led the company through the spinoff from Pentair (now a focused water treatment company) Wozniak (who counts the first female astronaut, and third woman in space,Sally Ride, as an inspiration) has a vision for the company that includes:
- Being more aggressive on acquisitions as a stand-alone company and scaling up, such as with the $1.1 billion acquisition of electrical connectivity products company ECM – a deal that would mark nVent's fifth acquisition since the spin
- Developing new and innovative products inspired by the encouragement of a creative culture and a positive office environment
- Focusing on higher growth categories, such as infrastructure, smart buildings, and data centers
How nVent is keeping shareholders happy
It would be a mistake to conclude that nVent's stock outperformance comes from favorable end markets, and I have two points to make.
- The Wozniak/Zawoyski team has acquired a well-earned reputation for underpromising and overdelivering on its guidance -- always a benefit for investors.
- The outperformance needs to be put in the context of a challenging trading environment, successfully navigated by nVent.
Underpromising and overdelivering
They have raised full-year earnings guidance on every available earnings call since the end of 2020. Having started fiscal 2021 forecasting full-year organic sales growth of 3% to 6% and adjusted earnings per share (EPS) of $1.58 to $1.68, nVent finished the year with 18% growth and $1.96 in adjusted EPS.
Similarly, in 2022 the team started the fiscal year guiding toward organic sales growth of 6% to 9% and adjusted EPS of $2.10 to $2.20 but ended up with 20% and $2.40, respectively. The recent first-quarter results saw management raising full-year 2023 guidance to $2.65 to $2.73 compared to initial guidance of $2.51 to $2.61.
Forgive the mass of numbers; the point I'm trying to reach is the level of conservatism in the guidance given by Wozniak and Zayowski.
NYSE: NVT
Key Data Points
Overcoming the supply chain crisis
While beating guidance was understandable in 2021, as the economy came back strongly from the contraction in 2020, the company's performance in 2022 deserves extra credit.
If 2021 was a year of growth, then 2022 was a year when economic growth slowed, and supply chain issues and raw material inflation led to margin pressures.
It was a tricky environment to navigate, with many managements struggling to find the right pricing strategy to offset cost increases but not kill off demand. Fortunately, nVent's team did well with pricing. They added $333 million to segment income, easily offsetting a $290 million increase in inflation and productivity costs due to supply chain issues. It all led to a 20% increase in segment income as profit margins expanded in a challenging year.
In comparison, industrial stalwarts like 3M, Stanley Black & Decker, and Johnson Controls missed their initial full-year guidance for 2022.
Looking ahead
nVent operates in attractive end markets and has a management team with a proven track record for generating value for investors. The team's success makes a compelling case for investing in a company led by two women who stand out in the STEM world and deserve wider investor attention.
