Earnings can be decomposed into cash and accrual components. The accrual component (aggregate accruals) has been found to have less persistence than the cash component, and therefore (1) earnings with higher accrual component are less persistent than earnings with smaller accrual component, all else equal; and (2) the cash component of earnings should receive a higher weighting evaluating company performance.
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- Analysis of Reportable Segments
- Analysis of Geographic Areas
- Enterprise Value to EBITDA (EV/EBITDA)
- Capital Asset Pricing Model (CAPM)
- Operating Profit Margin since 2005
- Current Ratio since 2005
- Total Asset Turnover since 2005
- Price to Book Value (P/BV) since 2005
- Analysis of Revenues
- Analysis of Debt
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Balance-Sheet-Based Accruals Ratio
Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
---|---|---|---|---|---|---|
Operating Assets | ||||||
Total assets | ||||||
Less: Cash and cash equivalents | ||||||
Less: Short-term investments | ||||||
Operating assets | ||||||
Operating Liabilities | ||||||
Total liabilities | ||||||
Less: Short-term debt and current portion of long-term debt | ||||||
Less: Long-term debt, excluding current portion | ||||||
Operating liabilities | ||||||
Net operating assets1 | ||||||
Balance-sheet-based aggregate accruals2 | ||||||
Financial Ratio | ||||||
Balance-sheet-based accruals ratio3 | ||||||
Benchmarks | ||||||
Balance-Sheet-Based Accruals Ratio, Competitors4 | ||||||
Boeing Co. | ||||||
Caterpillar Inc. | ||||||
Eaton Corp. plc | ||||||
GE Aerospace | ||||||
Honeywell International Inc. | ||||||
Lockheed Martin Corp. | ||||||
RTX Corp. | ||||||
Balance-Sheet-Based Accruals Ratio, Sector | ||||||
Capital Goods | ||||||
Balance-Sheet-Based Accruals Ratio, Industry | ||||||
Industrials |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Net operating assets = Operating assets – Operating liabilities
= – =
2 2022 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2022 – Net operating assets2021
= – =
3 2022 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × ÷ [( + ) ÷ 2] =
4 Click competitor name to see calculations.
- Net Operating Assets
- The net operating assets showed a relatively stable trend over the four-year period. Starting at approximately $3,335,700 thousand in 2019, the value marginally increased to $3,406,500 thousand in 2020. Subsequently, there was a slight decline to $3,390,300 thousand in 2021, followed by a further minor decrease to $3,358,400 thousand in 2022. Overall, the fluctuations are minimal, indicating consistent levels of operating assets during the period analyzed.
- Balance-sheet-based Aggregate Accruals
- The aggregate accruals exhibited considerable volatility across the years. In 2019, accruals were negative at -$58,200 thousand, signaling potentially conservative earnings adjustments or cash flows exceeding accruals. However, in 2020, the figure sharply reversed to a positive value of $70,800 thousand, suggesting a significant increase in accruals. The years 2021 and 2022 showed negative accruals again, at -$16,200 thousand and -$31,900 thousand respectively, though the magnitudes were smaller compared to the volatility between 2019 and 2020. This oscillation indicates variability in the company's accounting adjustments over the period, possibly reflecting changing operational or financial conditions.
- Balance-sheet-based Accruals Ratio
- The accruals ratio follows a pattern consistent with the aggregate accruals. It was negative at -1.73% in 2019, turned positive to 2.1% in 2020, and then reverted to negative values of -0.48% in 2021 and -0.95% in 2022. The positive spike in 2020 indicates a relative increase in accruals compared to net operating assets, while the return to negative ratios in subsequent years suggests a partial reversal. The negative values in later years, albeit smaller in absolute percentage terms, may imply a strengthening in the company’s earnings quality or less reliance on accruals over these periods.
- Summary
- Overall, the financial quality measures reveal stable net operating assets with notable fluctuations in accruals and the accruals ratio. The sharp reversal in 2020 between negative and positive accruals stands out, potentially reflecting transient changes in earnings management or operational results. The subsequent return to negative accruals and negative ratios in 2021 and 2022 suggests a normalization or improvement in earnings quality after the volatility observed in 2020.
Cash-Flow-Statement-Based Accruals Ratio
Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
---|---|---|---|---|---|---|
Net income attributable to Hubbell Incorporated | ||||||
Less: Net cash provided by operating activities | ||||||
Less: Net cash (used in) provided by investing activities | ||||||
Cash-flow-statement-based aggregate accruals | ||||||
Financial Ratio | ||||||
Cash-flow-statement-based accruals ratio1 | ||||||
Benchmarks | ||||||
Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | ||||||
Boeing Co. | ||||||
Caterpillar Inc. | ||||||
Eaton Corp. plc | ||||||
GE Aerospace | ||||||
Honeywell International Inc. | ||||||
Lockheed Martin Corp. | ||||||
RTX Corp. | ||||||
Cash-Flow-Statement-Based Accruals Ratio, Sector | ||||||
Capital Goods | ||||||
Cash-Flow-Statement-Based Accruals Ratio, Industry | ||||||
Industrials |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × ÷ [( + ) ÷ 2] =
2 Click competitor name to see calculations.
The analysis of the annual financial reporting quality measure data reveals several noteworthy trends over the four-year period ending December 31, 2022.
- Net Operating Assets
- Net operating assets demonstrated a relatively stable pattern throughout the period. The value increased slightly from approximately 3,335,700 thousand US dollars at the end of 2019 to a peak of about 3,406,500 thousand US dollars at the end of 2020. Subsequently, the figure experienced a gradual decline over the next two years, settling at approximately 3,358,400 thousand US dollars by the end of 2022. Overall, the fluctuations in net operating assets were minor, indicating stability in the underlying asset base.
- Cash-Flow-Statement-Based Aggregate Accruals
- The aggregate accruals showed a high degree of volatility across the reported years. In 2019, aggregate accruals were negative at -61,800 thousand US dollars, indicating potential cash flow challenges or adjustments during that year. In 2020, the figure reversed to a positive 32,000 thousand US dollars, which may imply improved cash flow management or accounting adjustments. This improvement was not sustained, as the figure again turned negative in 2021 (-42,100 thousand US dollars) and further declined to -108,400 thousand US dollars in 2022. The sharp decline in 2022 could point to increasing discrepancies between earnings and cash flows, potentially signaling deteriorating quality or timing differences in earnings recognition.
- Cash-Flow-Statement-Based Accruals Ratio
- The accruals ratio exhibited a similar pattern to the aggregate accruals, reflected as a percentage of net operating assets. It started at -1.84% in 2019, moved to a positive 0.95% in 2020, then fell back to -1.24% in 2021, and reached its lowest point at -3.21% in 2022. The increasing negative values in 2021 and 2022 indicate that accruals were forming a larger proportion of net operating assets in a direction that typically suggests lower earnings quality. The upward spike in 2020 appears to be an anomaly within the overall trend.
In summary, while the net operating assets remained relatively stable, the accrual-based measures revealed significant volatility and a general deterioration in the quality of reported earnings, especially in the most recent year. The sharp increase in negative accruals and accruals ratio in 2022 may point to increased earnings management or operational challenges impacting cash flow realization relative to reported earnings.