Hammond Power Solutions (TSX: HPS.A) continued its strong growth trajectory in the second quarter, posting an impressive 45% sales increase.
Notably, Hammond Power manufactures dry-type transformers, power quality equipment, and related magnetic products. The company is seeing strong demand for its offerings amid artificial intelligence (AI)- driven data center investments, ongoing electrification, and increased spending on power infrastructure.
This favourable industry backdrop has led to a significant rally in Hammond Power Solutions’ shares. The stock has climbed approximately 94% year-to-date and gained more than 128% over the past 12 months.
Despite this notable gain, I’m betting on Hammond Power for its solid growth prospects. Its ability to expand sales rapidly, supported by a healthy order backlog and efficient conversion of orders into revenue, could build momentum in the quarters ahead.
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Into Hammond Power’s Q2 Performance
Hammond Power Solutions (HPS) delivered a strong second-quarter performance, supported by record sales, margin expansion, and improved operational efficiency. The results indicate that the company is benefiting from favourable demand conditions, particularly in the data centre segment, while pricing actions and manufacturing improvements are strengthening profitability.
The U.S. market drove most of the sales growth. The market continues to benefit from increased shipments to data centres, improvements in industrial demand, and better pricing.
Despite higher shipments, its order backlog remained high, indicating continued demand for its products. Notably, the order backlog rose 96.9% from the same quarter last year, mainly due to strong demand from data centre projects. Investments in production capacity and manufacturing efficiency helped the company fulfill orders faster and reduce delivery times.
Hammond Power’s product mix is improving, supporting the bottom line. For instance, its customized products accounted for nearly 70% of total product sales, supporting higher margins. In Q2, HPS’s margins improved. Gross margin rose from 30.7% to 31.5%, up 80 basis points. Operating earnings increased by 16.8%, while adjusted earnings per share (EPS) jumped over 60%.
Overall, HPS’s performance reflects strong demand, effective cost management, and improved profitability. Moreover, solid data centre demand will likely support future growth.
Hammond Power to sustain solid growth momentum
Hammond Power is well positioned to sustain its growth trajectory, supported by rising investment in data centre infrastructure, electrification, and power reliability. Strong quoting activity and continued customer engagement indicate healthy demand, with data centres accounting for an increasingly significant share of the company’s custom business.
Ongoing investments in production capacity, operational efficiency, and cost optimization are expected to support profitability as sales volumes grow. Moreover, its margins will continue to benefit from disciplined pricing, strategic sourcing, engineering-led cost reductions, and a greater focus on higher-margin products. Increased production volumes may also improve fixed-cost absorption, while economies of scale and flexible manufacturing capabilities could further strengthen long-term margins.
The acquisition of AEG Power Solutions represents a strategic step in expanding Hammond Power’s capabilities beyond transformers into power quality, conversion, and critical power applications. AEG’s established service operations and global installed base also provide opportunities to increase recurring revenue, expand geographic reach, and introduce additional technologies to North American markets.
The company’s long-term growth prospects remain favourable, supported by structural trends in electrification, infrastructure development, and increasingly complex power systems. Although the Canadian market faces challenges, utility investment and electrification projects may offer additional growth avenues.
Overall, Hammond Power’s expanding product portfolio, strategic acquisitions, operational improvements, and exposure to long-term infrastructure trends position it to deliver solid growth ahead.
The bottom line
Hammond Power Solutions presents a compelling growth opportunity, backed by solid fundamentals, rapidly growing sales, a substantial backlog, and improving profitability. Rising investment in AI data centres, electrification, and power infrastructure provides a strong structural tailwind. At the same time, capacity expansion, higher-margin customized products, and the AEG acquisition could further strengthen this Canadian company’s earnings growth. Although Hammond Power’s sharp rally raises valuation risks, its strong demand pipeline and expanding growth opportunities support a case for buying its shares.
