02:10 PM EST, 02/03/2025 (MT Newswires) -- National Bank says that tariffs should have a transitory, negative impact on margins at Hammond Power Solutions.

HPS largely manufactures dry type transformers, which are a subset of the U.S. transformer market. Analyst Rupert Merer believes that the North American dry-type transformer market is roughly $2.5 billion, of which the majority of the product is imported. HPS generates 60% of its revenue from the U.S. market, with product largely made in Canada and Mexico (although Merer estimates 5% to 10% of its product for the U.S. is made in the U.S.). However, with only 3% of global electrical steel supply coming from the U.S., even U.S. manufacturers depend on imports to make a product that has about 50% of its costs generated by raw materials, he adds.

Transformer prices in the U.S. should rise by the amount of the tariff, as the demand for imported product could continue to rise, Merer notes.

Hammond is rated Outperform, with a $175 target.

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