Ladies and gentlemen, thank you for standing by and welcome to Q3 2020 results call. At this time, all participant lines are in a listen-only mode. Later, we will conduct a question-and-answer session. The instructions will follow at that time. If anyone should require assistance during the conference, please press star zero on your touchtone telephone. As a reminder, this conference is being recorded. I would now like to hand the conference over to Mr. Bill Sperry, Executive Vice President and CFO. You may begin.
Good morning, everybody. Thank you very much for joining us. Usually, we've got Dan Innamorato kicking off our call. Dan and his lovely bride decided to go to labor and delivery this morning to hopefully welcome their first child. And so we're going to be joined instead this morning by Jay Penn. Jay's in his second year with Hubbell. He's been leading FP&A for us here. You may know his name or his voice from some prior lives he's had in IR. Jay will get us started.
Thank you, Bill. Good morning, everyone, and thank you for joining us. Earlier this morning, we issued a press release announcing our results for the Q3 2020. The press release and slides are posted to the investor section of our website at hubbell.com. I'm joined today by our chairman, Dave Nord, our CEO, Gerben Bakker, and as you just heard, our Executive Vice President and CFO, Bill Sperry. Please note that our comments this morning may include statements related to the expected future results of our company and are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Therefore, please note the discussion of forward-looking statements in our press release and consider it incorporated by reference into this call. In addition, comments may also include non-GAAP financial measures.
Those measures are reconciled to the comparable GAAP measures and are included in the press release and slides. Now let me turn the call over to Dave.
All right, great. Thanks, Jay Penn, and good morning, everybody. Before I turn this call over to Gerben, who's going to lead the earnings call, I want to just say a few words to close out my tenure as CEO and officially pass the baton on. You saw our announcement in the Q3 of our long-planned, thorough succession process resulted in our board of directors naming Gerben as the next CEO of Hubbell. Along with the rest of the board, I'm highly confident that Gerben will continue to build on a long proven track record of success at Hubbell and lead this company successfully into the future. Gerben's added a tremendous amount of value for Hubbell over the past 15 months in his role as Chief Operating Officer.
He's been instrumental in continuing to shape our long-term strategy while also leading our operational transformation, and you're seeing the results of those efforts come through in our recent performance. Gerben's also built a strong track record in his prior role leading our power systems business, where he delivered strong financial results for our shareholders, strong operational and service results for our customers, and a really strong performance-oriented culture among the employee base. He also has played a critical role in building our utility solutions platform through the acquisition of Aclara. Gerben knows his success and Hubbell's success is really dependent on the strength of the overall team, and certainly, we've got a great team. I have to highlight that there's some really key people.
One that you all are familiar with is Bill Sperry, who's a very strong financial and strategic partner and will continue to help guide Gerben to future success. I know I can speak highly from my own experience in knowing how valuable that role is and how valuable Bill has been to that. We've also been active in developing new talent, both internally and externally in our organization, at all levels, particularly at senior leadership. You recall our recent appointment of Pete Lau to lead our unified electrical solutions segment, as well as Alexis Bernard as Chief Technology Officer, and Katrina Redmond as Chief Information Officer. We also recently promoted from within Hubbell a long time and very talented sales executive, Terri Watson, as the VP of Customer Experience.
Of course, most of you have met Susan Huppertz over the last couple of years and know how much value she's added in our operational transformation. So while I'm certainly gonna miss being CEO of Hubbell and meeting with all of you every 90 days, I thought 61 times over the last 15 years is probably enough. But I'm proud of the leadership team we've built, and I'm confident in Gerben and the rest of the team's ability to lead Hubbell into the future. So with that, let me turn it over to Gerben to talk about our strong results for the Q3. Thanks. Gerben?
Great. Thank you, Dave, for the kind words. I just want to add how honored I am to take this new position at Hubbell. Good morning, everybody. I've seen firsthand that what makes this company special are our talented people, our reliable products, and our long-term relationships with our customers. I look forward to building on the success that we've achieved under your leadership, Dave, and I'm confident that we have a bright future ahead. Moving to the Q3, I'm going to start my comments on slide three with a brief summary of what was another strong quarter of operating performance and free cash flow generation for Hubbell.
We achieved high single-digit growth in our power systems business in the quarter as secular grid modernization trends continue to drive the need for utilities to invest in critical grid infrastructure. We continue to differentiate ourselves in this space with our unique utility solutions platform, as well as our reliability and service, and we anticipate T&D markets to remain supportive of growth. As expected, electrical markets remained soft in the quarter. We saw steady sequential improvement relative to the Q2, but most end markets continue to see year-over-year decline, with a notable exception in our residential lighting business, which grew double digits in the quarter with strength in e-commerce and retail channels.
Our operational transformation continues to pay dividends with structural savings on the investments we're making in footprint optimization, and we continue to execute on price cost while benefiting from proactive cost control as well as more temporary lower operating expenses. We continue to generate strong levels of free cash flow with almost 30% growth year-to-date. This cash flow allows us to pursue a balanced capital allocation strategy and generate attractive returns for our shareholders. In fact, we closed on a couple of bolt-on deals in October following the quarter close. High-margin businesses in attractive markets. We'll talk a little bit more about them later in the release here. Looking ahead, we're raising our guidance for the full year based on strong performance in the Q3 and our higher levels of visibility through year-end, particularly in our utility markets and our execution on cost.
Let's turn to page four to highlight our results for the quarter. You can see organic sales declined 8%, with demand for utility T&D components in our power systems business remaining strong as our utility customers continue to invest to upgrade, modernize, and harden the grid. Outside of the power systems, we continue to experience project delays at Aclara and generally soft economic activity across most electrical end markets, driven by the COVID-19 pandemic, though demand did improve sequentially in the quarter. Despite the volume declines, and similar to the strong operating execution we've demonstrated throughout 2020, we achieved another quarter of operating margin expansion. Our investment in footprint optimization continued to pay off with attractive and structural savings. We realized positive price cost across the portfolio, and we continue to manage our cost across Hubbell, as well as benefit from the more temporary lower operating expenses.
From an operational perspective, we are managing through the challenges of the pandemic effectively. As an essential manufacturer, our factories are open and operational. While we experienced some supply chain disruption in the Q2, these have been resolved, and we operated much more effectively in the Q3. Our focus remains on protecting the health and safety of our employees while continuing to serve the customers with the products they need to operate critical infrastructure. Finally, you see another quarter of strong free cash flow generation. This cash flow not only supports our strong liquidity position, but also gives us opportunity to reinvest in the business and deploy capital to our shareholders. Bill will give some more color on that later.
With that, let me turn it over to Bill to walk you through our results for the quarter in more detail, and I will come back later to provide some insights on our outlook.
Thanks, Gerben. Welcome. Here's to your next 61 quarters. Good morning, everybody. I'm starting on page five of the slides you hopefully found. And you see the sales contraction of 8% that Gerben had highlighted. The good news for us is that represents a sequential growth from the Q2 of about 17%, which was really good to see both a pickup in demand and also the smoothing out of supply chain disruptions that we experienced in Q2. Operating profit down 5%, but up 60 basis points. I think managing to that 10% incremental ballpark, very successful execution by the operating team. You see the earnings per share, only $0.04 less than last year at $2.30, despite 8% lower profit growth. Below the OP line, we had a little bit of favorability in non-op as we had lower interest expense, and we paid off some debt.
We also had some favorable tax as our effective tax rate was about 22.3% in the quarter, comparing favorable to 23% last year, largely on some provision- to- return favorability as some of the tax regs got finalized and clarified. Also, I think importantly on the cash flow, you see the quarterly amount 10% below last year at $135 million, but the yellow box to the right indicating a 29% improvement year-to-date. We typically, over our last five years, we've shown on average to have the H2 of the year generate about 70% of the free cash flow. Very back-end loaded versus this year, a much more balanced and even, much closer to 50/50.
And so the year-to-date number is well ahead of last year, largely as we're offsetting the lower profit with better working capital management, and we'll talk a little bit more about that a couple pages from now. We'll unpack now the performance into our two segments, and we'll start on page six with Electrical. You can see the challenging demand environment that we're operating in 3Q, as electrical sales are down 14% to $591 million. That sales decline was quite broad-based. The heavy industrial markets were the hardest hit, but most of the balance of our electrical markets were off there in the mid-teens range. The one exception was residential, largely the lighting product, but where they saw double-digit growth driven by strength in people doing more renovation spending while they're at home.
I also wanted to point out, you'll see the point on net M&A neutral, some small amount of portfolio management happening during the year. You'll recall in the Q3 of last year, we sold the Swiss-based high voltage test equipment business called Haefely, and we bought CPI, a connector business fitting in with the BURNDY brand. Those two, the sales that we sold versus we acquired offset each other, we acquired at much higher margins. And so that's a net gain through buying and selling within the portfolio. You see on the operating profit side, a 20% decline to $76 million or 12.9% OP margins. About a one-point decline, which was really driven by the decrementals of the lower volumes and partially offset by effective price cost management, as well as footprint rationalization.
Page seven, we'll switch to see the really strong performance turned in by the Utility Solutions segment, really revealing the strength of our franchise, strong brands, strong relationships with customers, large installed base, high-quality components, and being essential to helping our customers powering people's lives. It's important to disaggregate the segment between our legacy power systems and Aclara. Now you see that Aclara was down 16%, behaving more like some of our electrical businesses. Really, a function of lumpiness, as most of their demand is on large contracts and installations, and the rolling on and rolling off can get a little lumpy. They also had significant access problems, as when you get closer to people's homes, we were prevented from putting in some of the product there.
So at the when you pull your lens back on Aclara, though, for the couple of years we've owned it's been in a nice mid-single digit growth. We're anticipating that into the future. But the star of the quarter for us was the Power Systems business, up 9%. Really three drivers to that. One was secular market growth, the other was storms, and the third was entering the quarter with an elevated backlog. I think the secular market growth Gerben referred to really seeing on the distribution side, that last mile, grid hardening spending on components and transmission aided by renewable spending that are required to transmit the longer distances to get the electricity to the customers. The storms in the quarter added between three, four points.
That really does help sales and OP in the quarter, but I'd argue, more importantly, really reinforces the value proposition that we've got in our utility franchise, namely offering those quality solutions at really critical time to our customers to allow them to get the lights turned back on, and get their revenues reengaged. So, it was a really successful quarter for Power Systems. And as a result, the Utility Solutions operating profit grew 11% to $105 million and breached 20% OP margins in the quarter, expanding by a couple of points. That's really a function of very strong execution on price cost, good productivity, but also, you see the effect of mix. Power outgrowing Aclara is mix friendly. Inside of Aclara, the lower margin end of the portfolio, which is the installation side, is where there's some access restrictions.
The combination is to help be a positive contributor to margin expansion. Wanted to show you a margin bridge year-over-year for the Q3, because I think it's instructive, not just on this quarter, but how we're thinking about managing the income statement as we go forward. You'll see that the picture starts at 15.8% the Q3 last year. You see the negative impact of the volume declines, the decremental effect there that has to be overcome in order to expand margins 60 basis points. I'm going to read the green bars right to left and start with cost benefits. That's naturally variable expenses that are proven to be tailwinds in the COVID environment, things like T&E, medical, and supplies. That there's a natural partial offset there between the volume and those variable expenses.
Next you see price cost, which is something that we focus very closely on managing year in and year out. You see favorability in this quarter. That was helped by the fact that with volumes down, you had commodity prices down. As sequentially, we see volumes tick up, we naturally will expect inflation in those commodity areas, which means as we get into next year, we're going to have to be focused on getting price to manage that price cost equation. The restructuring and related footprint optimization work, you can see how important that is to our equity story going forward, and we anticipate continuing to have this kind of contribution from restructuring and why we've had a multi-year program that we'll keep investing in and keep getting very favorable paybacks on.
Hopefully, that's a helpful picture of how we got the margins to expand and how that can relate to the future as we go forward here. Switch to free cash flow on page nine. You'll see that 29% improvement year-over-year to $404 million, really improving the balance sheet, getting our net debt to cap ratio down to about 34% range. Very healthy to support investing. This cash flow performance is essentially replacing reduced income with lower working capital needs. The largest contributor to the working capital management is inventory, but receivables has also been a source. We worked very hard, as we saw the conditions of the pandemic rolling through, starting in March and April, to constrain inventories.
We've continued to service our customers, manage that line item closely, it's really helped support the free cash flow, which in turn helps support our capital deployment strategy. In the mentioned during earnings, we paid back a little bit of debt, and we had lower interest expense. So that was the term loan that we used to acquire Aclara. So that's entirely paid off now. We also have, as Gerben described, closed on two acquisitions in October, post-close of the quarter. One was a small product line inside of power systems. Very high margin product line that we're happy to add. The second, which you see detailed here, is called AccelTex, which makes antennas and enclosures that work inside of the wireless world and are creating better connectivity and better performance of wireless networks.
So common application is to improve cellular reception inside of the building through distributed antenna systems that you maybe have all heard about. It's a chance for us to acquire exposure to high growth, very high margin business that fits inside of the electrical business. Besides acquisitions and debt payback, you also, I hope, saw last week an increase in our annual dividend by about 8%, and we also reauthorized a share repurchase program at $300 million. Certainly, I'm happy to have that authority to do that. Probably not for you to model in $300 over the course of the next year or so. I think we'll still be tilting our capital deployment toward acquisitions, but good to have that authority, of course, to make those investments in our own stock. Page 10.
We've got a look at our end markets and how they've performed during the course of the year and maybe how they're leaning as we go forward. I'm going to start at 5 o'clock on the pie at gas distribution. Similar to some of the Aclara business, we've seen demand there, but a lot of our activity is near the house and even in the basement. Having restricted access has prevented that business from growing. The explosion-proof devices we sell into upstream oil continuing to be weak off of a low base. On the industrial side, we distinguish a little bit between the heavier side, where our applications would be inside of steel mills or componentry that assist in locomotive production as examples. We've seen that be quite soft, a little more resilience on the lighter side of the industrial space.
Here is a clear area of strength for the year. I think as people have spent much more time in their homes than they are used to, seen them doing quite a bit of reno spending and making that home space more enjoyable to live in. Our resi lighting, for example, has seen much stronger orders, both in big box retail as well as through e-commerce channels. In non-res, we continue to see contraction in put-in-place spending and have a cautious near-term outlook as we end the year. Going around past noon to the utility space, you see demand really remaining solid on the transition and distribution components. I really think there are four drivers that are really helping us. We've got an aged infrastructure that really requires modernization and upgrade. That's proving to be secular here, that need.
The leaning towards renewables is causing demand for transmission on where that wind or solar is being harvested, needs to be transmitted the miles to get to where the users are. I think as well, the environmental impacts have been quite profound on the grid, whether that's hurricane or an ice storm or a fire, depending on where you're located. It seems we're all exposed in some way to these environmental impacts, that's placing an increased demand on utilities, hardening their infrastructure to be able to interact in the environment more successfully. The fourth driver I'd cite is in automation, which is really important and leads to major savings to utilities as they maintain and repair their grids. It allows for collection of data and communication of data that can become very important in efficiently running networks.
That's everything from meter reading to reclosers that are clearing faults to maintenance and fault detection products. And so I think we've seen those prove to be secular growth drivers that are powering through the pandemic environment. So with that discussion of our end markets, I was going to hand it back to Gerben.
Great. Thanks, Bill. I'd like to make perhaps a couple more comments on what Bill just stated, and this is really something that I'm very excited and optimistic about, and that is the continued strength in our utility-facing markets, driven by the secular grid modernization growth. As the economy continues to transition away from fossil fuels and more things get plugged into the electrical grid, this creates the need for new solutions behind the meter, at the meter, or at the grid edge, and in front of the meter. We've talked about this in our investor day. As a leader across the energy infrastructure, Hubbell is uniquely positioned to solve these problems for our customers. Things like protecting the electrical critical infrastructure, enabling the transition to renewable energy, building a more efficient and connected grid, and increasing the energy efficiency of buildings and homes.
We can do this through our products and solutions, but we're also committed to doing this as part of a manufacturer through our sustainability initiatives. We set multi-year targets to reduce our water consumption and greenhouse gas emission. We also refreshed our sustainability website with new details on the initiative we're undertaking and the expanded disclosures around our operation. I encourage you to visit our website and look forward to providing you some additional updates on our efforts as we go forward. Let me turn to page 11 for an update on our outlook. While the macroeconomic situation remains uncertain, we're confident in the level of execution we've demonstrated over the past several quarters.
With increased visibility through the year-end, continued strength in our power systems business, improving market, as well as the execution on cost, we are raising our 2020 adjusted earnings per share guidance from a range of $7 to $7.25 up to $7.45 to $7.60. From a volume standpoint, we expect the Q4 to continue to show improvement. We expect a similar theme as we saw in the Q3, with electrical year-over-year volume declines moderating and our utility markets holding up more resilient. Within utility, we expect power systems to achieve another quarter of year-over-year growth, while the declines at Aclara are expected to continue, but at moderating levels as projects get restarted. On margins, we continue to be bolstered by restructuring savings of about $25 million. Price cost has been a positive throughout 2020, but these benefits should start to fade going forward.
We also expect the return of some operating expenses, which have run below normal levels throughout the pandemic, but we'll continue to actively manage this trade-off relative to improving volumes. Finally, as previously disclosed, we had a discrete benefit in the Q4 of 2019 related to tariff exclusions, and this will create some distortion in this year's Q4 margin compare. On cash, we expect to deliver approximately $550 million for the full year, representing double-digit growth over 2019, despite the declines in revenue and margins. Let me also provide some comments as we look ahead into 2020. We'll provide guidance when we release our Q4 results, we're in the middle of our planning process right now, we're anticipating a year of modest market growth in 2021.
We expect our utility-facing end markets to remain solid, while our electrical market should continue to show steady improvements into 2021. On margins, there will be a lot of gives and takes, but on net, we're planning for a year of modest margin expansion with our operational transformation actions continuing to provide tailwinds. To summarize, we are very pleased with Hubbell's performance and execution in the Q3, delivering margin expansion, strong cash generation, and essentially flat year-over-year earnings per share in what remains a challenging environment. We are raising our guidance for the balance of the year, we remain confident in our ability to deliver differentiated performance for our shareholders over the near and long term. This concludes our prepared remarks for the quarter, and maybe we can ask the operator to operate the line now for questions.
Thankyou. Ladies and gentlemen, if you have a question at this time, please press the star and then the number one on your touchtone telephone. Again, that is star one. If your question has been answered or you wish to remove yourself from the queue, please press the boundary. Your first question comes to the line of Jeff Sprague from Vertical Research Partners. The line's now open.
Thank you. Good day, everyone. Dave, enjoy the retirement. Hopefully, we'll see you around in Connecticut here and there.
All right. Thanks, Jeff.
Yeah. All the best. I wonder if we could talk about Aclara a little bit more, Gerben. Your view that some of the project delays are starting to wane, how do we get confidence in that, actually, if COVID is still raging, and you would seem we still have these access issues. Are your customers taking other precautionary actions or something that would allow them to move forward? Just a little additional color on how you expect this to play out into Q4, and then maybe what the setup is for Aclara into 2021, given the comps that you're going to have here.
Right. Good morning, Jeff. Yeah, I think you used the word caution, and that's still very much what we're seeing with our customers. If you think, there's really two phases of activity again. One is resuming projects that were put on hold, and there is enormous pressure on utility companies to resume. There's a lot of fixed costs that they have when they deploy these projects. When you come to a stop like this, you don't eliminate all those costs. Certainly, utility customers that are in the middle of deployment feel the pressure to restart those. We're doing that right now. I would say we're doing it pretty successfully, but with a lot of precautions to make sure that certainly we don't infect our own people and the people that we go into the homes.
A second area is if you're a utility and you haven't started the project yet, there is a tendency to not start for that same reason, right? Because once you get started, there's a lot of cost that you're deploying, and you want to make sure that you don't get interrupted a month later. That's where we're seeing a little bit of projects continuing to move to the right. The positive is that we're continuing to see the projects, we're continuing to quote on projects. Our backlog continues to be strong. We believe that this is a move to the right as opposed to demand slowing. As a result, we do see the Q4 improving, and we see 2021 improving further.
Separate, unrelated, could you speak to channel inventories? We heard from Schneider that there's a rebuild going on across their channels. Obviously, they're much broader and globally diverse, et cetera. What is going on with the channel? Maybe as part of that, you noted the price cost will start to narrow. Are you out with or plan to be out with pricing as you look into the new calendar year? Thanks.
Yeah, Jeff, I think we did see during the Q2 some destocking happening in the channel. I'm not sure we have lots of evidence that everything's been restocked. As Gerben and I have been meeting with our customers, I think there's a general cautiousness. I think they're happy to have some of their inventories lower. They're happy to put demands on us to make sure we can deliver things on time, especially in vendor-managed inventory situations. I don't think we've seen a big restock yet that has offset the destocking that happened. I think everyone's kind of playing to see how volumes unfold. Yes, on the pricing side, sequentially, certainly, I think copper kind of bounced first, Jeff, right? Steel, aluminum coming. I think we felt very successful through, for example, the tariff period, working with our customers on price.
I think this will be a new phase where we have to get it. You're right, that that doesn't happen in a week.
Usually, several weeks of conversation and planning and working with customers to get that figured out, so that there's a process on that underway across various parts of the company. Great. Thanks a lot. I'll pass the baton.
Your next question comes to the line of Steve Tusa from J.P. Morgan. Your line is now open.
Good morning.
Morning, Steve.
Congrats, to Gerben, and congrats to Dave as well.
Thanks, Steve.
Thank you.
Just on the cash flow for next year, is this year a good base for growth, or are there certain things that are kind of unsustainable in a down revenue environment, a volatile revenue environment here?
I think Steve, the two things that I think it's a difficult level to grow from. I think 2019's level is much more, the way to think of the right pace. One of the factors that contributes to that is the fact that we've had some tailwinds from the CARES Act and how payroll taxes were able to be deferred. That switches next year from a tailwind to a headwind. The balance is the relationship between, as you ramp volume back up, the requirement to invest in working capital, most notably in inventory. It's incumbent upon us to kind of manage those days, Steve. I don't think of this year's level as a good point to grow from. I think we'll be growing off of the 2019 level.
Okay, that makes sense. Then just lastly, on some of these deals, and any other kind of carryover puts and takes into next year? I know you guys just talked about price cost a bit, but any other moving parts next year, that may be more mechanical for the view?
Yeah, I think Gerben mentioned the distortion in the Q4 from some of the tariff exemptions that kind of were lumpy as they came through there. The storms that happened in Q3, it's always storm season. This happened to be an active year. Hard to know how much of that repeats. Kind of typical puts and takes, I would say, Steve. Yeah, maybe to add to that, on the opposite side of that is our continued work on the footprint realignment that should be able to provide some tailwinds for us into 2021.
Right. Okay. Thanks, guys.
Your next question comes on the line of Nigel Coe from Wolfe Research. Your line is now open.
Thanks. Good morning. Also to Gerben, congratulations. Dave, congratulations and enjoy retirement. I think we're all quite jealous about that.
Thanks, Nigel.
You've definitely done your tour of duty then. I want to go back to price cost, because I'm not sure if the margin bridge is to scale, but it looks like it's certainly well north of the point of price cost benefit this quarter. Maybe just comment on that, and then as we go into 2021, it feels like steel and aluminum inflation is kind of hitting at the right time, in that at the end of the year, beginning of the new year, when you normally put through some price increases. Do you think you can be more proactive on the pricing discussions than you have been, or rather than you were in, say, 2018? Then on freight, as part of the same discussion, do you normally surcharge freight to your distributors? Just because obviously freight rates are running quite hot right now.
Yeah. You had a couple pieces to that, Nigel. Price cost in the quarter was favorable. Your order of magnitude is reasonable. You had kind of the two effects of we were getting price, plus commodities were a tailwind. That happens, but it's an unusual arrangement. That will be moderating obviously as we move forward. I think your point on steel and aluminum is exactly right. I totally agree with your timing point that it's good to be able to have that come up at the end of the year because a lot of, and particularly a lot of the power systems is done on blankets, and that happens around this time of year. You're aligned on doing that. I think certainly as tariffs roiled us in 2018, we learned a lot about how to have the pricing conversations with our customers.
We learned how to share that information, make sure they understood where we were coming from. Importantly, we learned to ask, and that you have to ask, and I think we had a very good experience managing through that tariff. I think we'll apply all that learning. To your freight point, we typically do not get reimbursed for freight, unless there are occasions inside of some storm business, for example, that would be rushed that maybe a customer would pay. Typically, we do, and so it was interesting. Coming out of some of the disruptions, Nigel, of the Q2, I think we found ourselves in the Q3 doing more expedited freight, having kind of inefficient mode usage.
Maybe a little more LTL rather than truckload, a little too much parcel, a little too much express, because we're kind of coming out of a disrupted quarter and looking to keep customers serviced at adequate levels. I think that within freight, I think we're looking to re-get that mode shift back to favorable mixes that'll come out of a more normal supply chain, smoothly running supply chain.
Okay, Bill, that's great color. My follow-on would be that obviously the outlook for power systems in 2021 beyond looks pretty good. Are you getting anything from D.C. on what a stimulus bill might look like and how that might benefit smart grid investments and specifically how it benefits Hubbell? Any color there?
Yeah, I don't know that we do have any unique insights to how stimulus bill might specifically affect. I think it'll be interesting to see how the next week goes and what we have policy-wise rolling down at all of us.
Yeah, maybe just would add to that, Nigel, that independent perhaps of policy, there's definitely investment in these areas, and I would say almost neutral of what party is in charge. We believe this business is really well-positioned with secular growth trends in renewables and with the upgrade and modernization of the grid. We're very optimistic about this area over the next few years, independent of policy.
Great. Thanks, guys.
Your next question comes to the line of Deepa Raghavan from Wells Fargo Securities.
Hi, good morning.
Hi, Deepa.
Hey. First off, Dave, good luck, and thanks for your leadership.
Thanks, Deepa.
Official congratulations to Gerben.
Thanks, Deepa.
Looking forward. Two questions. One for Gerben, one for Bill. Gerben, can you talk to trends in the quarter, July, August, September, and generally talk through how October has shaped up so far? Also touch upon if any verticals disappointed you based on what you were expecting 90 days ago. Then I have a follow-up for Bill.
Yeah, we've certainly seen through that period strengthening, and I think that was one of the reasons why we narrowed our guidance range with more visibility, and we increased our guidance. I would say some markets have been stronger than others in that. I think the industrial markets, specifically the light industrial markets, we've seen some pretty nice rebounds over that period. The one that we continue to be most concerned about, even though we have seen sequential improvement as well, is on the non-res side. I don't know that I would say that any have surprised or disappointed us in the quarter, but perhaps to a smaller magnitude that granularity of how we look at it. Overall, we've definitely seen improvement and the reason why, not only the comments for the Q4 and the full year, but our early view for 2021.
I'll just state with that, there's still a lot of uncertainty in the next three months for us. We're really engaged with our teams, with our customers to fully understand what 2021 could bring. At this point, we see slight growth for 2021.
Got it. Thanks. Bill, given all the cost actions taken this year, should we expect some of your typical annual restructuring of $0.20 worth? Should that be lower next year, or do you think you'd continue it so you can offset some of the temporary costs that potentially could come back next year?
I think, Deepa, it's a good question. Since everyone's congratulated everybody but me, I feel like the booby prize winner here. That's the way that it is. I think the cost actions, if you go back to our investor day, which feels, Deepa, like a lifetime ago when we were together in New York in the first week of March. Our expectation was that there could be some tapering in our restructuring spending starting next year. Maybe going from $0.40 down to $0.30 maybe. I think what we've seen is the spending this year, we're trying to keep on track to spend the $0.40. Some of the actual footprint work was hard to do with people on furloughs. You don't have the resources in to get the work done.
Some of the dollars were shifted towards good old-fashioned headcount realignment, which has really quick payoffs. Rather than having that tapering that I think we talked about in March, I would anticipate, and we don't have our operating plan to present to you all yet. We'll do that in January. I'd anticipate our restructuring spending to be more flat next year because I think there's some projects from this year that we won't get a chance to finish, and we're going to want to do them anyway because they have really nice returns. I think our spending, we'll kind of probably maintain that, I would think, next year.
Maintain as in $0.40 similar to this year, or $0.20, which is your normalized level, or $0.30, which you said in March?
No, I'm saying-
Sorry, which one is it?
Yeah, I'm saying $30 million or $0.40, which is what we're trying to do this year, yeah. Maintain that next year.
Got it. Thanks for the clarification.
Rather than taper back 20 or 30. Yeah.
Okay. Got it. Thanks so much.
Your next question comes from the line of Josh Pokrzywinski from Morgan Stanley. Your line is now open.
Hi. Good morning, all.
Morning, Josh.
Morning, Josh.
Let me just first echo some of the congratulations out there for Dave and Gerben, and then Bill, I don't want you to feel left out.
I really appreciate it.
Keep on it, Bill.
Appreciate it, Josh.
Yeah.
Great.
A couple of questions from me, not to put too fine a point on it, but I think the earlier comment on expecting some margin expansion next year. Maybe if I can just get one additional slice on, is that as a function of operating leverage or is that margin expansion in a vacuum kind of before the impact of growth?
No, the growth will be an important part of that, Josh. That's why I wanted to show you that margin slide. Even though it's only for the quarter, I think it's instructive. I think the way we get to margin expansion is the red bar on volume incremental slips to green. Some of those cost benefits, T&E and furloughs and temporary actions, stuff like that'll flip back to red. The net of those two should be okay, and that leaves you to manage price cost, which was, I think, two of the questioners were getting at, and we agree how important that topic is as we're at the point of watching materials re-inflate here. As well, as Gerben was highlighting, just getting that restructuring benefits of continued projects this year.
I think that picture is how we accomplish it, but getting volume is a good, important part of the story. At least eliminating the red of the negative.
Got it. Just to follow up on, I think Nigel's earlier question on lighting. Maybe broadening a little bit, can you just remind us, kind of regardless of anything that happens on the legislative front or any incentives, what you think the penetration looks like on LED today? To the extent that we've seen past actions like ARRA, I think it was like a decade ago. Is there anything in there on Buy American that would necessarily advantage Hubbell relative to peers if you were to see kind of a similar shell for climate or energy efficiency-based incentives with a given election outcome?
Yeah, I think to the first point on penetration, I think we're at a very high level now. We're sort of, I think, in that 85-ish% range of LED is sort of the new norm now, I would say. In terms of how our supply chain is organized versus other lighting manufacturers, I don't think there's really much advantage or disadvantage to anybody vis-a-vis tariffs or any trade policy or Buy American type. I think we would all benefit if there's a push towards more energy efficient buildings and more clean buildings, and people spending more on components to make the spaces we live and work in cleaner and more efficient. I think that would just lead to more component sales and retrofit work. I don't think any competitive advantage or disadvantage based on supply chain structure.
Yeah, maybe just to comment to add to that. While the LED penetration certainly is deep, I think an area of growth for this market is lighting controls, and it's how to make the LED lights that are now in buildings and structures more efficient and more effective. That's certainly an area that we're seeing the growth in our own business.
Understood. Appreciate the color. Thanks, guys.
Your next question comes from the line of Christopher Glynn from Oppenheimer. Your line is now open.
Thanks. Good morning, everyone, and happy 61st, Dave.
Thanks, Chris.
I only have 59, but I'll be more careful.
You were there for the first one, so that's.
That's right. I had a question on your non-res exposure. How are you thinking about the mix of new construction versus maintenance and reno, and operating in a downturn, the demand for indoor space, new construction might see some sustained pressure, but maybe the reno maintenance has some tactical tailwinds coming in. I'm just thinking of the range of outcomes maybe you're contemplating for non-res markets.
Yeah, Chris, I think, if you took our non-res exposure, you can kind of cut it in half. Half of it is C&I lighting product. The other half is wiring and some connector type products. I think if you were to start with lighting, they've really gone more than 50/50 to the reno side. There really are some interesting national account drivers of large owner operators of real estate. Think of quick service restaurants or big box retailers. They can turn on and off large programs of reno. That can kind of uncouple from some of the non-res data. There's opportunity in some of that, for that to switch on, I'd say specifically in lighting.
On the other C&I products, I think that skews less reno and more new construction and, at the same time, I think there's still an emphasis on how we sell the product, looking for, trying to find those reno opportunities and make sure you're getting your share or more than your share of that work, either by getting to specifiers right and being part of getting specced in rather than just waiting to be plucked off the shelf.
Thanks, Bill. I had a follow-up on Aclara. You had maybe you're off $80 million-$90 million this year, but prior to COVID, I think you were expecting some growth after the tough Q1 comp and backlogs hanging in there. Maybe utilities adapt a little with COVID on off quarter-to-quarter. Could that kind of unleash and put up very nice growth next year? Is that a scenario that's reasonable?
I'd say it's a possible scenario. I think we'll be able to, when we give you our outlook on our next call, we'll be more explicit about what we see there. I think what you're describing is possible.
Maybe just one other comment to add to that is clearly we're seeing the projects move to the right. There is a constraint in the labor availability to put all this in. I agree with Bill, there's definitely growth into next year. There's a desire by utilities to continue to invest in this area. Limiting factor is how quickly can they put these systems up.
Great. Thanks a lot.
Your next question comes to the line of Chris Snyder from UBS. Your line is now open.
Hey, thanks for the time, guys. My first question, just following up on the comments just previously around Aclara. You guys said you see this as kind of a mid-single digit secular growth business. By my math, it's running down double digits this year. If you could kind of unpack that maybe like 15-ish% or higher disconnect, in terms of what we should expect next year. How much of that do you think has really been pushed to the right, and how much of that is maybe kind of lost or will come on maybe some year post 2021?
Yeah, I'm describing our couple of years of ownership where we had some big up years. Right? And so that's combining with this year to get us to mid-singles. And so I think that when you can get the installers into and near buildings, I think you're going to see that return to that level of growth. I absolutely think in our conversation with our customers that the role of smart meters and communication devices and grid monitoring products that Aclara sells are in quite high demand. As we're seeing on the component side of our business, the utilities, where it's in the infrastructure and backbone and they don't have access issues, they're actually willing to spend to upgrade. I think that's taken us to 11 o'clock and Dan usually comes on at this time and says, "Please call me and follow up," and Dan won't be around.
I'm hoping you can wait a day or two for Dan. If there's something burning that you need to follow up on, Jay and I will figure out how to get back to you. It just may not be as responsive in cycle time. But appreciate your understanding there.
Well, thank you everyone for joining us on the call today. That will conclude today's call. Thank you, operator.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.