Shares of The Eastern Company (EML Quick QuoteEML - Free Report) have gained 0.9% since the company reported its earnings for the quarter ended June 28, 2025. This compares to the S&P 500 index’s 1% growth over the same time frame. Over the past month, the stock moved -6.3% versus the S&P 500’s 2.3% change.

Eastern posted second-quarter 2025 adjusted net income of 57 cents per share, compared with 65 cents per share last year. 

The company’s net sales of $70.2 million, down 3% from $72.6 million in the year-ago period, were largely due to weaker truck mirror assembly sales, partially offset by gains in latch and lock assemblies. 

Net income from continuing operations declined to $2 million from $4.1 million a year earlier. Adjusted net income was $3.5 million compared with $4.1 million last year. 

Gross margin narrowed to 23.3% from 25.4%, primarily due to higher raw material costs from transitioning to in-house sourcing for a mirror project.

The Eastern Company Price, Consensus and EPS Surprise

The Eastern Company price-consensus-eps-surprise-chart | The Eastern Company (The) Quote

Other Key Business Metrics

Adjusted EBITDA from continuing operations fell to $6.7 million from $8 million in the prior-year quarter, reflecting the sales decline and margin pressure. Selling, general and administrative expenses rose 9.4% to $12.2 million, mainly from $1.8 million in restructuring charges, partly offset by reduced personnel and other costs. Product development costs accounted for 1.5% of sales, down from 1.8% a year earlier. Backlog at quarter-end dropped 19% to $87.1 million, driven by decreased orders for returnable transport packaging and latch/handle assemblies.

Management Commentary

CEO Ryan Schroeder emphasized operational progress across all divisions, highlighting SG&A reductions, efficiency gains, and successful tariff mitigation. Notably, Big 3 Precision underwent a footprint overhaul, consolidating production in Centralia, Illinois, and relocating design/prototyping operations to Sterling Heights, Michigan. Eberhard benefited from supplying components for the U.S. Postal Service’s first major vehicle replacement program in 30 years. Schroeder acknowledged persistent macroeconomic headwinds, particularly in heavy-duty truck and automotive markets, but expressed confidence in Eastern’s strengthened operational foundation and disciplined approach to acquisitions.

CFO Nicholas Vlahos reiterated that reduced truck mirror assembly sales were the primary drag on revenue, with added pressure from industry-wide demand changes and EV pullbacks. He noted the company’s share repurchases — 31,000 shares in the quarter and 82,000 year to date — along with net debt reduction of $4 million in Q2 and $5.9 million year to date, underscoring capital allocation priorities.

Factors Influencing the Headline Numbers

The sales decline reflected a combination of industry-specific and operational factors. Weaker demand in the heavy truck and automotive segments, coupled with fewer model changes in the automotive market, weighed on volumes. Higher raw material costs, linked to in-house sourcing changes, eroded gross margins. However, restructuring efforts and efficiency gains are expected to generate about $4 million in annual cost savings beginning in 2026. Management’s proactive tariff mitigation also helped avoid further profit compression.

Other Developments

During the quarter, Eastern completed the sale of Big 3 Mold’s ISBM business unit and integrated its remaining mold operations into continuing businesses. The company continued to execute its share repurchase program, authorized in April 2025, buying back $2.1 million worth of stocks year to date. Capital expenditures totaled $0.8 million in the quarter, while dividends paid were $0.7 million.