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UG Q2 Earnings Fall Y/Y on Weak Cosmetic Sales, Pharma Gains
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Shares of United-Guardian (UG - Free Report) have risen 1.5% since reporting second-quarter 2025 results, trailing the S&P 500 index’s 1.8% growth. However, over the past month, the stock has fallen 0.6%, underperforming the broader index’s 3.2% advance. This relative weakness over the month contrasts with its modest post-earnings uptick.
For the three months ended June 30, 2025, United-Guardian posted net sales of $2.84 million, down 16.3% from $3.39 million a year earlier. Net income fell 34.5% year over year to $626,826, or 14 cents per share, from $956,225, or 21 cents per share. On a six-month basis, net sales declined 20% to $5.32 million from $6.65 million in the prior-year period, while net income slid 36.9% to $1.19 million, or 26 cents per share, from $1.88 million, or 41 cents per share.
United-Guardian, Inc. Price, Consensus and EPS Surprise
Cost of sales as a percentage of net sales increased to 47% in the second quarter of 2025 from 46% in the year-ago quarter. Operating expenses rose 15.1% to $694,050 in the quarter, driven by higher marketing and selling costs. Research and development (R&D) expenses were relatively stable, slipping 3.4% to $107,868. Investment income for the quarter totaled $70,573, down from $100,007 in the same period of 2024, while the company booked a $24,576 net gain on marketable securities against a $9,501 loss a year ago.
Sales performance varied significantly by product category. For the first half of 2025, sales of pharmaceuticals grew 11%, and medical lubricants rose 12% from the prior-year period. However, cosmetic ingredient sales dropped sharply due to reduced orders from the company’s largest distributor, Ashland Specialty Ingredients (“ASI”), which faced an inventory overstock, led by softer demand in Asia. Management indicated that efforts are underway to resolve the overstock and recover sales momentum in the second half of the year.
Management Commentary
President Donna Vigilante noted that the pharmaceutical and medical lubricant categories provided a measure of resilience in an otherwise weaker sales environment. The company is pursuing a strategic initiative to have Renacidin, its most important pharmaceutical product, added to additional drug formularies, a move expected to meaningfully boost sales in the coming years. Management acknowledged the cosmetic segment’s weakness but expressed optimism that resolving ASI’s inventory issue would restore growth.
Factors Influencing the Headline Numbers
The year-over-year revenue decline was primarily linked to weakness in cosmetic ingredient sales, which outweighed gains in pharmaceuticals and medical lubricants. The cosmetic category’s softness was concentrated in sales to Asia, especially China, where subdued demand created excess inventory at ASI. On the expense side, higher marketing and selling costs contributed to rising operating expenses, pressuring margins alongside the lower sales base. Additionally, investment income dropped as market conditions delivered smaller returns on the company’s portfolio compared to 2024.
The company’s cost-of-sales ratio remained relatively steady, suggesting pricing and production costs were not significantly disrupted despite revenue pressures. Gains on marketable securities provided a modest offset to lower investment income in the quarter.
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Management expects a rebound in cosmetic ingredient sales in the second half, contingent on the resolution of ASI’s inventory overhang. The company also anticipates potential long-term upside from expanding Renacidin’s formulary inclusion, though this is dependent on the successful execution of its current initiatives.
Other Developments
There were no acquisitions, divestitures, or major restructuring activities disclosed in the quarter. The company’s dividend policy remained intact, with distributions declared earlier in the year, reflecting continued capital return to shareholders despite profit pressures. Management reaffirmed that its cash position and working capital are sufficient to meet operational needs and support strategic projects over the next 12 months.
Overall, United-Guardian’s second-quarter results reflected a challenging sales environment in its largest product category but showed resilience in pharmaceuticals and medical lubricants. While near-term performance will depend heavily on a recovery in cosmetic ingredient demand, the company’s longer-term growth prospects may be supported by targeted expansion of its flagship pharmaceutical product into more formularies. The next few quarters will likely determine whether these strategic initiatives can offset category-specific weaknesses and restore top-line growth.
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UG Q2 Earnings Fall Y/Y on Weak Cosmetic Sales, Pharma Gains
Shares of United-Guardian (UG - Free Report) have risen 1.5% since reporting second-quarter 2025 results, trailing the S&P 500 index’s 1.8% growth. However, over the past month, the stock has fallen 0.6%, underperforming the broader index’s 3.2% advance. This relative weakness over the month contrasts with its modest post-earnings uptick.
For the three months ended June 30, 2025, United-Guardian posted net sales of $2.84 million, down 16.3% from $3.39 million a year earlier. Net income fell 34.5% year over year to $626,826, or 14 cents per share, from $956,225, or 21 cents per share. On a six-month basis, net sales declined 20% to $5.32 million from $6.65 million in the prior-year period, while net income slid 36.9% to $1.19 million, or 26 cents per share, from $1.88 million, or 41 cents per share.
United-Guardian, Inc. Price, Consensus and EPS Surprise
United-Guardian, Inc. price-consensus-eps-surprise-chart | United-Guardian, Inc. Quote
Other Key Business Metrics
Cost of sales as a percentage of net sales increased to 47% in the second quarter of 2025 from 46% in the year-ago quarter. Operating expenses rose 15.1% to $694,050 in the quarter, driven by higher marketing and selling costs. Research and development (R&D) expenses were relatively stable, slipping 3.4% to $107,868. Investment income for the quarter totaled $70,573, down from $100,007 in the same period of 2024, while the company booked a $24,576 net gain on marketable securities against a $9,501 loss a year ago.
Sales performance varied significantly by product category. For the first half of 2025, sales of pharmaceuticals grew 11%, and medical lubricants rose 12% from the prior-year period. However, cosmetic ingredient sales dropped sharply due to reduced orders from the company’s largest distributor, Ashland Specialty Ingredients (“ASI”), which faced an inventory overstock, led by softer demand in Asia. Management indicated that efforts are underway to resolve the overstock and recover sales momentum in the second half of the year.
Management Commentary
President Donna Vigilante noted that the pharmaceutical and medical lubricant categories provided a measure of resilience in an otherwise weaker sales environment. The company is pursuing a strategic initiative to have Renacidin, its most important pharmaceutical product, added to additional drug formularies, a move expected to meaningfully boost sales in the coming years. Management acknowledged the cosmetic segment’s weakness but expressed optimism that resolving ASI’s inventory issue would restore growth.
Factors Influencing the Headline Numbers
The year-over-year revenue decline was primarily linked to weakness in cosmetic ingredient sales, which outweighed gains in pharmaceuticals and medical lubricants. The cosmetic category’s softness was concentrated in sales to Asia, especially China, where subdued demand created excess inventory at ASI. On the expense side, higher marketing and selling costs contributed to rising operating expenses, pressuring margins alongside the lower sales base. Additionally, investment income dropped as market conditions delivered smaller returns on the company’s portfolio compared to 2024.
The company’s cost-of-sales ratio remained relatively steady, suggesting pricing and production costs were not significantly disrupted despite revenue pressures. Gains on marketable securities provided a modest offset to lower investment income in the quarter.
View
Management expects a rebound in cosmetic ingredient sales in the second half, contingent on the resolution of ASI’s inventory overhang. The company also anticipates potential long-term upside from expanding Renacidin’s formulary inclusion, though this is dependent on the successful execution of its current initiatives.
Other Developments
There were no acquisitions, divestitures, or major restructuring activities disclosed in the quarter. The company’s dividend policy remained intact, with distributions declared earlier in the year, reflecting continued capital return to shareholders despite profit pressures. Management reaffirmed that its cash position and working capital are sufficient to meet operational needs and support strategic projects over the next 12 months.
Overall, United-Guardian’s second-quarter results reflected a challenging sales environment in its largest product category but showed resilience in pharmaceuticals and medical lubricants. While near-term performance will depend heavily on a recovery in cosmetic ingredient demand, the company’s longer-term growth prospects may be supported by targeted expansion of its flagship pharmaceutical product into more formularies. The next few quarters will likely determine whether these strategic initiatives can offset category-specific weaknesses and restore top-line growth.