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Espey's Q1 Earnings Rise Y/Y on Margin Gains and Navy Contracts
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Shares of Espey Mfg. & Electronics Corp. (ESP - Free Report) have gained 1.1% since the company reported its earnings for the quarter ended Sept. 30, 2025. This compares to the S&P 500 index’s 2% decline over the same time frame. Over the past month, the stock has gained 1.7% compared with the S&P 500’s 0.2% growth.
Espey reported first-quarter fiscal 2026 net income of 76 cents per share, up from 61 cents per share in the prior-year period.
Net sales of $9.1 million for the quarter reflected a 12.9% decline from the $10.4 million posted in the same quarter a year earlier. Despite the revenue contraction, net income rose to $2.2 million compared to $1.6 million in the prior-year period.
Gross profit rose 14.9% to $3.2 million, pushing gross margin up to 35.4% from 26.8% in the year-ago quarter. The company also declared and paid total dividends of $1.00 per share, including a special dividend of 75 cents, up from 25 cents in the prior-year quarter.
Espey Mfg. & Electronics Corp. Price, Consensus and EPS Surprise
The jump in gross margin and profitability stemmed from improved product mix, labor efficiencies, and cost management. Operating income reached $2.1 million, up from $1.7 million in the prior-year quarter, even as selling, general and administrative expenses rose by 6.4% to $1.2 million. Interest income nearly doubled year over year to $0.5 million thanks to higher cash balances and investment yields. Total comprehensive income came in at $2.2 million, compared to $1.6 million a year ago.
Cash flow from operations was robust at $5.7 million, a significant increase from $1.4 million in the prior-year quarter, driven by higher customer advances and lower receivables. Capital expenditures totaled $1.3 million, offset by $1 million in milestone reimbursements under a Navy funding program.
Management Commentary
Management attributed the lower sales to fewer deliveries and milestone completions tied to the product mix. Key contributors to the decline included the wind-down of a significant build-to-print program and lower shipments on select magnetics and power supply contracts. However, these were partially offset by increases in other core programs. The company emphasized that the sales decrease was not indicative of a long-term trend, but rather due to the timing of shipments.
Leadership remains confident in the company’s engineering and production capabilities, highlighting their vertically integrated model and commitment to delivering on military and industrial contracts. Operational efficiencies and procurement savings were also credited for the improvement in gross margins.
Factors Influencing the Headline Numbers
Espey’s revenue model is heavily influenced by milestone-based and delivery-based billing. Of the $9.1 million in total net sales, $7.3 million was recognized based on units delivered and $1.8 million from milestone achievements. The decline in revenues compared to the prior year ($10.4 million total) was mainly due to fewer deliveries and milestone completions during the quarter. The company’s top five customers accounted for nearly 80% of total sales, up from 52% in the year-ago period, underscoring customer concentration.
Tax expense was $0.39 million, down slightly from the prior-year’s $0.4 million, resulting in an effective tax rate of 15.2%, lower than last year’s 20%. The decrease reflects tax benefits from employee stock ownership plan (ESOP) dividends, stock-based compensation, and deductions on foreign-derived intangible income (FDII).
Guidance Provided by Management
Espey anticipates higher revenues for fiscal 2026 compared to fiscal 2025, supported by a healthy backlog of $141.1 million as of Sept. 30, 2025. Management expects at least $38.9 million of the backlog to convert into revenues by June 30, 2026. However, the company also indicated that new orders for fiscal 2026 may be lower than fiscal 2025’s total of $86.4 million, which had included two major multi-year awards.
First-quarter fiscal 2026 new orders totaled $10.5 million, up from $7.8 million in the same quarter last year. Espey noted approximately $161.5 million in outstanding opportunities across new and repeat business lines, but cautioned that awards remain subject to competitive bidding and U.S. defense spending dynamics.
Other Developments
The company continues to make progress on a $3.4 million Navy-funded capital improvement initiative aimed at enhancing test and qualification infrastructure. As of Sept. 30, 2025, Espey had received $1 million in milestone reimbursements and spent $1.9 million, with $0.6 million of equipment already placed in service. The project, based in Saratoga Springs, NY, is expected to be completed by fiscal year-end 2026 and requires Espey to contribute approximately $0.5 million of its own funds.
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Espey's Q1 Earnings Rise Y/Y on Margin Gains and Navy Contracts
Shares of Espey Mfg. & Electronics Corp. (ESP - Free Report) have gained 1.1% since the company reported its earnings for the quarter ended Sept. 30, 2025. This compares to the S&P 500 index’s 2% decline over the same time frame. Over the past month, the stock has gained 1.7% compared with the S&P 500’s 0.2% growth.
Espey reported first-quarter fiscal 2026 net income of 76 cents per share, up from 61 cents per share in the prior-year period.
Net sales of $9.1 million for the quarter reflected a 12.9% decline from the $10.4 million posted in the same quarter a year earlier. Despite the revenue contraction, net income rose to $2.2 million compared to $1.6 million in the prior-year period.
Gross profit rose 14.9% to $3.2 million, pushing gross margin up to 35.4% from 26.8% in the year-ago quarter. The company also declared and paid total dividends of $1.00 per share, including a special dividend of 75 cents, up from 25 cents in the prior-year quarter.
Espey Mfg. & Electronics Corp. Price, Consensus and EPS Surprise
Espey Mfg. & Electronics Corp. price-consensus-eps-surprise-chart | Espey Mfg. & Electronics Corp. Quote
Other Key Business Metrics
The jump in gross margin and profitability stemmed from improved product mix, labor efficiencies, and cost management. Operating income reached $2.1 million, up from $1.7 million in the prior-year quarter, even as selling, general and administrative expenses rose by 6.4% to $1.2 million. Interest income nearly doubled year over year to $0.5 million thanks to higher cash balances and investment yields. Total comprehensive income came in at $2.2 million, compared to $1.6 million a year ago.
Cash flow from operations was robust at $5.7 million, a significant increase from $1.4 million in the prior-year quarter, driven by higher customer advances and lower receivables. Capital expenditures totaled $1.3 million, offset by $1 million in milestone reimbursements under a Navy funding program.
Management Commentary
Management attributed the lower sales to fewer deliveries and milestone completions tied to the product mix. Key contributors to the decline included the wind-down of a significant build-to-print program and lower shipments on select magnetics and power supply contracts. However, these were partially offset by increases in other core programs. The company emphasized that the sales decrease was not indicative of a long-term trend, but rather due to the timing of shipments.
Leadership remains confident in the company’s engineering and production capabilities, highlighting their vertically integrated model and commitment to delivering on military and industrial contracts. Operational efficiencies and procurement savings were also credited for the improvement in gross margins.
Factors Influencing the Headline Numbers
Espey’s revenue model is heavily influenced by milestone-based and delivery-based billing. Of the $9.1 million in total net sales, $7.3 million was recognized based on units delivered and $1.8 million from milestone achievements. The decline in revenues compared to the prior year ($10.4 million total) was mainly due to fewer deliveries and milestone completions during the quarter. The company’s top five customers accounted for nearly 80% of total sales, up from 52% in the year-ago period, underscoring customer concentration.
Tax expense was $0.39 million, down slightly from the prior-year’s $0.4 million, resulting in an effective tax rate of 15.2%, lower than last year’s 20%. The decrease reflects tax benefits from employee stock ownership plan (ESOP) dividends, stock-based compensation, and deductions on foreign-derived intangible income (FDII).
Guidance Provided by Management
Espey anticipates higher revenues for fiscal 2026 compared to fiscal 2025, supported by a healthy backlog of $141.1 million as of Sept. 30, 2025. Management expects at least $38.9 million of the backlog to convert into revenues by June 30, 2026. However, the company also indicated that new orders for fiscal 2026 may be lower than fiscal 2025’s total of $86.4 million, which had included two major multi-year awards.
First-quarter fiscal 2026 new orders totaled $10.5 million, up from $7.8 million in the same quarter last year. Espey noted approximately $161.5 million in outstanding opportunities across new and repeat business lines, but cautioned that awards remain subject to competitive bidding and U.S. defense spending dynamics.
Other Developments
The company continues to make progress on a $3.4 million Navy-funded capital improvement initiative aimed at enhancing test and qualification infrastructure. As of Sept. 30, 2025, Espey had received $1 million in milestone reimbursements and spent $1.9 million, with $0.6 million of equipment already placed in service. The project, based in Saratoga Springs, NY, is expected to be completed by fiscal year-end 2026 and requires Espey to contribute approximately $0.5 million of its own funds.