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As Q3 earnings unfurl, companies which rely heavily upon China for product sourcing are taking their tariff lumps, mostly on the Gross Margin line. In my universe of micro-cap stocks it’s common to see 50-700 bps degradation in Gross Margin resulting from tariffs. Consequently, the share prices of these stocks have taken a hit.
However, all is not lost. Here we highlight 2 microcaps which have proactively adjusted to tariffs with cost restructurings and sourcing diversification. Both companies count Walmart and Amazon as large customers and now appear attractively valued with newly coiled earnings springs.
Crown Crafts, Inc. (CRWS - Free Report) is a consumer products company specializing in the infant, toddler and juvenile products segment. Crown Crafts (CRWS - Free Report) markets a broad range of products, including infant and toddler bedding, diaper bags, bibs, blankets, developmental and plush toys, feeding and care goods and various disposable items. Walmart Inc. and Amazon.com, Inc. remained key customers, accounting for 47% and 19% of fiscal 2025 gross sales, respectively.
Image Source: Zacks Investment Research
Despite a 3.1% decline in sales and 70 bps Gross Margin erosion from tariffs in the latest quarter, Crown Crafts (CRWS - Free Report) was able to increase EPS YOY from $.08 to $.11. A 13.2% drop in bedding and diaper bag sales was partially offset by a 6.6% increase in bibs, toys and disposable products, reflecting broad gains across retailers.
Administrative and marketing costs fell 13.6% year over year in second-quarter fiscal 2026 as post-acquisition synergies materialized. Management’s internal consolidation plan is expected to unlock further cost savings through reduced IT redundancies and unified operations by fiscal 2027.
Please note that the stock seems to have some support near tangible book value of $2.90/share, complemented by a current dividend yield of 11.72%. The stock is currently trading at 3.2X trailing 12-month EV/EBITDA TTM, which compares to 5.9X for the Zacks sub-industry, 10.3X for the Zacks sector and 18.5X for the S&P 500 Index. Over the past five years, the stock has traded as high as 22.1X and as low as 3X, with a five-year median of 5.7X.
The other micro-cap is Hamilton Beach Brands Holding Company (HBB - Free Report) . Hamilton Beach operates through two reportable segments — Home and Commercial Products, and Health. The Home and Commercial Products segment, which includes consumer and commercial product revenues, primarily contributes to the company's revenue, with approximately 74% of total revenues in 2024. Its product offerings include a wide range of appliances, such as air fryers, blenders, coffee makers and commercial equipment for restaurants and hotels.
Image Source: Zacks Investment Research
The Health segment, which encompasses lease and licensing revenues associated with connected healthcare devices, accounted for the remaining 26% of total revenues.
The company has established significant relationships with major retailers, with Walmart and Amazon accounting for approximately 29% and 24% of revenues, respectively, in 2024.
Hamilton Beach’s (HBB - Free Report) Gross Margin sustained a one-time 690-bps hit from tariffs in the latest quarter but has successfully implemented offsetting pricing actions in late June and August. Concurrently, HBB accelerated manufacturing diversification across APAC to mitigate future trade volatility.
Importantly, the Health segment’s operating profit turned positive in the quarter and HBB's premiumization strategy gained traction through the Lotus brand, launched in the second quarter and expanded in the third quarter. Sell-through of the high-end Lotus Professional line exceeded expectations by double digits, even ahead of its planned holiday marketing push.
The 15.2% YOY drop in revenue for the quarter seems more a case of trade paralysis by its major retail customers. Hamilton Beach (HBB - Free Report) reports revenue improvement from the second quarter, suggesting a gradual recovery in retail demand as trade conditions stabilized.
The stock price appears to have some support around tangible book value of $11.48/share. The stock is currently trading at 6.26X trailing 12-month EV/EBITDA TTM, which compares to 5.39X for the Zacks sub-industry, 10.35X for the Zacks sector and 18.65X for the S&P 500 index.
Over the past five years, the stock has traded as high as 11.85X and as low as 3.75X, with a five-year median of 7.01X.
While both companies no doubt have exposure to consumer spending, both companies have large exposure to Walmart which appears to be weathering macro headwinds well with its value proposition. And in the case of Crown Crafts (CRWS - Free Report) , baby products have typically demonstrated more macro resiliency due to their disposable nature.
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2 Tariffic Microcaps To Check Out
As Q3 earnings unfurl, companies which rely heavily upon China for product sourcing are taking their tariff lumps, mostly on the Gross Margin line. In my universe of micro-cap stocks it’s common to see 50-700 bps degradation in Gross Margin resulting from tariffs. Consequently, the share prices of these stocks have taken a hit.
However, all is not lost. Here we highlight 2 microcaps which have proactively adjusted to tariffs with cost restructurings and sourcing diversification. Both companies count Walmart and Amazon as large customers and now appear attractively valued with newly coiled earnings springs.
Crown Crafts, Inc. (CRWS - Free Report) is a consumer products company specializing in the infant, toddler and juvenile products segment. Crown Crafts (CRWS - Free Report) markets a broad range of products, including infant and toddler bedding, diaper bags, bibs, blankets, developmental and plush toys, feeding and care goods and various disposable items.
Walmart Inc. and Amazon.com, Inc. remained key customers, accounting for 47% and 19% of fiscal 2025 gross sales, respectively.
Image Source: Zacks Investment Research
Despite a 3.1% decline in sales and 70 bps Gross Margin erosion from tariffs in the latest quarter, Crown Crafts (CRWS - Free Report) was able to increase EPS YOY from $.08 to $.11. A 13.2% drop in bedding and diaper bag sales was partially offset by a 6.6% increase in bibs, toys and disposable products, reflecting broad gains across retailers.
Administrative and marketing costs fell 13.6% year over year in second-quarter fiscal 2026 as post-acquisition synergies materialized. Management’s internal consolidation plan is expected to unlock further cost savings through reduced IT redundancies and unified operations by fiscal 2027.
Please note that the stock seems to have some support near tangible book value of $2.90/share, complemented by a current dividend yield of 11.72%. The stock is currently trading at 3.2X trailing 12-month EV/EBITDA TTM, which compares to 5.9X for the Zacks sub-industry, 10.3X for the Zacks sector and 18.5X for the S&P 500 Index.
Over the past five years, the stock has traded as high as 22.1X and as low as 3X, with a five-year median of 5.7X.
The other micro-cap is Hamilton Beach Brands Holding Company (HBB - Free Report) . Hamilton Beach operates through two reportable segments — Home and Commercial Products, and Health. The Home and Commercial Products segment, which includes consumer and commercial product revenues, primarily contributes to the company's revenue, with approximately 74% of total revenues in 2024. Its product offerings include a wide range of appliances, such as air fryers, blenders, coffee makers and commercial equipment for restaurants and hotels.
Image Source: Zacks Investment Research
The Health segment, which encompasses lease and licensing revenues associated with connected healthcare devices, accounted for the remaining 26% of total revenues.
The company has established significant relationships with major retailers, with Walmart and Amazon accounting for approximately 29% and 24% of revenues, respectively, in 2024.
Hamilton Beach’s (HBB - Free Report) Gross Margin sustained a one-time 690-bps hit from tariffs in the latest quarter but has successfully implemented offsetting pricing actions in late June and August. Concurrently, HBB accelerated manufacturing diversification across APAC to mitigate future trade volatility.
Importantly, the Health segment’s operating profit turned positive in the quarter and HBB's premiumization strategy gained traction through the Lotus brand, launched in the second quarter and expanded in the third quarter. Sell-through of the high-end Lotus Professional line exceeded expectations by double digits, even ahead of its planned holiday marketing push.
The 15.2% YOY drop in revenue for the quarter seems more a case of trade paralysis by its major retail customers. Hamilton Beach (HBB - Free Report) reports revenue improvement from the second quarter, suggesting a gradual recovery in retail demand as trade conditions stabilized.
The stock price appears to have some support around tangible book value of $11.48/share. The stock is currently trading at 6.26X trailing 12-month EV/EBITDA TTM, which compares to 5.39X for the Zacks sub-industry, 10.35X for the Zacks sector and 18.65X for the S&P 500 index.
Over the past five years, the stock has traded as high as 11.85X and as low as 3.75X, with a five-year median of 7.01X.
While both companies no doubt have exposure to consumer spending, both companies have large exposure to Walmart which appears to be weathering macro headwinds well with its value proposition. And in the case of Crown Crafts (CRWS - Free Report) , baby products have typically demonstrated more macro resiliency due to their disposable nature.