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NVE Corp Stock Falls 33% After Y/Y Earnings Decline in Q2
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Shares of NVE Corporation (NVEC - Free Report) have fallen 33% since reporting second-quarter fiscal 2027 results. This compares with the S&P 500’s 0.5% return over the same period. Over the past month, the stock has lost 35.9%, while the S&P 500 inched up 0.4%.
Earnings & Revenue Performance
NVEC reported second-quarter fiscal 2027 revenues of $5.83 million, down 8% from $6.35 million in the year-ago quarter. The decline reflected weaker product sales, partially offset by higher contract research and development revenues. Net income decreased 4% year over year to $3.17 million from $3.31 million in the prior-year quarter. Earnings per share declined to 65 cents from 68 cents in the prior-year period.
NVEC's Product Sales Decline Amid Customer Order Adjustments
Product sales decreased 9% to $5.58 million from $6.14 million in the prior-year quarter. Management attributed the decline primarily to a temporary inventory adjustment at a major medical device customer and a 95% reduction in defense product sales.
Principal financial officer Daniel Nelson explained that medical device customers' inventory adjustments can create short-term ordering fluctuations, while defense revenues remain sensitive to government procurement cycles.
However, distributor sales surged 67% year over year, supported by improving industry conditions, and demand for new and existing commercial products. Management indicated that distributor sales growth accelerated during the quarter.
Contract research and development revenues increased 25% to approximately $259,000 from $208,000 in the prior-year quarter, reflecting progress on existing contracts.
Gross profit decreased to $4.56 million from $4.97 million in the year-ago quarter. Nevertheless, the gross margin remained strong at approximately 78%.
Operating expenses increased 4% year over year to $1.36 million. Selling, general and administrative expenses rose 44% to approximately $630,000 due to higher director option grant-date stock prices.
Research and development expenses declined 17% to approximately $727,000, reflecting staffing redeployment.
Operating income decreased to $3.21 million from $3.66 million in the prior-year quarter, resulting in an operating margin of approximately 55%.
The effective income tax rate declined to 14% from 20%, primarily benefiting from favorable tax law changes. This reduction helped cushion the impacts of lower operating earnings, supporting a net profit margin of approximately 54%.
NVEC Reports Strong H1 Growth & Cash Generation
Despite second-quarter weakness, NVEC's first-half fiscal 2027 revenues increased 36% year over year to $16.9 million from $12.5 million.
Product sales increased 35%, while contract research and development revenues advanced 38%. Net income climbed 39% to $9.57 million, with earnings increasing to $1.97 per share from $1.42.
The operating cash flow reached $11.1 million during the first six months compared with $8 million a year earlier.
Cash and marketable securities totaled $44.4 million at September-end, up from $43.5 million at March-end. Management noted that operating cash generation exceeded dividend payments and capital expenditure.
President and CEO Peter Eames emphasized opportunities in robotics, industrial automation and power conversion.
During the quarter, NVEC introduced miniature wafer-level chip-scale sensors measuring 0.55 millimeters square and a family of seven gear sensor variants designed for precision motion applications.
Eames highlighted early design wins and growing customer interest, although initial orders remain relatively small.
Management expects medical device and defense sales to recover in the third quarter, with revenues returning to growth. Second-half fiscal 2027 revenues are expected to remain broadly consistent with the first-half levels.
Nelson also projected an effective tax rate of 14-16% for at least the remainder of fiscal 2027.
Other Developments
NVEC completed a leadership transition in August, appointing Peter Eames president and CEO. Former CEO Dan Baker became chairman, replacing Terry Glarner.
The company also appointed Carolyn Valentine to its board, expanding membership from five to seven directors.
Separately, NVEC declared a quarterly cash dividend of $1 per share, payable Nov. 30, 2026, to shareholders of record as of Nov. 2, 2026.
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NVE Corp Stock Falls 33% After Y/Y Earnings Decline in Q2
Shares of NVE Corporation (NVEC - Free Report) have fallen 33% since reporting second-quarter fiscal 2027 results. This compares with the S&P 500’s 0.5% return over the same period. Over the past month, the stock has lost 35.9%, while the S&P 500 inched up 0.4%.
Earnings & Revenue Performance
NVEC reported second-quarter fiscal 2027 revenues of $5.83 million, down 8% from $6.35 million in the year-ago quarter. The decline reflected weaker product sales, partially offset by higher contract research and development revenues. Net income decreased 4% year over year to $3.17 million from $3.31 million in the prior-year quarter. Earnings per share declined to 65 cents from 68 cents in the prior-year period.
NVE Corporation Price, Consensus and EPS Surprise
NVE Corporation price-consensus-eps-surprise-chart | NVE Corporation Quote
NVEC's Product Sales Decline Amid Customer Order Adjustments
Product sales decreased 9% to $5.58 million from $6.14 million in the prior-year quarter. Management attributed the decline primarily to a temporary inventory adjustment at a major medical device customer and a 95% reduction in defense product sales.
Principal financial officer Daniel Nelson explained that medical device customers' inventory adjustments can create short-term ordering fluctuations, while defense revenues remain sensitive to government procurement cycles.
However, distributor sales surged 67% year over year, supported by improving industry conditions, and demand for new and existing commercial products. Management indicated that distributor sales growth accelerated during the quarter.
Contract research and development revenues increased 25% to approximately $259,000 from $208,000 in the prior-year quarter, reflecting progress on existing contracts.
NVEC's Operating Margins Reflect Higher Administrative Costs
Gross profit decreased to $4.56 million from $4.97 million in the year-ago quarter. Nevertheless, the gross margin remained strong at approximately 78%.
Operating expenses increased 4% year over year to $1.36 million. Selling, general and administrative expenses rose 44% to approximately $630,000 due to higher director option grant-date stock prices.
Research and development expenses declined 17% to approximately $727,000, reflecting staffing redeployment.
Operating income decreased to $3.21 million from $3.66 million in the prior-year quarter, resulting in an operating margin of approximately 55%.
The effective income tax rate declined to 14% from 20%, primarily benefiting from favorable tax law changes. This reduction helped cushion the impacts of lower operating earnings, supporting a net profit margin of approximately 54%.
NVEC Reports Strong H1 Growth & Cash Generation
Despite second-quarter weakness, NVEC's first-half fiscal 2027 revenues increased 36% year over year to $16.9 million from $12.5 million.
Product sales increased 35%, while contract research and development revenues advanced 38%. Net income climbed 39% to $9.57 million, with earnings increasing to $1.97 per share from $1.42.
The operating cash flow reached $11.1 million during the first six months compared with $8 million a year earlier.
Cash and marketable securities totaled $44.4 million at September-end, up from $43.5 million at March-end. Management noted that operating cash generation exceeded dividend payments and capital expenditure.
Management Highlights Robotics Opportunities & Revenue Recovery
President and CEO Peter Eames emphasized opportunities in robotics, industrial automation and power conversion.
During the quarter, NVEC introduced miniature wafer-level chip-scale sensors measuring 0.55 millimeters square and a family of seven gear sensor variants designed for precision motion applications.
Eames highlighted early design wins and growing customer interest, although initial orders remain relatively small.
Management expects medical device and defense sales to recover in the third quarter, with revenues returning to growth. Second-half fiscal 2027 revenues are expected to remain broadly consistent with the first-half levels.
Nelson also projected an effective tax rate of 14-16% for at least the remainder of fiscal 2027.
Other Developments
NVEC completed a leadership transition in August, appointing Peter Eames president and CEO. Former CEO Dan Baker became chairman, replacing Terry Glarner.
The company also appointed Carolyn Valentine to its board, expanding membership from five to seven directors.
Separately, NVEC declared a quarterly cash dividend of $1 per share, payable Nov. 30, 2026, to shareholders of record as of Nov. 2, 2026.