Sign in
EC

EASTERN CO (EML)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 net sales from continuing operations were $63.3M (−2% YoY), gross margin was 22.4% (−150 bps YoY), diluted EPS was $0.31, and adjusted EPS was $0.32; adjusted EBITDA from continuing ops was $4.6M .
  • Management executed portfolio actions: sold Big 3 Mold’s ISBM business on April 30, 2025, closed Big 3’s Dearborn facility, consolidated production into Centralia, and transitioned engineering/prototyping to Sterling Heights to lower costs .
  • Backlog fell 9% YoY to $85.9M, reflecting softer orders for returnable packaging, truck mirrors, and latch/handle assemblies amid heavy-duty truck market weakness and higher raw material costs partially offset by pricing actions .
  • Capital allocation catalyst: completed prior 200,000-share repurchase; new authorization to repurchase up to 400,000 shares through May 2030; Q1 dividend was $0.11 per share .
  • Tone: “met our earnings expectations” with focus on margin protection, nimble supply chain, tariff management, and disciplined M&A; aftermarket growth and a new mirror platform at Velvac highlighted as positives .

What Went Well and What Went Wrong

What Went Well

  • Completed sale of Big 3 Mold’s ISBM unit and advanced Big 3 footprint revamp to cut costs; CEO: “meaningful structural changes… sell the ISBM Blow Mold business… close the Dearborn facility” .
  • Aftermarket growth at Velvac continued despite industry softness; team “able to grow that business” and is pursuing vertical integration to strengthen cost position .
  • New and expanded buyback program: finished 200,000-share plan; Board authorized up to 400,000 additional shares through May 2030, signaling confidence and potential support for per-share metrics .

What Went Wrong

  • Heavy-duty truck market softness weighed on volume (truck mirror assemblies/accessories), driving a 2% revenue decline and 150 bps gross margin compression (raw material cost pressure despite price increases) .
  • Backlog declined 9% YoY to $85.9M, with weakness in returnable transport packaging, truck mirrors, and latch/handle assemblies .
  • Net income from continuing ops fell to $1.9M (from $2.1M YoY), and adjusted EBITDA dipped to $4.6M (from $4.8M YoY) as mix and input costs pressured margins .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Net Sales ($USD Millions)$71.3 $66.7 $63.3
Diluted EPS ($)$0.75 $0.26 $0.31
Gross Margin (%)25.5% 23.0% 22.4%
Backlog ($USD Millions)$97.2 $89.2 $85.9

Non-GAAP context:

  • Adjusted EPS: $0.32 in Q1 2025 vs $0.34 in Q1 2024; adjusted net income $1.958M in Q1 2025 .
  • Adjusted EBITDA (continuing ops): $4.6M in Q1 2025 vs $4.8M in Q1 2024 .

Capital allocation and repurchases:

MetricQ3 2024Q4 2024Q1 2025
Shares Repurchased (#)50,000 39,000 50,587
Dividends per Share ($)——$0.11
Authorization Update——New buyback up to 400,000 shares through May 2030

KPIs:

KPIQ3 2024Q4 2024Q1 2025
Product Development Costs (% of Net Sales)1.5% 1.7% 2.0%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Share Repurchase AuthorizationMay 2025–May 2030200,000 shares (Aug 2023 program, now completed) Up to 400,000 shares Raised
Dividend per ShareQ1 2025$0.11 in Q1 2024 $0.11 Maintained
Revenue/Margins/OpEx/OI&E/Tax Rate2025No explicit numeric guidance disclosedNo explicit numeric guidance disclosedMaintained stance (no formal guidance)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Tariffs/MacroQ4: Emphasis on nimble supply chains across U.S., Mexico, China; teams “well equipped to manage tariffs and pricing fluctuations” Q1: Team “more or less neutralize[d] the tariffs… plans thus far have supported doing exactly that,” acknowledging uncertainty Sustained focus; management claims neutralization efforts working
Heavy-Duty Truck DemandQ4: Class 8 mirror programs launching; backlog up YoY but market noted as variable Q1: ACT build rates showing softness; Velvac working flexibly; aftermarket growing despite headwinds Softening OE demand offset by aftermarket resilience
Big 3 TransformationQ3: Initiated sale/reclassification of Mold business to discontinued ops Q1: Completed ISBM sale; footprint consolidation to Centralia/Sterling Heights; cost inputs improved Executed portfolio rationalization; cost structure improvement in flight
Supply Chain/Vertical IntegrationQ4: “Nimble supply chains” and multiple sourcing options Q1: Velvac in-sourcing (plastic injection) and nimble supply chain at Eberhard Continued vertical integration to manage cost/tariffs
Product/Aftermarket StrategyQ4: Aftermarket expansion opportunities and new product roadmaps at Velvac/Eberhard Q1: Velvac aftermarket growth continues; Eberhard doubling down on new product development Ongoing commercial/product execution
M&A PriorityQ4: Reset/enhance strategic growth plans Q1: Balance sheet “in quite good shape”; disciplined M&A now a priority Reopened M&A aperture

Management Commentary

  • CEO: “The first quarter met our earnings expectations yet still with plenty of challenges in the marketplace… Revenues came in at $63.3 million… EBITDA… $4.8 million… EPS at $0.31” .
  • CEO on Big 3: “Completed the sale of the ISBM Blow Mold business… close[d] the Dearborn facility… improve[d] our structural competitiveness within our racking business” .
  • CFO: “Net sales… decreased 2%… decline primarily due to decreased sales of truck mirror assemblies and truck accessories, offset by increased sales of returnable transport packaging products… Gross margin… 22.4% vs 23.9%… decrease due to higher raw material costs, partially offset by price increases” .
  • CEO on tariffs: “through the first quarter, [we’ve] been able to more or less neutralize the tariffs… plans thus far have supported doing exactly that” .
  • Capital allocation: “completed a share buyback program of 200,000 shares… Board approved an additional… 400,000 shares” .

Q&A Highlights

  • Returnable packaging outlook: Market “quite quiet… particularly in the Automotive segment” but Big 3 is insulated by U.S.-centric supply chain; pent-up demand could break loose; nearshoring could be a tailwind .
  • Gross margin trajectory: Mix contributed to Q1 decline; expectation to sell more higher-margin products and continue cost-out in COGS .
  • Strategic focus: Cost discipline, operational efficiency, and aggressive tariff management; disciplined M&A with a strong balance sheet .

Estimates Context

  • Wall Street consensus via S&P Global for Q1 2025 EPS and revenue was unavailable; S&P data provided no consensus figures for “Primary EPS Consensus Mean,” “Revenue Consensus Mean,” or estimate counts for Q1 2025. Values retrieved from S&P Global.*
  • Given lack of published consensus, a formal beat/miss vs Street cannot be determined for Q1. Actuals: Net sales $63.3M, diluted EPS $0.31 .
Metric (Q1 2025)Consensus (S&P Global)ActualBeat/Miss
Revenue ($)—*$63.3M N/A
EPS ($)—*$0.31 N/A

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term: Mix and raw material inflation compressed margins; monitor OE heavy-duty truck build rates and backlog trajectory, while aftermarket and pricing actions serve as offsets .
  • Execution: Big 3 footprint consolidation and ISBM divestiture should lower costs and improve focus; watch Q2 completion milestones and resulting EBITDA margin progression .
  • Capital returns: New 400,000-share buyback authorization through May 2030 plus stable $0.11 dividend underscores Board confidence and could support EPS/share count even amid cyclical softness .
  • Strategic levers: Vertical integration at Velvac and nimble supply chain/tariff management at Eberhard provide cost and resilience advantages in uncertain macro/tariff environments .
  • M&A optionality: Balance sheet positioned for disciplined acquisitions; potential inorganic growth could complement operational improvements .
  • Watch list: Raw material cost trends (steel, plastics, zinc/copper/electronics), tariff developments, Class 8 build rates, and customer program timing for returnable packaging; all cited by management as key drivers .
  • Non-GAAP lens: Adjusted EPS/EBITDA modestly below prior-year levels; if mix normalizes and cost actions flow through, margin stabilization could follow in coming quarters .

Appendix: Additional Data Points

  • Q1 2025 operating profit: $3.23M; interest expense: $0.62M; other expense: $0.20M; income before taxes: $2.41M; income tax expense: $0.51M; net income from continuing ops: $1.91M .
  • SG&A: $9.85M in Q1 2025; SG&A as % of net sales: 15.6% in Q1 2025 (vs 16.5% in Q1 2024) .
  • Cash from operations: $(1.85)M in Q1 2025, reflecting working capital movements; capex: $0.85M; dividends paid: $0.68M .