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EASTERN CO (EML)·Q3 2026 Earnings Summary

Executive Summary

  • Primary Q3 2026 source documents are not available; analysis uses latest reported quarter (Q3 2025) and prior quarters to assess trajectory and management’s outlook for FY 2026, including guidance commentary from the Q3 2025 call indicating a soft first half of 2026 and incremental improvements later .
  • Q3 2025 was weak: revenue $55.3M, diluted EPS $0.10, gross margin 22.3%; declines driven by heavy-duty truck and automotive end-markets and a mirror project sourcing change increasing raw material costs .
  • Management implemented restructuring and SG&A actions, repurchased ~$3.0M of stock YTD (118K shares) and reduced debt by $7.0M; secured a new $100M revolver post-quarter to enhance flexibility for growth/M&A .
  • Narrative catalyst: USPS vehicle program ramp (Eberhard) offsetting truck-market softness; leadership expects gradual recovery into late 2026, positioning operations to flex volumes and protect margins .

What Went Well and What Went Wrong

What Went Well

  • New $100M revolving credit facility post-quarter improves liquidity and strategic optionality .
  • Capital allocation: ~$3.0M YTD buybacks (118,000 shares, ~2% of outstanding), and $7.0M YTD debt reduction support shareholder value and balance sheet strength .
  • USPS vehicle program ramp “has been a bright spot,” with Oshkosh becoming Eberhard’s largest customer in Q3; program expected to run through next year, partially offsetting truck market softness .

What Went Wrong

  • Net sales fell 22% YoY to $55.3M; diluted EPS dropped to $0.10 vs. $0.75 a year ago as truck and automotive demand softened materially .
  • Gross margin compressed to 22.3% from 25.5% YoY due to reduced volumes and a sourcing transition on a mirror project that raised raw material costs .
  • Backlog decreased 24% YoY to $74.3M, driven by lower orders in returnable transport packaging, latch/handle assemblies, and truck mirror assemblies, signaling near-term demand pressure .

Financial Results

Quarterly Results (Sequential)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$63.3 $70.2 $55.3
Diluted EPS ($)$0.31 $0.33 $0.10
Gross Margin %22.4% 23.3% 22.3%
Adjusted EBITDA ($USD Millions)$4.616 $6.735 $3.483

YoY Comparison – Q3

MetricQ3 2024Q3 2025
Revenue ($USD Millions)$71.3 $55.3
Diluted EPS ($)$0.75 $0.10
Gross Margin %25.5% 22.3%
Adjusted EBITDA ($USD Millions)$8.745 $3.483

Sales Change Drivers – Q3 2025 vs. Q3 2024

DriverYoY Change ($USD Millions)
Returnable transport packaging products-$9.9
Truck mirror assemblies-$6.4

KPIs and Balance Sheet

KPIQ1 2025Q2 2025Q3 2025
Backlog ($USD Millions)$85.9 $87.1 $74.3
Inventories ($USD Millions)$55.36 $54.14 $56.77
Senior Net Leverage Ratio (x)1.45 1.32 1.64
Shares repurchased (YTD)50,587 82,000 118,000
Dividend per share ($)$0.11 $0.11 $0.11

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue/Volume OutlookFY 2026NoneManagement planning for a soft H1 2026 with incremental improvements toward late 2026 New qualitative outlook
Cost Savings (annual cash)FY 2026 onwardNone~$4M annual savings from restructuring actions beginning 2026 New
DividendOngoing$0.11/qtr$0.11/qtr Maintained
LiquidityPost-Q3 2025N/ANew $100M revolver to support growth and M&A New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2025)Previous Mentions (Q1 2025)Current Period (Q3 2025)Trend
Heavy-duty truck marketSoftness; ACT build rates weak; Velvac focusing on aftermarket and vertical integration Medium/heavy truck markets impacted; flexible operations at Velvac OE truck production down ~36%; limited Q4 volume bounce; soft H1 2026 outlook Stabilization later in 2026
Automotive model launches / EV shiftDemand changes; backlog impact from EV pullback Quiet market; potential pent-up demand; U.S.-made supply chain advantage Fewer EV platform launches; expecting more launches next year; backlog starting to improve Improving into 2026
Tariffs & supply chainMinimizing tariff impacts; vertical integration at Velvac Aggressive tariff management; nimble supply chains Diversified footprint helping reduce tariff/trade pressures Manageable with actions
USPS program (Eberhard)Benefiting from USPS fleet launch Noted strategic wins and growth focus at Eberhard Ramped nicely; Oshkosh was Eberhard’s largest Q3 customer; program runs through next year Positive offset
Restructuring/SG&A$1.8M Q2 restructuring; ~$4M annual savings expected Big 3 footprint overhaul; ISBM sale; buybacks Actions continued; ~$1.8M savings within the quarter Savings to benefit 2026
M&A optionalityHealthy balance sheet; disciplined acquisitions M&A a priority again; disciplined approach Evaluating opportunities leveraging new revolver Optionality enhanced

Management Commentary

  • “Our third quarter results were negatively affected by the downturn in the heavy-duty truck and automotive market… we took proactive measures, including a strategic restructuring… we believe that we are in a strong position to capitalize when our markets return to a healthier position.”
  • “We… secured a new $100 million revolving credit facility that enhances our financial flexibility to advance our strategic priorities, including continued investment in long-term growth initiatives.”
  • “We are seeing some limited additional volume in the fourth quarter… forecasts… show a soft first half of 2026… and incremental improvements towards the end of 2026.”
  • “USPS vehicle program… has ramped up nicely… an important part of our overall business… going to run full through next year.”

Q&A Highlights

  • Margins: Management expects gross margins to improve as volumes normalize; Q3 contraction was driven by mix and lower volumes plus mirror sourcing transition costs .
  • Outlook: Limited Q4 volume improvements observed; planning for soft H1 2026 and potential recovery later in the year, with operations configured to flex with demand .
  • USPS program: Revenue contribution details withheld, but program is in full production and offsets softness in Class 8 truck market for Eberhard; Oshkosh was largest Q3 customer .
  • Automotive model cycles: 2025 saw historically low launches; backlog beginning to improve with expected increase in model launches next year .

Estimates Context

  • S&P Global consensus estimates for Q3 2026 were unavailable via our data pull; therefore, official Wall Street comparison to Q3 2026 cannot be provided at this time.*
  • For Q3 2025, only actual revenue was surfaced in SPGI; no consensus numbers were available to compare EPS or revenue in our query.*

* Values retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term demand pressure persists in heavy-duty truck and automotive, but management is configuring operations and cost base for recovery; soft H1 2026 then gradual improvement is the base case .
  • Structural actions (restructuring and SG&A reductions) and ~$4M annual savings expected from 2026 support margin resilience despite volume variability .
  • Liquidity and strategic flexibility improved with a $100M revolver; alongside YTD buybacks ($3.0M) and $7.0M debt reduction, capital deployment can support M&A and product initiatives .
  • USPS vehicle program provides a tangible offset to Class 8 weakness and should underpin Eberhard volumes through next year, mitigating end-market cyclicality .
  • Watch backlog trends and model-launch cadence in automotive; returnable packaging orders and truck mirror assembly demand are key swing factors for the next two quarters .
  • Margin normalization depends on volume recovery and continued tariff/sourcing management; gross margins should trend back toward historical norms as volumes rebound, per management .
  • Tactical implication: Expect estimate resets to reflect soft 1H26; positioning for late-2026 improvement favors patient capital focused on balance sheet strength, optionality, and execution milestones .