Investors might want to bet on Kimball Electronics (KE) , as it has been recently upgraded to a Zacks Rank #1 (Strong Buy). This upgrade is essentially a reflection of an upward trend in earnings estimates -- one of the most powerful forces impacting stock prices.The Zacks rating relies solely on a company's changing earnings picture. It tracks EPS estimates for the current and following years from the sell-side analysts covering the stock through a consensus measure -- the Zacks Consensus Estimate.Individu ...

Core Viewpoint - Kimball Electronics has demonstrated confidence in its financial outlook and strategic direction by reaffirming its guidance for fiscal year 2026 following the release of its first-quarter results [1] Financial Performance - The company reported a price-to-earnings (P/E) ratio of 28.21, indicating investor willingness to pay for earnings [3] - A price-to-sales ratio of 0.45 reflects the company's market value relative to its sales, suggesting potential for growth and profitability [3] - The enterprise value to sales ratio stands at 0.49, while the enterprise value to operating cash flow ratio is 4.99, providing insights into valuation and cash flow efficiency [4] Investment Ratings and Outlook - On November 7, 2025, Lake Street upgraded Kimball Electronics to a "Buy" rating, raising the price target from $28 to $32, indicating optimism about future performance [2][6] - The earnings yield is reported at 3.54%, offering insight into the profitability generated from investments in the stock [4] Financial Structure - Kimball Electronics maintains a debt-to-equity ratio of 0.24, suggesting a conservative financial structure with low debt compared to equity [5][6] - A current ratio of 2.21 indicates the company's strong ability to cover short-term liabilities with its short-term assets [5][6]

Financial Performance - Net sales for the first quarter of fiscal year 2026 decreased by 2% to $365.6 million compared to $374.3 million in the same period last year[109] - Gross profit increased by 22% to $28.8 million, with a gross profit margin of 7.9% compared to 6.3% in the prior year[109] - Automotive sales decreased by 10% to $164.4 million, while medical sales increased by 13% to $101.6 million[110] - The company recorded a net income of $10.1 million, a significant increase of 220% compared to $3.2 million in the previous year[109] Liquidity and Financial Ratios - The debt-to-equity ratio improved to 0.2 as of September 30, 2025, down from 0.3 at June 30, 2025[105] - The current ratio was stable at 2.2 as of September 30, 2025, indicating strong liquidity[119] - As of September 30, 2025, the company had $75.7 million in cash and $294.3 million in unused borrowings under credit facilities, indicating a strong liquidity position[135] Cash Flow and Investments - Net cash provided by operating activities for the first three months of fiscal year 2026 was $8.1 million, a decrease of 82.2% compared to $45.5 million in the same period of the prior year[123] - Net cash used by investing activities was $6.2 million in the first three months of fiscal year 2026, primarily due to capital investments of $10.6 million for a new medical facility and equipment replacement[127] - Net cash used for financing activities was $14.0 million in the first three months of fiscal year 2026, significantly lower than $53.0 million in the same period of the prior year[129] - Capital expenditure commitments were approximately $29.0 million as of September 30, 2025, primarily for leasehold improvements and new program wins[136] Operational Efficiency - Open orders remained flat at $593 million compared to $594 million in the previous year[109] - Days Sales Outstanding improved to 54 days in the three months ended September 30, 2025, down from 66 days in the same period of the prior year[121] - The restructuring expense for the first quarter was $1.4 million, down from $2.3 million in the same quarter last year[114] Strategic Initiatives - The company plans to continue investments to strengthen capabilities, including a new facility lease in Indianapolis and capacity expansions[103] - The company expects to sell the Tampa facility, with proceeds anticipated to exceed the total expected restructuring costs and carrying value of the assets held for sale[137] - The company has repurchased $105.2 million of common stock under its Repurchase Plan through September 30, 2025, with a total authorization of up to $120 million[140] Foreign Currency Impact - The company experienced a favorable 1% impact from foreign currency fluctuations on net sales compared to the previous year[111] Non-Cash Adjustments - Net income adjusted for non-cash items generated cash of $18.0 million in the first three months of fiscal year 2026, while changes in operating assets and liabilities used $9.9 million of cash[125] Accounts Receivable - The company sold $71.2 million of accounts receivable without recourse in the three months ended September 30, 2025, compared to $87.3 million in the same period of the prior year[133]

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Financial Data and Key Metrics Changes - Net sales for Q1 fiscal 2026 were $366 million, a 2% decline compared to Q1 fiscal 2025 [5][10] - Gross margin rate improved to 7.9%, a 160 basis point increase from 6.3% in the same period last year [10] - Adjusted income for Q1 was $17.5 million, or 4.8% of net sales, compared to $12.6 million, or 3.4% of net sales last year [11][12] - Adjusted net income was $12.3 million, or $0.49 per diluted share, up from $5.5 million, or $0.22 per diluted share last year [12][13] - Cash and cash equivalents at the end of Q1 were $75.7 million, with cash generated from operations at $8.1 million [13][15] Business Line Data and Key Metrics Changes - Medical sales were $102 million, up 13% year-over-year, accounting for 28% of total revenue [5][6] - Automotive sales were $164 million, down 10% year-over-year, representing 45% of total sales [7] - Industrial sales totaled $100 million, a 1% decrease compared to Q1 last year, making up 27% of total sales [7][8] Market Data and Key Metrics Changes - Medical sales growth was driven by strong performance in North America, Asia, and Europe [5][6] - Automotive sales decline was primarily due to lower sales in North America and Asia, partially offset by growth in Europe [7] - Industrial business saw a decline in North America due to softening demand for HVAC, while Asia reported strong sales growth [8] Company Strategy and Development Direction - The company aims to expand its capabilities in the medical sector, focusing on higher-level assemblies and finished medical devices [6][18] - A tuck-in acquisition strategy is being pursued to add new end markets and manufacturing capabilities [18] - The company is committed to returning to profitable growth, particularly in the medical space, while managing costs and improving margins [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to profitable top-line growth next year and reiterated guidance for fiscal 2026 [4][16] - The company is monitoring the evolving global tariff landscape and expects to recover tariff costs by passing them on to customers [8][9] - Management highlighted the importance of maintaining a strong balance sheet while preparing for growth [43][44] Other Important Information - Cash conversion days improved to 83 days, representing the lowest level in over three years [13][14] - Capital expenditures in Q1 were $10.6 million, primarily for leasehold improvements and the new facility in Indianapolis [15][16] - The company has $14.8 million remaining on its share repurchase program [15] Q&A Session Summary Question: Will working capital increase as top-line growth resumes? - Management does not expect a significant increase in working capital as they have improved inventory management [21][22] Question: Is the current cash conversion days level stable? - Management aims for cash conversion days to remain in the low 80s as the business grows [23] Question: What are the expectations for EBITDA margins? - Management does not expect a deterioration in EBITDA margins and anticipates improvements as growth resumes [24] Question: What is the focus for potential acquisitions in the medical segment? - The company is exploring acquisitions in the medical CMO space, focusing on new technologies and geographies [28] Question: How does the pipeline of medical projects look for revenue growth? - The company has a strong pipeline of medical projects and expects to close several as the year progresses [37][38] Question: What is the outlook for the automotive segment? - Management anticipates continued pressure in the automotive market but remains strategically focused on high-visibility revenue [41] Question: How is the company balancing organic growth and potential acquisitions? - Management is focused on disciplined capital allocation and will consider acquisitions that enhance their CMO strategy [43][44] Question: What impact does accelerated depreciation have on the company? - Accelerated depreciation is beneficial, particularly regarding interest expense deductions [46]

Core Insights - Kimball Electronics, Inc. (KE) reported first-quarter fiscal 2026 non-GAAP earnings of 49 cents per share, exceeding the Zacks Consensus Estimate by 104.2% and up from 22 cents per share a year ago [1][9] - The company has consistently beaten earnings estimates over the past four quarters, with an average surprise of 23.7% [1] Revenue Performance - Kimball Electronics posted revenues of $365.6 million for the first quarter of fiscal 2026, surpassing the Zacks Consensus Estimate by 6.28%, but down 2.3% year over year from $374.26 million [2][9] - The medical vertical generated $101.6 million in revenues, accounting for 28% of total revenues, marking a 13% year-over-year increase driven by strong demand in various medical applications [3] - The automotive vertical contributed $164.4 million, representing 45% of total revenues, which is a 10% decline year over year due to normalization of demand and ongoing program transitions among OEM customers [4] - Revenues from the industrial vertical, excluding divested segments, were $99.6 million, making up 27% of total revenues, down 1% year over year, supported by steady demand across various industrial applications [5] Profitability Metrics - Gross profit for the quarter rose to $28.8 million, resulting in a gross margin of 7.9%, an increase of 160 basis points from the previous year [6] - Adjusted operating income reached $17.5 million, up 39.9% year over year, with an adjusted operating margin of 4.8%, expanding 140 basis points from 3.4% a year ago [6] - Adjusted net income was $12.25 million, reflecting a significant increase of 121.6% year over year [6] Balance Sheet and Cash Flow - At the end of the quarter, Kimball Electronics had cash and equivalents of $75.7 million, down from $88.8 million in June 2025, while debt decreased to $138 million, the lowest level in over three years [7] - The company generated $8.1 million in cash from operations [7] Guidance and Outlook - Kimball Electronics reiterated its fiscal 2026 revenue guidance, expecting a range between $1.35 billion and $1.45 billion, with the Zacks Consensus Estimate at $1.4 billion, indicating a year-over-year decline of 5.72% [8] - The company anticipates an adjusted operating margin between 4.0% and 4.25% for fiscal 2026 and capital expenditures in the range of $50-$60 million [8]

Financial Performance - Net sales for the company were $366 million, a 2% decrease compared to Q1 fiscal 2025[11, 13] - Gross margin rate in the first quarter was 7.9%, a 160 bps increase compared to the same period of fiscal 2025[27, 29] - Adjusted operating income was $17.5 million, or 4.8% of net sales, compared to $12.6 million, or 3.4% of net sales last year[37] - Borrowings at September 30, 2025, were $138 million, down $108 million, or 44%, from a year ago[51, 53] Segment Performance - Medical sales were $102 million, up 13% compared to the same period last year, representing 28% of total company revenue[14] - Automotive sales were $164 million, down 10% compared to the first quarter of last year, representing 45% of total company sales[16, 18] - Industrial sales totaled $100 million, a 1% decrease compared to Q1 last year, representing 27% of total company sales[19, 22] Fiscal Year 2026 Guidance - The company is reiterating its guidance for fiscal 2026, with net sales of $1.35 - $1.45 billion[55] - Adjusted operating income is expected to be 4.0% - 4.25% of net sales[55] - Capital expenditures are projected to be $50 - $60 million[55]

Core Insights - Kimball Electronics reported quarterly earnings of $0.49 per share, exceeding the Zacks Consensus Estimate of $0.24 per share, and showing a year-over-year increase from $0.22 per share, resulting in an earnings surprise of +104.17% [1] - The company achieved revenues of $365.6 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 6.28%, although this represents a decline from year-ago revenues of $374.26 million [2] - Kimball Electronics has outperformed the S&P 500, with shares increasing by approximately 53.7% year-to-date compared to the S&P 500's gain of 15.1% [3] Earnings Outlook - The future performance of Kimball Electronics' stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [4][6] - The current consensus EPS estimate for the upcoming quarter is $0.25 on revenues of $347.8 million, and for the current fiscal year, it is $1.17 on revenues of $1.4 billion [7] Industry Context - The Electronics - Miscellaneous Products industry, to which Kimball Electronics belongs, is currently ranked in the top 23% of over 250 Zacks industries, indicating a favorable outlook compared to lower-ranked industries [8] - The correlation between near-term stock movements and earnings estimate revisions suggests that tracking these revisions can provide insights into stock performance [5]

Revenue and Sales Performance - Revenue for Q1 fiscal 2026 was $365.6 million, a decrease of 2% compared to Q1 fiscal 2025[5] - Medical vertical sales increased by 13% year-over-year, while automotive sales decreased by 10%[6] - Net sales for the three months ended September 30, 2025, were $0 million, compared to $2.1 million for the same period in 2024[23] - Net sales growth decreased by 2% compared to the same period in the prior year, while constant currency growth declined by 3%[24] - The company reiterated its fiscal 2026 guidance, expecting net sales between $1,350 million and $1,450 million, with adjusted operating income of 4.0% to 4.25% of net sales[9] - Open orders totaled $593 million, reflecting a decrease from $642 million at the end of the previous quarter[21] Income and Earnings - Operating income was $14.5 million, representing 4.0% of net sales, with adjusted operating income at 4.8%, up 140 basis points year-over-year[5] - Net income reached $10.1 million, or $0.40 per diluted share, with adjusted EPS of $0.49, more than double that of Q1 fiscal 2025[5] - Operating income for the three months ended September 30, 2025, was $0 million, compared to $0.8 million for the same period in 2024[23] - Reported net income for the three months ended September 30, 2025, was $10.1 million, compared to $3.2 million in 2024[24] - Adjusted diluted earnings per share for the three months ended September 30, 2025, increased to $0.49 from $0.22 in 2024[24] Cash Flow and Debt Management - Cash from operations was $8.1 million, marking the seventh consecutive quarter of positive cash generation[5] - Total debt decreased by $9.5 million to $138.0 million, with a borrowing capacity of $294.3 million[5] - Cash Conversion Days improved to 83, the lowest level in three years[5] - The company invested $1.5 million to repurchase 49,000 shares of common stock[5] Restructuring and Capital Management - The company reported a restructuring expense of $1.4 million for the three months ended September 30, 2025, compared to $2.3 million in 2024[24] - The average invested capital for the twelve months ended September 30, 2025, was $669.5 million, down from $773.0 million in 2024[24] - Return on invested capital (ROIC) for the twelve months ended September 30, 2025, was 6.4%, compared to 7.3% in 2024[24] - The company recognized a gain on sale of $1.3 million following the close of a sale on July 31, 2024, impacting the operating income for the three months ended September 30, 2024[23]

Core Points - Kimball Electronics, Inc. will report its first quarter fiscal year 2026 financial results on November 5, 2025, after market close [1] - A conference call and live webcast to discuss the results will take place on November 6, 2025, at 10:00 a.m. Eastern Time [2] Company Overview - Kimball Electronics is a global manufacturer providing Electronics Manufacturing Services (EMS) and Contract Manufacturing Organization (CMO) solutions [2] - The company operates in multiple countries including the United States, China, Mexico, Poland, Romania, and Thailand [2] - Kimball Electronics is headquartered in Jasper, Indiana, and is recognized for its commitment to quality, reliability, and ethical behavior [2] Contact Information - Andrew D. Regrut serves as the Treasurer and Investor Relations Officer, and can be contacted at 812.827.4151 or via email at Investor.Relations@kimballelectronics.com [4][9]