SigmaTron Stock Up 3% Despite Incurring Q2 Loss on Supply Chain Issues

Core Insights - SigmaTron International, Inc. reported a net loss of $1.55 per share for the second quarter of fiscal 2025, compared to breakeven earnings per share in the same quarter last year, with revenues declining by 24% year over year to $74.7 million [2][4] - The company's stock has seen a 3.2% increase since the earnings report, but a significant decline of 40.7% over the past month, underperforming the S&P 500 index [1] Financial Performance - Gross profit for the quarter was $6.9 million, down from $9.7 million in the prior year, with gross margin contracting due to lower revenues and supply chain challenges [4] - Operating income decreased to $0.5 million from $3.1 million a year ago, while selling and administrative expenses slightly decreased to $6.4 million from $6.6 million [4] Management Commentary - CEO Gary R. Fairhead noted ongoing revenue softness attributed to economic challenges and supply chain volatility, including previous overordering of electronic components leading to inflated inventory levels [5] - Despite the loss, the company achieved operating profitability in October 2024, driven by restructuring efforts, with management optimistic about demand recovery in calendar 2025 [6] Influencing Factors - Revenue decline was influenced by weaker backlog levels and inventory destocking in the electronics manufacturing industry, along with supply chain disruptions and previous component overordering [7] - One-time costs of approximately $3.3 million related to debt restructuring negatively impacted the quarter's net income [7] Guidance - Management did not provide formal guidance but indicated expectations for continued weak revenues in the fiscal third quarter, exacerbated by seasonal slowdowns in North America and Asia [8] - There is cautious optimism for improved demand trends in calendar 2025, supported by customer activity and new opportunities [8] Other Developments - SigmaTron completed a significant sale and leaseback transaction for its Elk Grove Village property, reducing bank debt and expected to result in a one-time capital gain of about $7 million in the fiscal third quarter [9] - The company made progress in inventory reduction and remains committed to further deleveraging its balance sheet [10]