SigmaTron's Q3 Earnings Rises Y/Y on Cost Cuts, Stock Gains 11%

Core Viewpoint - SigmaTron International, Inc. has experienced a significant increase in share price following its earnings report, despite a decline in revenue and ongoing market challenges [1][2]. Financial Performance - For the fiscal third quarter ended January 31, 2025, SigmaTron's earnings per share (EPS) rose to 63 cents from 10 cents a year earlier [2]. - The company reported revenues of $71.1 million, a decline of 26% from $95.9 million in the same period a year ago [2]. - Net income improved significantly to $3.9 million from $0.6 million in the prior-year quarter, aided by a one-time gain of approximately $7.2 million from a sale-leaseback transaction [3][10]. Cost Structure and Operational Adjustments - Gross profit for the quarter fell to $5.6 million from $9.9 million in the prior-year period [4]. - Selling and administrative expenses slightly decreased to $6.4 million from $6.7 million, reflecting the company's focus on expense management [4]. - The company incurred an operating loss of $0.8 million, a reversal from an operating income of $3.2 million in the same period last year [4]. Management Insights - CEO Gary Fairhead noted that while revenue levels remain depressed, cost-cutting initiatives have begun to yield benefits, with an operating profit recorded in January 2025 [5]. - Management expressed confidence in navigating the downturn and capitalizing on potential recovery opportunities [5]. Market Conditions and Demand Trends - SigmaTron acknowledged a normalization in the electronic component marketplace, with shorter lead times and more stable pricing [6]. - There have been modest demand increases from several customers, although management remains cautious about declaring a full recovery [6]. - The company believes that excess customer inventory has been significantly reduced, which could stabilize revenue volatility in the coming quarters [6]. Future Outlook - SigmaTron expects fiscal fourth-quarter revenues to be higher than the fiscal third quarter based on its current backlog [7]. - The company continues to reduce inventory, contributing to its financial stability [7]. External Challenges - SigmaTron remains exposed to geopolitical risks, trade policies, and tariff uncertainties, which could impact operations [8]. - Ongoing trade issues and potential new tariff policies are highlighted as sources of volatility [8]. Strategic Initiatives - The company is exploring strategic opportunities with Lincoln International to enhance long-term shareholder value [9].