FEIM Stock Up 29% Despite Q2 Earnings Dip Y/Y on Contract Delays

Core Insights - Frequency Electronics, Inc. (FEIM) shares have increased by 29.2% since the earnings report for the quarter ended October 31, 2025, significantly outperforming the S&P 500 index, which declined by 1.2% during the same period [1] - The stock has surged 61.4% over the past month, compared to a 3.4% growth in the S&P 500, indicating strong investor sentiment following the company's fiscal Q2 2026 results [1] Financial Performance - For Q2 fiscal 2026, FEIM reported a net income of $1.8 million (18 cents per share), down 35.7% from $2.7 million (28 cents per share) in the prior-year quarter [2] - Revenues increased by 8.3% to $17.1 million from $15.8 million year-over-year [2] - Gross margin decreased to $6.5 million, a decline of approximately 14.2% from $7.6 million a year ago [3] - Operating income fell to $1.7 million from $2.6 million in the previous year [2][3] Operational Metrics - Net cash from operating activities for the first half of fiscal 2026 was $0.6 million, down from $2.4 million in the same period last year [4] - The company's backlog grew to approximately $82 million at the end of October 2025, a 17.1% increase from $70 million at the end of April 2025 [4] Management Commentary - The President and CEO characterized Q2 as strong, noting that $17.1 million in revenue was the third-highest quarterly figure in the past decade [5] - Management anticipates reversing the effects of contract delays caused by a government shutdown in the upcoming fiscal quarters [6] - There is optimism regarding upcoming contract awards, which may exceed previous high-value contracts, particularly in core technology areas [6] Growth Opportunities - The company sees long-term growth potential in quantum sensing applications, including magnetometers and alternative positioning, navigation, and timing (ALT-PNT) solutions, expected to contribute significantly to growth over the next three to five years [7] - Management expects multiple contract wins in the near term, which are anticipated to be accretive and enhance performance in the second half of the fiscal year [10] Industry Developments - The second annual Quantum Sensing Summit was postponed due to the government shutdown and is rescheduled for January 14-15, 2026, in New York City, highlighting FEI's expanding role in quantum technologies [12]