Shares of SigmaTron International, Inc. SGMA have gained 3.2% since the company reported earnings for the quarter ended Oct. 31, 2024, outperforming the S&P 500 index, which increased by 0.8% in the same time frame. However, over the past month, SigmaTron’s stock has declined sharply by 40.7%, significantly underperforming the S&P 500’s modest 0.4% gain.

For the second-quarter fiscal 2025, SigmaTron incurred a net loss of $1.55 per share, while it reported breakeven earnings per share in the prior-year quarter.

The company reported a revenue decline of 24% year over year to $74.7 million compared to $98.7 million in the year-ago quarter.

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Other Key Business Metrics

Gross profit for the quarter stood at $6.9 million, down from $9.7 million in the prior year, with the gross margin contracting due to lower revenues and ongoing supply chain challenges. Operating income also declined to $0.5 million from $3.1 million a year ago. Selling and administrative expenses slightly decreased to $6.4 million from $6.6 million in the prior year.

SigmaTron International, Inc. Price, Consensus and EPS Surprise

SigmaTron International, Inc. price-consensus-eps-surprise-chart | SigmaTron International, Inc. Quote

Management Commentary

CEO Gary R. Fairhead acknowledged continued softness in revenues, which fell sequentially from $84.8 million in the fiscal first quarter to $74.7 million in the fiscal second quarter. He attributed the revenue softness to continued challenges in the general economy and supply chain volatility, including overordering of electronic components in the past, which led to inflated inventory levels.

Despite the loss, the company achieved operating profitability in October 2024, reflecting the positive impact of ongoing restructuring efforts. Management is optimistic that demand will begin recovering in calendar 2025, as many customers anticipate improved economic conditions and have started modestly increasing orders.

Factors Influencing the Headline Numbers

The decline in revenues was influenced by weaker backlog levels and inventory destocking in the electronics manufacturing industry. Additionally, supply chain disruptions and component overordering in previous quarters contributed to the subdued demand. One-time costs of roughly $3.3 million related to debt restructuring also weighed heavily on the quarter's net income.

Guidance

While management refrained from providing formal guidance, it indicated expectations for continued weak revenues in the fiscal third quarter, exacerbated by seasonal holiday slowdowns in North America and Asia. However, they expressed cautious optimism for improved demand trends in calendar 2025, supported by customer activity and emerging new opportunities.

Other Developments

SigmaTron completed a significant sale and leaseback transaction involving its Elk Grove Village property, finalizing the deal on Dec. 13, 2024. This move reduced the company’s bank debt and is expected to result in a one-time capital gain of approximately $7 million, which will be recognized in the fiscal third quarter. Management continues to explore strategic options to strengthen the balance sheet and operational flexibility with the help of advisory firm Lincoln International.

The company also made progress in inventory reduction during the quarter and remains committed to further deleveraging its balance sheet.

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