Custom-engineered solutions manufacturer Methode Electronics (NYSE: MEI) reported Q4 CY2025 results topping the market’s revenue expectations, but sales fell by 2.6% year on year to $233.7 million. The company’s full-year revenue guidance of $975 million at the midpoint came in 2.5% above analysts’ estimates. Its non-GAAP loss of $0.37 per share was 85% below analysts’ consensus estimates.

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President and Chief Executive Officer Jon DeGaynor said, “We continue to make progress in our transformation journey, a multi-year effort to align our portfolio, refine our organization, optimize our footprint, and strengthen operational discipline. During the quarter, we finalized an agreement for the sale of our Harwood Heights facility and subsequent to the quarter-end, we completed the sale of dataMate, our copper transceiver business. These actions are tangible proof points of our commitment to simplify the organization, improve our cost structure, and sharpen our focus on key growth strategies, particularly in the area of power solutions."

Company Overview

Founded in 1946, Methode Electronics (NYSE: MEI) is a global supplier of custom-engineered solutions for Original Equipment Manufacturers (OEMs).

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, Methode Electronics struggled to consistently increase demand as its $978.2 million of sales for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and suggests it’s a low quality business.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Methode Electronics’s recent performance shows its demand remained suppressed as its revenue has declined by 7.3% annually over the last two years.

This quarter, Methode Electronics’s revenue fell by 2.6% year on year to $233.7 million but beat Wall Street’s estimates by 6.5%.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. While this projection indicates its newer products and services will fuel better top-line performance, it is still below average for the sector.

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Operating Margin

Methode Electronics was profitable over the last five years but held back by its large cost base. Its average operating margin of 4.1% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Analyzing the trend in its profitability, Methode Electronics’s operating margin decreased by 13.7 percentage points over the last five years. Methode Electronics’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q4, Methode Electronics generated an operating margin profit margin of negative 2.6%, down 1.7 percentage points year on year. Since Methode Electronics’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Methode Electronics, its EPS declined by 20.4% annually over the last five years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.

Diving into the nuances of Methode Electronics’s earnings can give us a better understanding of its performance. As we mentioned earlier, Methode Electronics’s operating margin declined by 13.7 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Methode Electronics, its two-year annual EPS declines of 23,631,469,465% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q4, Methode Electronics reported adjusted EPS of negative $0.37, down from negative $0.21 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street is optimistic. Analysts forecast Methode Electronics’s full-year EPS of negative $1.55 will flip to positive $0.23.

Key Takeaways from Methode Electronics’s Q4 Results

We were impressed by how significantly Methode Electronics blew past analysts’ revenue expectations this quarter. We were also glad its full-year revenue guidance exceeded Wall Street’s estimates. On the other hand, its full-year EBITDA guidance missed and its EBITDA fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded up 5.4% to $7.94 immediately following the results.

Is Methode Electronics an attractive investment opportunity at the current price? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).