What happened
Shares of Methode Electronics (MEI 0.74%) were down 22.4% as of 3 p.m. ET Thursday after the electronics manufacturing specialist announced disappointing quarterly earnings and lowered its full-year outlook.
For its fiscal first-quarter 2024 ended July 29, 2023, Methode's net sales grew 2.6% year over year to $289.7 million, translating to adjusted (non-GAAP) net income of $2 million, or $0.06 per share. Analysts, on average, were looking for significantly higher earnings of $0.23 per share, but on lower revenue of $281.3 million.
So what
Methode's net sales would have declined 1.5% year over year had it not been for its recent acquisition of lighting solutions company Nordic Lights, which more than offset the negative impact of $10.4 million in lower material spot buy and premium freight cost recovery. Management also blamed the earnings shortfall on a combination of accelerated expenses related to program launches and "operational inefficiencies" in its North American Auto business caused by labor and vendor issues.
"These operational challenges have been identified and corrective action plans are already in place," stated Methode CEO Donald Duda. "The residual effects will also impact our second quarter and, along with significant further weakening in the e-bike market, are the primary drivers to our lowering of earnings guidance for the full year."
Now what
More specifically, Methode now expects full fiscal-year 2024 net sales in the range of $1.14 billion to $1.18 billion, down from $1.15 billion to $1.20 billion previously. On the bottom line, Methode anticipates full-year adjusted earnings per share of $0.80 to $1, down from previous guidance for full-year earnings per share of $1.55 to $1.75.
Though Methode is actively working on fixing its operational issues, the stock is understandably selling off given this earnings miss and reduced guidance.
