Shares of Methode Electronics (MEI +0.83%) rose as much as 40% on Thursday afternoon, boosted by a strong Q4 2026 earnings report. The engineering and manufacturing specialist crushed Wall Street's consensus estimates.
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Contract safeguards saved the quarter
Methode faced a difficult business environment in the fourth quarter, as several electric vehicle makers delayed their expected product launches or canceled them altogether. The Street consensus called for revenue growth of just 2% to $239.5 million, while the bottom line was supposed to swing from a $0.01 profit to a $0.09 loss per share.
But some of Methode's key contracts were set up with minimum order volumes and other safeguards, and management was able to negotiate effective recoveries under these terms. In the end, automotive sales rose 28% and industrial revenues jumped 14%, adding up to total Q4 revenues of $298.1 million. Helped by the high-margin customer recoveries, earnings held steady at $0.01 per share.
NYSE: MEI
Key Data Points
Methode's turnaround still has miles to go
With $19 million of recoveries in the bank, the recovery process is about halfway done. Methode's management expects to collect $25 million more over the next 3-4 years, chiefly in the form of higher product prices and tooling fees. The company had expanded its manufacturing capacity in recent years, expecting a boom in electric vehicle production, and was caught off-guard as that industry saw a global slowdown instead.
After today's big jump, Methode's stock has nearly doubled in 52 weeks -- but it's also down 62% in five years. Sales are lumpy, profits are roughly breakeven, and the balance sheet holds $325 million of long-term debt against just $149 million in cash reserves.
This is a turnaround story in progress, not a triumphant victory march to new highs.
