The U.S. multinational company and a global developer of custom-engineered and application-specific products and solutions,Methode Electronics Inc. (MEI, Financial) reported its fourth quarter financial results last week.
Diving into the numbers
Methode’s net sales in the fourth quarter surged 13.3% to $249 million. Revenue for the 12-month period came in at a record-breaking figure of $908.3 million, up 11.2%. The company reported earnings of 98 cents per share in the fourth quarter, up from 62 cents per share in the year-ago quarter. As far as the whole year is concerned, the company’s earnings plummeted to $1.52 per share from $2.48 per share. Strong yearly earnings were attributable to lower tax expense of $10.7 million, robust sales in the automotive and power products sectors, as well as the receipt of international government grants amounting to $2.2 million.
In the fourth quarter of the year, Methode’s earnings were adversely impacted by higher wages and compensation, travel and intangible asset amortization expense, increased investment in Dabir and unfavorable currency impact.
The company’s consolidated gross margins for the quarter plunged to 24.9%. Selling and administration expense in the fourth quarter stood at $32.4 million, up 12.5% year on year due to expenses from new acquisitions, as well as higher wages and travel expenses. While the company’s operating margin for the fourth quarter was 11.1%, it reported 13% for fiscal 2018. The company’s fourth-quarter intangible asset amortization expense climbed a mammoth 280% to $1.9 million.
Segment details
In the automotive segment, the company’s fourth-quarter net sales jumped 17.6% or $30 million. The sales gain was powered by sales improvement of 37.4% in Europe caused by sales from Procoplast, higher customer-funded tooling, design fees and higher hidden switch and sensor product volumes. While the segment saw sales growth in North America (up 19.8% year over year), its sales plunged 19.9% in Asia arising from lower transmission lead-frame assembly volume, as well as price reductions.
In the interface sector, the company’s consolidated sales decreased 9.2% or $3 million as the company did not have active markets during the quarter. In Asia, the company’s sales were down 57.1% due to lower legacy product volume.
The company’s sales declined 12.7% in North America, as well due to the exit of the Connectivity business at the end of fiscal 2017, which was only partially offset by the increase in the sales of remote control products. Gross margin, when taken as a percentage of sales was 21.7%. The increase was attributable to increased radio remote control product volume that was only partially offset by price reductions and unfavorable currency impact.
As far as the power product segment is concerned, sales improved 12.2% during the fourth quarter on a year over year basis. The sales gain was attributable to higher PowerRail sales and busbar sales in North America and Asia. The segment’s gross margin soared to 30.4%. For the year, it soared 27.2%, thanks to robust sales, which were partially offset by increased copper prices.
Guidance
The company projects sales for fiscal 2019 to range from $950 million to $970 million. Earnings per share during the same period are estimated to be around $2.81 to $2.96. Pretax income is expected to be in the range of $127 million to $134 million. CEO Donald W. Duda commented:
“Fiscal 2018 was a milestone year for Methode with record sales and pre-tax income, and we are pleased to announce fiscal 2019 annual guidance that reflects continued growth over last year. Our optimism around fiscal 2019 is based on leveraging the strong leadership throughout our organization to capitalize on the investments we have made, to generate synergies from our recent acquisitions and to produce continued growth in our legacy businesses.”
Disclosure: I do not hold any position in the stock mentioned in this article.
