Shares of The Eastern Company EML have declined 3.8% since the company reported its earnings for the quarter ended Dec. 28, 2024. This compares to the S&P 500 index’s 0.4% growth over the same time frame. Over the past month, the stock has declined 8% compared with the S&P 500’s 8.2% decline.

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Eastern reported net income from continuing operations of 26 cents per share for the fourth quarter of 2024 compared with 63 cents per share in the prior-year period. On an adjusted basis, net income was 42 cents per share compared with 63 cents per share a year earlier.  

The company reported net sales of $66.7 million, a 4.5% increase from $63.8 million in the same period a year ago. 

Net income from continuing operations fell to $1.6 million compared to $3.9 million in the prior-year period. On an adjusted basis, net income was $2.6 million versus $3.9 million a year earlier.

Key Business Metrics

Gross margin in the fourth quarter declined to 23% from 26.8% a year ago, primarily due to higher material costs and the absence of a favorable LIFO reserve adjustment recorded in the prior-year period. 

Selling and administrative expenses in the fourth quarter rose 11% year over year, driven by increased payroll, legal, and professional expenses, as well as higher selling costs. 

Eastern’s backlog at the year-end stood at $89.2 million, up 15.7% from $77.1 million a year earlier, reflecting increased orders for new mirror programs in the Class 8 truck segment at Velvac. However, this was partially offset by lower demand for returnable packaging products.

Management Commentary and Strategic Initiatives

New CEO Ryan Schroeder, who joined in November 2024, emphasized a renewed focus on operational efficiency, cost management and market expansion. The company recently appointed new presidents for two of its three operating businesses to drive revenue growth and improve profitability.

Schroeder outlined Eastern’s commitment to executing a decentralized management strategy, allowing each business unit to pursue its own commercial strategy while receiving corporate support. The leadership team is also prioritizing supply chain resilience amid ongoing macroeconomic uncertainties.

Factors Influencing Performance

Eastern’s fourth-quarter earnings were impacted by higher material costs and increased operating expenses. The company also noted that while demand remained strong in some product categories, the market for truck accessories and mirror assemblies showed signs of softness.

Management stated that pricing actions and cost-saving measures helped mitigate some of the margin pressures, but rising labor and professional service costs weighed on profitability. The company continues to navigate supply chain challenges while ensuring pricing strategies remain competitive in a challenging economic environment.

2024 Update

For the full year, net sales rose 5% to $272.8 million from $258.9 million in 2023. Gross margin improved slightly to 24.7% from 23.9% in 2023.

Net income from continuing operations improved 12% to $13.2 million, or $2.13 per share, from $11.8 million, or $1.88 per share, in 2023. Adjusted EBITDA for 2024 reached $27.1 million, up from $25.4 million in the previous year.

Other Developments

During the fourth quarter, Eastern repurchased 39,337 shares under its buyback program, which was authorized in August 2023. The company ended the year with a net leverage ratio of 1.23:1, a slight improvement from 1.41:1 at the end of 2023.

Looking ahead, Eastern aims to leverage its established market presence and new leadership to drive growth across its business units. The company remains focused on increasing market share through product expansion, particularly in its Velvac and Eberhard segments.

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This article originally published on Zacks Investment Research (zacks.com).

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