Shares of Sypris Solutions, Inc. (SYPR Quick QuoteSYPR - Free Report) have gained 2.9% since the company reported its earnings for the quarter ended Sept. 29, 2024. This compares to the S&P 500 index's -0.3% change over the same period. Over the past month, however, Sypris stock moved -7.3%, against the S&P 500's gain of 3.3%, indicating a mixed sentiment among investors despite the quarterly report.

For the third quarter of 2024, Sypris reported a net income of $0.4 million, translating to an earnings per share (EPS) of 2 cents, against the net loss of $0.6 million, or a loss of 3 cents per share, in the prior-year quarter.

The company reported revenues of $35.7 million, a 6.2% increase from the $33.6 million recorded in the prior-year quarter. This growth was primarily driven by a 13.6% rise in revenues for the Sypris Electronics segment, which benefited from recent contract wins in markets including electronic warfare, subsea communications, and avionics for both aircraft and missiles. Sypris Technologies also contributed with a modest 0.7% increase in revenues. 

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Other Key Business Metrics

Gross profit for Sypris climbed 48% year over year, supported by a 480-basis-point improvement in gross margin. The increase in profitability was bolstered by favorable product mix and currency exchange rates. Specifically, Sypris Technologies saw a 150.9% year-over-year surge in gross profit, contributing to an 18.8% gross margin for the segment compared with 7.5% a year ago. Meanwhile, Sypris Electronics experienced a slight dip in gross margin to 14.3% from 18.1% in the previous year, impacted by additional labor and overhead costs.

Management Commentary

Jeffrey T. Gill, president and CEO, expressed optimism over the growth in Sypris Electronics, citing a robust backlog exceeding $100 million. He noted that funding had been secured for key customer programs, enabling the company to mitigate future supply chain risks. The outlook for Sypris Technologies appeared stable as demand remained consistent across markets like automotive, commercial vehicles, and sport utility sectors, with new product lines helping to offset the expected cyclical downturn in commercial vehicles. Additionally, the company observed an uptick in energy-related product orders, driven by global LNG demand and other new opportunities in adjacent markets like CO2 capture.

Factors Influencing Headline Numbers

Sypris attributed its revenue growth largely to increased shipments in the Sypris Electronics division, supported by follow-on contracts. However, temporary production delays impacted the company's ability to fully capitalize on demand in some areas. In Sypris Technologies, a favorable sales mix and exchange rates aided profitability, although the segment faced challenges from the anticipated cyclical decline in commercial vehicle demand. Increased labor and overhead costs in Sypris Electronics were a factor in the contraction of its gross margin compared to the previous year.

Guidance Update

For 2024, Sypris updated its revenue growth to 10%, now expecting results to align with the lower end of prior guidance. Management also forecasted a 100-125 basis point increase in gross margin for the year, underscoring the company’s confidence in its operational efficiency despite market challenges. This outlook reflects the company’s expectation of continued strength in electronic warfare and energy markets, with orders supporting revenue into 2025.

Other Developments

In a strategic move to support long-term growth, Sypris Technologies signed an exclusive contract extension with one of the world’s leading commercial vehicle manufacturers. This agreement will continue the supply of the company’s Ultra Axle Shafts, a product integral to the customer's branded drive axles used in medium and heavy-duty trucks. The agreement marks a key step in bolstering Sypris Technologies' market presence in the commercial vehicle sector.