Methode Electronics Clocks 7% Revenue Growth In Q2; Warns On Inflationary Cost Environment

Methode Electronics, Inc MEI reported a second-quarter FY23 net sales growth of 6.9% year-on-year to $315.9 million, beating the consensus of $293.9 million.
The increase was mainly the result of record sales in the Industrial segment driven by power distribution solutions for data centers and electric vehicles and by lighting solutions for commercial vehicles.
EPS of $0.75 topped the consensus of $0.63.
Segments: The Automotive segment's net sales grew 0.5% Y/Y to $196.9 million.
Net sales for the Industrial segment grew by 28.6% Y/Y to $103.8 million, and the Interface segment declined 21.7% Y/Y to $14.1 million.
Margin: The operating margin contracted 85 bps to 10.4% due to higher materials and other costs associated with supply chain disruptions.
Methode Electronics held $129.6 million in cash and equivalents. It generated $15.4 million in operating cash flow.
CEO Donald W. Duda said, "Methode delivered strong sales in the quarter driven by our strategic efforts in power and lighting solutions. While our cost recovery actions are gaining traction, material cost inflation continues to challenge our margin expansion efforts."
Duda added, "Due to the ongoing inflationary cost environment, geopolitical risks, semiconductor shortages, and now an increased foreign currency headwind, additional uncertainty has been infused into our near-term outlook. As a result, we lowered the high end of our earnings guidance range for fiscal 2023."
Outlook: Methode Electronic revised its FY23 revenue forecast to $1.17 billion - $1.20 billion versus the prior $1.16 billion - $1.21 billion against the consensus of $1.16 billion.
It narrowed EPS guidance to $2.70 - $2.90 from the prior $2.70- $3.10 versus the consensus of $2.70.
Price Action: MEI shares closed higher by 3.82% at $45.68 on Wednesday.

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