Why Methode Electronics Shares Are Diving Today

Methode Electronics Inc MEI shares are down Tuesday morning after reducing its FY23 EPS outlook to $2.10 - $2.14, down from the previously provided guidance of $2.50 - $2.60 and largely missing the Street view of $2.51.

In Q4, the company experienced a significant impact to its earnings performance due to acquisition costs, higher than expected professional fees, various discrete tax expense items, a mix of lower margin sales, currency hedging inefficiencies, and other higher costs.

The company expects to report $1.183 billion in sales for FY23, representing a 2% increase from last year. This compares to the consensus of $1.17 billion and previously provided net sales guidance range of $1.155 billion - $1.18 billion.

CEO Donald W. Duda said, "We expect lower sales and earnings in fiscal 2024 due to program roll-offs as well as market headwinds in commercial vehicles, data centers, and e-bikes. However, given the strength of our award activity over the past three years, we expect significant organic sales and earnings growth in fiscal 2025 over fiscal 2024."

FY24 Outlook: Methode sees FY24 sales of $1.15 billion - $1.20 billion (consensus $1.21 billion) and EPS of $1.55 - $1.75.

The lower earnings are largely due to additional costs to support new program launches, the impact from program roll-offs, and market headwinds in the higher margin Industrial segment. 

FY25 Outlook: The company expects net sales to be $1.25 billion - $1.35 billion, which is below its previously announced three-year organic sales compounded annual growth rate target of 6% primarily due to the unexpected early sunsetting of an EV program in fiscal 2024 due to a change in technology by the customer.

The company will release its fourth quarter and fiscal 2023 results for the period ended April 29, 2023, on Thursday, June 22, 2023, before the market opens.

Price Action: MEI shares traded lower by 16.12% at $37.81 on the last check Tuesday.