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On Tuesday, Sidoti analysts upgraded Methode Electronics (NYSE:MEI) stock from Neutral to Buy, setting a new price target at $14.00. Currently trading at $11.44, with a market capitalization of $416 million, the stock appears undervalued according to InvestingPro analysis. The upgrade is based on the firm’s belief that the company is emerging from a recent profit low and is on the cusp of an earnings recovery in fiscal year 2026.
The analysts cited several reasons for their optimistic outlook. They expect that costs associated with new program launches will decrease, which, along with a more favorable revenue mix, should improve profitability. While current gross margins are weak at 16.2%, the company maintains a strong dividend yield of 5.33% and has maintained dividend payments for 44 consecutive years. The $14 price target reflects a multiple of 16 times Sidoti’s revised fiscal year 2026 earnings per share (EPS) estimate of $0.85, a slight increase from the previous estimate of $0.84. For more detailed financial metrics and analysis, check out the comprehensive research report available on InvestingPro.
Methode Electronics’ management has forecasted that revenue in fiscal year 2026 will surpass that of fiscal year 2025. Additionally, they anticipate pretax income to be positive and significantly higher than in the previous fiscal year.
In their analysis, Sidoti analysts also mentioned the company’s third-quarter results, which are expected to show the impact of the new management’s strategies. They project a breakeven net per share for the quarter, in contrast to a loss of $0.33 per share in the same quarter of the previous year.
The report included financial details from the second quarter of fiscal year 2025, noting that Methode Electronics had net debt of $243.6 million, equating to $6.64 per share. The company maintains a healthy current ratio of 2.75, indicating strong liquidity to meet short-term obligations. Looking ahead, the analysts project that by the end of fiscal year 2026, the company’s net debt will be reduced to $189.2 million, or $5.15 per share. Discover more financial health indicators and exclusive insights with InvestingPro, which offers 8 additional key tips for MEI investors.
In other recent news, Methode Electronics reported its second-quarter fiscal 2024 earnings, exceeding analyst expectations. The company achieved an adjusted earnings per share (EPS) of $0.14, significantly outperforming the forecasted -$0.16. Revenue also surpassed projections, reaching $292.6 million compared to the anticipated $269.78 million. Methode Electronics continues to expand its data center business, which experienced a 50% growth year-over-year. Additionally, the company is preparing for over 30 program launches in fiscal 2025, focusing on growth opportunities in the electric vehicle and data center sectors. The company has also made new leadership appointments to strengthen its global operations. Methode Electronics expects fiscal 2025 net sales to remain flat compared to fiscal 2024, with improved financial performance anticipated in fiscal 2026. The company is also addressing challenges such as supply chain disruptions and macroeconomic pressures.
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