Methode Electronics Inc. (NYSE:MEI) announced its fiscal first quarter 2016 results before the market opened thus morning, and managed to beat the earnings expectations of analysts, posting a profit of $0.60 per share, though revenues came in light at $203.3 million. Analysts were anticipating revenues of $210 million and earnings of $0.54 per share. Despite the mixed results, the stock has skyrocketed in today’s trading session, gaining more than 22% by noon.
Compared to the three months ended August 2, 2014, revenues fell by 6.78%, but net income rose by roughly 10% to $23.5 million. Methode Electronics Inc. (NYSE:MEI) laments increased legal and travel costs, lower revenues from its Automotive and Power Product segments, and the costs associated with the transfer of its manufacturing from the Philippines to Egypt in the Interface segment for the decrease in net sales. The company reiterated its forecast for the 2016 fiscal year, eyeing revenues in the range of $830 million to $865 million and earnings per share of $2.07 to $2.22.
“First-quarter profitability was positively impacted by favorable currency translation on raw materials and labor costs, favorable commodity pricing and the refund of import duties in our Automotive segment. However, costs and manufacturing inefficiencies in our Interface segment due to the transfer of manufacturing from the Philippines to Egypt and the unfavorable currency effect on sales negatively impacted our results […] While we will continue to make investments in our business through new product development, vertical integration and potential acquisitions, we believe the initiation of a share repurchase program demonstrates our continued commitment to creating and returning value to our shareholders,” commented Donald W. Duda, Chief Executive Officer of Methode Electronics.
A large number of hedge funds hold positions in the stock, with Jim Simons‘ Renaissance Technologies and Joel Greenblatt‘s Gotham Asset Management among them, which we’ll investigate on the next page.
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Hedge fund guru Jim Simons is very bullish on Methode Electronics Inc. (NYSE:MEI), having boosted his stake in the company by 152% during the second quarter. His fund holds the largest stake in Methode Electronics among the funds that we track, consisting of 1.1 million shares valued at more than $36.2 million following today’s spike. Joel Greenblatt also added to his stake in the company in the second quarter, by 19% to 772,644 shares worth an estimated $25.3 million. Chuck Royce, on the other hand, chose to reduce his exposure to Methode Electronics Inc. (NYSE:MEI), dumping almost half of his position and leaving his mutual fund, Royce & Associates, with a holding of 485,496 shares.
So far this year Methode Electronics Inc.(NYSE:MEI) is down by 10.5%, following a massive fall at the end of June due to lower guidance paired with revenues for the previous quarter coming in below estimates. Since then, the stock went sideways until today’s earnings report, which could provide it with the necessary boost to recover the ground lost over the past two months. Methode Electronics is trading at a trailing Price to Earnings (P/E) ratio of 13, lower than the industry average of just over 15. The company also pays an annual dividend of $0.36, which represents a yield of 1.30%. The latest change in broker sentiment toward the company came on June 16, when Robert W. Baird downgraded the company to ‘Neutral’ from ‘Outperform’ and set a price target of $52 on it; the stock collapsed soon afterwards.
Disclosure: None
