Espey Mfg. & Electronics Corp. ESP has declined 15% since the company reported its earnings for the quarter ended March 31, 2026, compared with the S&P 500 index’s 0.1% growth over the same period. Over the past month, the stock has declined 12.1%, underperforming the S&P 500’s 5% growth, reflecting a weaker investor reaction despite the company’s improved profitability.
For the fiscal third quarter of 2026, Espey reported earnings per share of 99 cents, which rose from 63 cents in the prior-year quarter.
Net sales of $11.4 million indicated a 10.9% increase from $10.3 million in the year-ago quarter.
Net income climbed 68.1% to $2.9 million from $1.7 million a year earlier. Gross profit improved 43.4% year over year to $4.2 million, and gross margin expanded to 37% from 28.6%.
Espey Mfg. & Electronics Corp. Price, Consensus and EPS Surprise
Espey Mfg. & Electronics Corp. price-consensus-eps-surprise-chart | Espey Mfg. & Electronics Corp. Quote
Backlog and Business Activity
Espey ended the quarter with a backlog of approximately $137.1 million compared with $138 million at the same point last year. About $92.7 million of the backlog came from three significant customers. Management noted that 11% of the current backlog is expected to be recognized during fiscal 2026, 38% in fiscal 2027, 22% in fiscal 2028 and the remainder thereafter.
The company received $30 million in new orders during the first nine months of fiscal 2026, down sharply from $75.1 million in the comparable prior-year period, which had benefited from two major multiyear contract awards totaling $49.4 million. Despite the slowdown, Espey said it had approximately $152.5 million in outstanding business opportunities spanning repeat and new programs as of May 7, 2026.
Contract liabilities increased to $33.5 million from $22.9 million at June 30, 2025, largely reflecting advance cash collections on certain contracts. Meanwhile, inventories rose significantly to $26.6 million from $17.8 million as the company continued work on contracts in process.
Margin Expansion and Operational Drivers
Management attributed the third-quarter sales increase primarily to higher activity on several magnetics programs and increased field service work, partly offset by lower sales from certain power supply and build-to-print programs. For the nine-month period, lower sales reflected shipment timing, milestone completion schedules and reduced deliveries on some power supply programs.
Gross margin improvement was driven by product mix, labor efficiencies and process improvements, though partially offset by additional investments tied to certain fixed-price engineering contracts. Espey said some power supply programs required additional testing and design modifications during development.
Selling, general and administrative expenses increased modestly due to higher employee health benefits, ESOP contributions, facility costs and professional services. Other income rose significantly, helped by higher interest income from larger balances held in money market accounts and investment securities. Interest income for the quarter increased to $0.4 million from $0.3 million a year earlier.
Management Outlook
Management expects fiscal 2026 revenue to exceed fiscal 2025 levels, driven largely by shipments already included in backlog that are expected to occur before fiscal year-end. The company also anticipates that fiscal 2026 net income will surpass the prior year’s results.
Espey acknowledged that government shutdowns have affected some short-term deliverables but said it does not currently expect a material effect on full-year results. The company also cited ongoing risks tied to supply chain constraints, labor availability, inflationary pressures and tariffs on steel and aluminum imports.
Liquidity and Capital Position
Espey finished the quarter with cash and cash equivalents of $21.2 million, up from $18.9 million at June 30, 2025. Investment securities totaled $25.5 million. Working capital rose to approximately $50.5 million from $39.9 million a year earlier. The company said it has funded operations through internally generated cash flows and existing investments and does not expect to require borrowings in the near future.
Other Developments
During fiscal 2025, Espey received a $3.4 million funding award from the U.S. Navy to support facility and capital equipment upgrades tied to the Surface Combatant Industrial Base initiative. As of March 31, 2026, the company had received approximately $2 million in milestone reimbursements and placed $3.2 million of related assets into service.
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