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FEIM's Q1 Earnings Fall Y/Y on Program Delays, Stock Down 16%
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Shares of Frequency Electronics, Inc. (FEIM - Free Report) have declined 16% since the company reported its earnings for the quarter ended July 31, 2025. This compares to the S&P 500 index’s 1.4% growth over the same time frame. Over the past month, the stock has declined 3.3% compared with the S&P 500’s 3.6% growth.
Frequency Electronics reported fiscal first quarter 2026 net income of 7 cents per diluted share, down from 25 cents per share in the comparable quarter last year, a decrease of 72% in earnings.
The company’s revenues were $13.8 million, representing an 8.4% decline from $15.1 million in the year-ago period. This decline was mirrored in profitability, as net income fell sharply to $0.6 million, down from $2.4 million in the comparable quarter last year, a decrease of nearly 74% in earnings.
Operating income dropped significantly to $0.4 million from $2.4 million a year earlier. Gross margin also contracted, with both the gross margin and gross margin rate down due to a mix shift from higher-margin to lower-margin programs. However, net cash provided by operations improved to around $1.2 million, compared to a use of $1.5 million in the prior-year quarter.
Frequency Electronics, Inc. Price, Consensus and EPS Surprise
Business Metrics: Backlog Stays Strong Despite Revenue Miss
Despite the revenue and EPS shortfall, the company reported a healthy order book. The fully funded backlog stood at around $71 million as of July 31, 2025, slightly higher than the $70 million reported at the end of the previous quarter. Revenues from U.S. government satellite programs were $6.5 million, down from $8.3 million. However, revenue from non-space U.S. government and DOD contracts increased to $6.9 million from $6.3 million year-over-year, now comprising 50% of total revenues versus 42% previously.
Other commercial and industrial revenues totaled approximately $0.4 million, an improvement from $0.5 million last year. While the quarter's top-line softness was due in part to customer-driven delays, management emphasized that these were not cancellations but deferrals that are expected to be realized in upcoming quarters.
Management Commentary: A “Timing Issue” With Optimism Ahead
CEO Tom McClelland framed the quarterly decline in revenue and income as a timing issue rather than a sign of weakening fundamentals. According to him, some revenue was pulled forward into the prior quarter, and additional revenues were deferred due to late-quarter customer delays, particularly in defense-related programs.
McClelland highlighted that customer demand remains strong, and some delayed programs are likely to be expanded, increasing contract value. Management reiterated confidence in the company’s long-term growth, citing ongoing bids for larger contracts and continued government interest in the company’s solutions for quantum sensing and alternative Positioning, Navigation and Timing (PNT).
Factors Behind the Numbers
The quarterly results were hurt largely by program delays and timing mismatches in defense funding allocations, which were only finalized by Congress in early July, leaving little time to convert awards into recognized revenue. Gross margin pressure was compounded by a revenue mix skewed toward lower-margin development programs.
Selling, general and administrative expenses rose to 26% of revenue from 19% a year earlier, primarily due to payroll increases and investments in the Colorado facility and quantum sensing initiatives. R&D expenditure also dropped to $1.1 million from $1.5 million, now comprising 8% of revenues versus 10% previously.
Other Developments: Share Repurchase and Facility Expansion
A notable development in the quarter was the announcement of a $20 million share repurchase authorization, roughly equivalent to the value of the two special dividends issued over the past two years. This move reflects confidence in the company’s financial stability and its desire to return value to shareholders.
Additionally, the company expanded its footprint with a new engineering facility in Boulder, CO. Staffed with senior scientists from the National Institute of Standards and Technology, this center is focused on quantum sensing and is expected to contribute to profitability beginning in the third quarter.
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FEIM's Q1 Earnings Fall Y/Y on Program Delays, Stock Down 16%
Shares of Frequency Electronics, Inc. (FEIM - Free Report) have declined 16% since the company reported its earnings for the quarter ended July 31, 2025. This compares to the S&P 500 index’s 1.4% growth over the same time frame. Over the past month, the stock has declined 3.3% compared with the S&P 500’s 3.6% growth.
Frequency Electronics reported fiscal first quarter 2026 net income of 7 cents per diluted share, down from 25 cents per share in the comparable quarter last year, a decrease of 72% in earnings.
The company’s revenues were $13.8 million, representing an 8.4% decline from $15.1 million in the year-ago period. This decline was mirrored in profitability, as net income fell sharply to $0.6 million, down from $2.4 million in the comparable quarter last year, a decrease of nearly 74% in earnings.
Operating income dropped significantly to $0.4 million from $2.4 million a year earlier. Gross margin also contracted, with both the gross margin and gross margin rate down due to a mix shift from higher-margin to lower-margin programs. However, net cash provided by operations improved to around $1.2 million, compared to a use of $1.5 million in the prior-year quarter.
Frequency Electronics, Inc. Price, Consensus and EPS Surprise
Frequency Electronics, Inc. price-consensus-eps-surprise-chart | Frequency Electronics, Inc. Quote
Business Metrics: Backlog Stays Strong Despite Revenue Miss
Despite the revenue and EPS shortfall, the company reported a healthy order book. The fully funded backlog stood at around $71 million as of July 31, 2025, slightly higher than the $70 million reported at the end of the previous quarter. Revenues from U.S. government satellite programs were $6.5 million, down from $8.3 million. However, revenue from non-space U.S. government and DOD contracts increased to $6.9 million from $6.3 million year-over-year, now comprising 50% of total revenues versus 42% previously.
Other commercial and industrial revenues totaled approximately $0.4 million, an improvement from $0.5 million last year. While the quarter's top-line softness was due in part to customer-driven delays, management emphasized that these were not cancellations but deferrals that are expected to be realized in upcoming quarters.
Management Commentary: A “Timing Issue” With Optimism Ahead
CEO Tom McClelland framed the quarterly decline in revenue and income as a timing issue rather than a sign of weakening fundamentals. According to him, some revenue was pulled forward into the prior quarter, and additional revenues were deferred due to late-quarter customer delays, particularly in defense-related programs.
McClelland highlighted that customer demand remains strong, and some delayed programs are likely to be expanded, increasing contract value. Management reiterated confidence in the company’s long-term growth, citing ongoing bids for larger contracts and continued government interest in the company’s solutions for quantum sensing and alternative Positioning, Navigation and Timing (PNT).
Factors Behind the Numbers
The quarterly results were hurt largely by program delays and timing mismatches in defense funding allocations, which were only finalized by Congress in early July, leaving little time to convert awards into recognized revenue. Gross margin pressure was compounded by a revenue mix skewed toward lower-margin development programs.
Selling, general and administrative expenses rose to 26% of revenue from 19% a year earlier, primarily due to payroll increases and investments in the Colorado facility and quantum sensing initiatives. R&D expenditure also dropped to $1.1 million from $1.5 million, now comprising 8% of revenues versus 10% previously.
Other Developments: Share Repurchase and Facility Expansion
A notable development in the quarter was the announcement of a $20 million share repurchase authorization, roughly equivalent to the value of the two special dividends issued over the past two years. This move reflects confidence in the company’s financial stability and its desire to return value to shareholders.
Additionally, the company expanded its footprint with a new engineering facility in Boulder, CO. Staffed with senior scientists from the National Institute of Standards and Technology, this center is focused on quantum sensing and is expected to contribute to profitability beginning in the third quarter.