Why Methode Electronics (MEI) Shares Are Falling Today

Custom-engineered solutions manufacturer Methode Electronics reported Q3 CY2025 results exceeding the market’s revenue expectations, but sales fell by 15.6% year on year to $246.9 million. The company expects the full year’s revenue to be around $950 million, close to analysts’ estimates. Its non-GAAP loss of $0.19 per share was in line with analysts’ consensus estimates.

Is now the time to buy MEI? Find out in our full research report (it’s free for active Edge members).

Methode Electronics (MEI) Q3 CY2025 Highlights:

• Revenue: $246.9 million vs analyst estimates of $237.7 million (15.6% year-on-year decline, 3.9% beat)
• Adjusted EPS: -$0.19 vs analyst estimates of -$0.20 (in line)
• Adjusted EBITDA: $17.6 million vs analyst estimates of $15.27 million (7.1% margin, 15.2% beat)
• The company reconfirmed its revenue guidance for the full year of $950 million at the midpoint
• EBITDA guidance for the full year is $75 million at the midpoint, above analyst estimates of $73.53 million
• Operating Margin: 1.6%, down from 3.2% in the same quarter last year
• Market Capitalization: $274.1 million

StockStory’s Take

Methode Electronics' third quarter was marked by continued operational challenges, with revenue declining notably year over year. Management attributed the sales contraction to ongoing headwinds in automotive and delayed program launches, particularly in the electric vehicle segment. CEO Jonathan DeGaynor highlighted that, “our EV exposure is not just in North America, it's in Europe and Asia,” and stressed the company has already absorbed much of the impact from canceled and delayed launches. The company’s efforts to improve plant performance, especially in Egypt and Mexico, helped deliver sequential improvements, but overall margin pressures persisted.

Looking ahead, Methode Electronics is maintaining its full-year guidance, with management emphasizing a focus on cost discipline, improved plant execution, and selective investment in growth areas such as data centers. The leadership team is cautious about external volatility, including tariffs and supply chain disruptions, which continue to create uncertainty in forecasting. CFO Laura Kowalchik outlined that, “we expect our second half results to be higher than the first half,” driven by operational improvements and a more stable manufacturing footprint. Management remains focused on completing its transformation, aiming for a more reliable and resilient business model even as key end markets remain turbulent.

Key Insights from Management’s Remarks

Management identified delayed automotive program launches and plant improvement initiatives as key themes, with sequential progress in operational metrics despite ongoing challenges in core end markets.

• Plant transformation progress: Significant management attention was devoted to improving facilities in Egypt and Mexico, resulting in better product quality, cost controls, and delivery performance. CEO DeGaynor stated Egypt is ahead in its transformation, while Mexico continues to make progress on cost reduction and operational stability.
• Leadership restructuring completed: Methode completed a top-to-bottom revamp of its leadership team, moving from a regional to a global, cross-functional structure. The company believes this new structure will drive better execution and faster problem-solving across its facilities.
• Data center momentum builds: Management noted that Power Solutions for data centers remain a long-term growth driver, with recent moves toward vendor-managed inventory expected to enhance customer relationships and sales predictability. The company invested $10 million in inventory to support this initiative, indicating confidence in future demand.
• Automotive and EV headwinds absorbed: The bulk of the negative impact from delayed or canceled electric vehicle launches, especially in North America, has already been reflected in results and guidance. Management believes the company is now positioned to benefit from any future recovery in these segments.
• Operational efficiencies drive margin opportunity: Sequential margin improvements were attributed to cost-cutting and waste reduction, particularly in the Mexico and Egypt plants. Management emphasized that further gains will depend on successful program launches and continued plant performance improvements.

Drivers of Future Performance

Methode’s outlook centers on plant execution, selective growth investments, and managing volatility in its core end markets.

• Operational improvements in key plants: Management expects continued margin recovery as operational upgrades in Egypt and Mexico gain traction, reducing cost of poor quality and reliance on premium freight. CFO Kowalchik pointed to “gross margins nearly doubled” in Egypt due to these initiatives.
• Data center strategy as a growth lever: The company is betting on its data center Power Solutions to offset weakness in automotive and industrial segments. CEO DeGaynor described the vendor-managed inventory investment as a strategic move to “take share and get a lot more clarity with regard to the sales forecast.”
• External risks and market turbulence: Persistent uncertainty from tariffs, supply chain issues, and customer program delays continue to limit the company’s ability to narrow guidance. Management reiterated that guidance remains broad due to these factors, and any improvement in end markets, especially commercial vehicles and industrial, could be a tailwind.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be closely monitoring (1) the ongoing operational improvements in Egypt and Mexico for sustainable margin expansion, (2) the success of data center Power Solutions and the vendor-managed inventory rollout as a potential growth offset to weaker automotive, and (3) any resolution or escalation of external risks such as tariffs or supply chain disruptions. We will also track the pace and profitability of new program launches across core segments.

Methode Electronics currently trades at $7.73, down from $8.69 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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What Happened?

Shares of custom-engineered solutions manufacturer Methode Electronics fell 10.4% in the afternoon session after the company reported third-quarter results that showed a steep year-over-year sales decline, overshadowing revenue that came in ahead of estimates. The custom-engineered solutions manufacturer posted an adjusted loss of $0.19 per share, which was in line with analysts' expectations. Although total revenue of $246.9 million beat expectations, it still marked a 15.6% drop from the same period in the previous year. While the company reconfirmed its full-year revenue guidance, the market's reaction suggested investors were more focused on the significant drop in current sales and the reported loss.

The shares closed the day at $7.74, down 10.9% from previous close.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Methode Electronics? Access our full analysis report here.

What Is The Market Telling Us

Methode Electronics’s shares are extremely volatile and have had 32 moves greater than 5% over the last year. But moves this big are rare even for Methode Electronics and indicate this news significantly impacted the market’s perception of the business.

The previous big move we wrote about was 2 days ago when the stock gained 7.8% on the news that investors showed optimism ahead of its quarterly earnings report scheduled for the following day. The positive sentiment came even as analysts projected a loss per share of around -$0.28 and a significant year-over-year revenue decline of about 18.8%. This investor confidence may have been fueled by the company's performance in the previous quarter. In that period, Methode Electronics beat earnings per share estimates, which resulted in a 12.16% jump in its stock price on the day after the announcement. Investors appeared to be anticipating a similar positive surprise this time around.

Methode Electronics is down 34.7% since the beginning of the year, and at $7.73 per share, it is trading 44.9% below its 52-week high of $14.02 from December 2024. Investors who bought $1,000 worth of Methode Electronics’s shares 5 years ago would now be looking at an investment worth $206.02.