NEW YORK - Mayville Engineering Company Inc. (NYSE: NYSE:MEC) reported fourth-quarter earnings that surpassed analyst expectations, but a revenue shortfall and weaker-than-expected guidance for the upcoming year sent shares down 5%.
The company, a leading value-added provider of design, prototyping, and manufacturing solutions, announced an adjusted EPS of $0.21 for the quarter, beating the consensus estimate of $0.17. However, revenue for the quarter was $148.6 million, falling short of the analyst projection of $152.31 million.
Mayville's fourth-quarter revenue represented a 15.6% increase compared to the same period last year, with organic growth contributing 6.1% year-over-year (YoY). Despite the revenue miss, the company achieved a record quarterly free cash flow of $19.9 million, a significant improvement from the previous year.
The company's full-year 2024 guidance indicated expected net sales ranging from $620 million to $640 million, which is below the analyst consensus of $644.8 million. The midpoint of the guidance range, $630 million, is still below expectations. Adjusted EBITDA is projected to be between $72 million and $76 million, and free cash flow is anticipated to be between $35 million to $45 million for the year.
President and CEO Jag Reddy highlighted the company's progress in its multi-year business transformation journey and the recent acquisition of Mid-States Aluminum (MSA), which positions MEC to capitalize on rising demand for lightweight materials fabrication capabilities. Reddy noted that the company delivered organic net sales growth of over 6% in the fourth quarter, with adjusted EBITDA margins nearing 12%.
The market's negative reaction, as indicated by the 5% drop in share price, reflects concerns over the revenue miss and the cautious outlook for 2024. The company's performance was impacted by an estimated $5.0 million due to United Auto Workers (UAW) labor strikes at select customers and a $1.6 million impact to Adjusted EBITDA related to the strikes.
Despite these challenges, MEC's management remains optimistic about the company's ability to deliver profitable growth in the coming year, citing share gains, enhanced productivity, a higher-value sales mix, and continued price discipline as key drivers.
The company also expects its Hazel Park facility to approach $100 million of annualized sales by the fourth quarter of 2024 and anticipates at least $20 million of annual synergies resulting from the MSA acquisition by year-end 2026.
Investors and analysts will be closely monitoring MEC's performance as the company navigates a potentially softening macroeconomic environment while striving to achieve its 2026 financial targets.
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