Matthews International Corporation (MATW) reported 25Q2 revenues of $427.6 million, down 9.3%. Sales at its Memorialization business fell 7.4%, due to the normalization of U.S. death rates after COVID. Industrial Technology’s sales plunged 30.4%, as the energy storage solutions business suffered the lingering effects of the Tesla litigation as well as declines in its warehouse automation business. Sales at its SGK Solutions business rose 6.7%.
With the drop in sales, operating profit fell 72%, with operating margin contracting from 4.5% to 1.4%. MATW reported a net loss of $8.9 million, a reversal from 24Q2’s profit of $9.0 million. GAAP EPS was a loss of $0.29 vs. last year’s earnings of $0.29. Adjusted EPS fell to $0.34 from $0.70. 25Q2 revenues were 8.6% below my estimate. The GAAP loss per share of $0.29 was below my projected profit of $0.01. Adjusted EPS of $0.34 fell short of my estimate of $0.54. Adjusted EBITDA of $51.4 million was below my $55.2 million.
On May 1, the company completed the sale of SGK, for which it received $250 million in cash, $50 million of preferred stock and a 40% equity interest in the newly formed entity. Management lowered its 2025 adjusted EBITDA guidance from $205-$210 million to at least $190 million to account for the expected loss of adjusted EBITDA from SGK.
Of particular concern was the drop in Industrial Technology’s sales and profitability. Management stopped marketing its dry battery electrode (DBE) solution while the Tesla lawsuit played out, but building back sales momentum will take time because of the long lead time required for customers to reconfigure their production lines. The company does, however, have a stop-gap measure that would quickly convert existing wet battery lines. It is also implementing its DBE technology in other lithium-ion battery applications.
Yet, the market potential of DBE is unclear. Tesla has touted advances in its 4680 battery, but still describes DBE as “on the horizon.” Meanwhile, other technologies are making waves. (For example, China’s CATL, the world’s largest battery manufacturer, has launched a sodium-ion battery.) These could supplant demand for DBE before it gets off the ground.
Since my last report (2/13), Matthews’ stock has fallen 24.1%, worse than the S&P Small Cap 600’s 12.9% decline. The degree of underperformance accelerated over the last few days after 25Q2 results. Management’s guidance implies at least $100 million of adjusted EBITDA during the second half of the year, equal to 24H2, despite the loss of SGK’s profits. My projections assume fiscal 2025 adjusted EBITDA of $177 million, below management guidance of $190 million plus. I also now project a 2025 GAAP loss of $0.18 and non-GAAP EPS of $1.18. (My estimates include the dividend on the venture’s 10% preferred, but nothing from the 40% equity interest.) For fiscal 2026, I now show adjusted EBITDA of $168 million, GAAP EPS of $0.83 and non-GAAP EPS of $1.13. My non-GAAP EPS estimates are down from $1.88 for 2025 and $2.13 for 2026 previously. My revised projections are above the consensus (of two other analysts).
Along with the revised projections, I have reduced my price target from $32 to $20. The new target equates to 24 times projected 2026 GAAP EPS of $0.83 and 18 times non-GAAP EPS of $1.13. The PT non-GAAP multiple is above the current one-year forward non-GAAP EPS multiple of 16. The $20 price target represents a potential total return of 10.9%, including its 5.3% dividend yield. Accordingly, I am reducing my performance rating from “1” (Buy) to “3” (Neutral). The $20 PT is admittedly tight to the current price, as the stock has traded sideways for a month and its RSI is nearly oversold.
This is a summary of Lark Research’s recent report on Matthews International Corporation (MATW). To obtain a copy of the report, please reach out to Steve Percoco using the contact information provided below.
June 20, 2025 (Report published on May 5, 2025.)
Stephen P. Percoco
Lark Research
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© 2015-2025 by Stephen P. Percoco, Lark Research. All rights reserved.
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