Matthews International Corporation (MATW) reported 25Q3 revenues of $349.4 million, down 18.3%. Most of the decline was due to the sale of SGK Solutions, which was completed in May. Sales at its Memorialization business rose 0.5%, due to acquisition of acquisition of The Dodge Company, which more than offset a product sales decline attributed to a drop in death rates. Industrial Technology’s sales fell 4.2%, due in part to the discontinuance of the R&S automotive engineering product line and the lingering effects of the Tesla litigation on its energy storage business, offset in part by a rise in warehouse automation sales.
Despite the drop in sales, operating profit surged to $75.2 million from $6.7 million in 24Q3, due substantially to a $57.1 million gain booked on the sale of the SGK business. The tax rate on the gain was high – 75.1% – which limited the increase in GAAP net income to $15.4 million, up from $1.8 million last year. GAAP EPS was $0.49 vs. last year’s $0.06. Adjusted EPS fell from $0.55 to $0.28. The GAAP EPS far exceeded my projection of $0.02, as I had significantly underestimated the gain on sale. Adjusted EPS of $0.28 fell short of my estimate of $0.30. Adjusted EBITDA of $44.6 million exceeded my $42.4 million.
On May 1, the company completed the sale of SGK, for which it received $228 million in cash, $50 million of preferred stock and a 40% equity interest in the newly formed entity, called Propelis, which was recorded at $213 million on the books. Management’s full year 2025 adjusted EBITDA guidance is unchanged at $190 million and includes the anticipated equity in earnings from its equity interest in Propelis. Excluding the earnings from the Propelis equity interest, I estimate that management’s guidance would be $173.3 million.
Based upon that guidance and certain disclosures in the 10-Q and on the conference call, I have adjusted my projection model to reflect the impact of the Propelis equity interest and the 10% dividend on the $50 million Propelis preferred, which I assume will be paid in kind. I include both the equity earnings and the preferred dividend in the calculation of GAAP and non-GAAP EPS but exclude them from the calculation of adjusted EBITDA. I would, however, include any cash distributions from Propelis to Matthews in adjusted EBITDA.
Since my last report (5/15), Matthews’ stock has advanced 26.3%, better than the S&P Small Cap 600’s 8.2% rise. All of the outperformance occurred in May and June. The stock has slightly underperformed that benchmark since the beginning of July. It reached an intraday high of $26.22 on August 6, the day before the earnings release, but then fell 5.5% to close at $23.48 on the day of the conference call. Since then, it has been trying to recover those losses.
My projections assume fiscal 2025 adjusted EBITDA of $178.8 million, GAAP EPS of $0.42 (vs. a loss of $0.18 previously) and non-GAAP EPS of $1.21, up from $1.18. For fiscal 2026, I show adjusted EBITDA of $161.5 million, GAAP EPS of $1.55 (up from $0.83) and non-GAAP EPS of $1.89 (up from $1.13). My projections are above consensus (two analysts).
I have raised my price target from $20 to $25. The new target equals 16.0 times projected 2026 GAAP EPS of $1.55 and 12 times non-GAAP EPS of $1.89. The lower multiple (compared with my previous estimate) assumes that the market will ignore the non-cash earnings and preferred dividends from Propelis. The $25 price target suggests a potential total return of 11.2%, including the stock’s 4.3% dividend yield. Thus, I am maintaining MATW’s performance rating at “3” (Neutral).
This is a summary of my recent update report on Matthews International Corp. (MATW). To obtain a copy of the report, please reach out to me using the contact information provided below.
August 13, 2025 (Report published on August 12, 2025.)
Stephen P. Percoco
Lark Research
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