Matthews Intl Corp (MATW) 26Q1 Update

Matthews International Corporation (MATW) reported 26Q1 revenues of $284.8 million, down 29.1%.  Nearly all of the decline was due to divestitures, especially the sale of SGK Solutions last May.  Sales at its Memorialization business rose 7.2%, due to the acquisition of The Dodge Company and a modest pick-up in unit volumes, the first such increase in over a year.  Industrial Technology’s sales fell 14.2%, due to lower sales for the engineering business and the divestiture of its tooling business, offset partially by higher sales in the warehouse automation business.  Sales for the Brand Solutions segment fell 91%, due to the divestiture of SGK and only two months sales for the European packaging operations, which were divested on December 1.

Operating profit rose from $5.7 million in 25Q1 to $97.5 million.  However, excluding a $113.2 million net gain on divestitures, MATW would have posted an operating loss of $15.7 million.  Despite the 29% drop in sales, administrative expense increased 6.2% and as a percent of revenues by 940 bp from 19.1% to 28.5%.  Among the factors driving higher administrative costs were the non-repeat of an $8.7 million asset sale gain from 25Q1, a $2.1 increase (to $9.0 million) in legal costs from its ongoing dispute with Tesla, equity-method losses of $2.3 million from its interest in Propelis, a $3.0 million increase (to $6.1 million) from certain commercial, operation and cost-reduction initiatives, offset partially by a $5.6 million decrease to $3.0 million in intangibles amortization due to the divestiture of SGK.

GAAP EPS was $1.39 vs. last year’s loss of $0.11.  26Q1 non-GAAP EPS loss of $0.19 compared with 25Q1’s profit of $0.14.  I had projected a GAAP EPS profit of $0.16 and non-GAAP EPS of $0.14.  The consensus non-GAAP estimate was $0.05.   Adjusted EBITDA (according to MATW’s definition) of $35.2 million fell short of my projected $37.2 million.

The company has made significant strides over the past year to divest marginally profitable businesses, lower operating costs and reduce debt.  In January, MATW announced that it had repaid all $300 million of its 8.625% Senior Notes due 2027.  It has also nearly eliminated its pension liability, but off-balance sheet debt, though down, is still a concern.  Consequently, its work is far from finished.  The remaining businesses –energy storage and product identification in the Industrial Technologies segment and the Memorialization segment – still face considerable challenges and it is difficult to determine what their baseline profitability will be.  Although management hopes to monetize its 40% equity interest and 10% PIK preferred investment in Propelis within 18-24 months, it is still too early to make that call.  The company’s strategic review process is ongoing, so there could be further acquisitions and divestitures in fiscal 2026 and beyond.

Management has reaffirmed its fiscal 2026 adjusted EBITDA guidance of $180 million.  However, its definition of adjusted EBITDA includes the non-cash earnings (or losses) from its 40% interest in Propelis as well as the PIK dividends on the Propelis preferred, both of which are non-cash in nature.  It would be appropriate to include only the cash dividends received on both of those investments.

My projections now anticipate adjusted EBITDA (according to MATW’s definition) of $149.4 million for fiscal 2026, below management’s guidance of $180 million, and $159.5 million for fiscal 2027.  My projections also show fiscal 2026 GAAP EPS of $1.46 and non-GAAP EPS of $0.39 and fiscal 2027 GAAP EPS of $0.86 and non-GAAP EPS of $1.55.  Based upon those projections, I am raising my price target on MATW’s stock slightly from $25 to $26.  The new price target equates to forward valuation multiples of 30 times projected 2027 EPS of $0.86 and 16.5 times projected 2027 non-GAAP EPS of $1.55.  With the stock closing yesterday at $25.87 yesterday and its 3.9% dividend yield, the potential total return is 4.4%.  Accordingly, I am maintaining my performance rating of “3” (Neutral).

This is a summary of my recent update report on Matthews International Corporation (MATW). To obtain a copy of the report, please reach out to me using the contact information provided below.

February 14, 2026 (Report published on February 12, 2026.)

Stephen P. Percoco
Lark Research
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© 2015-2026 by Stephen P. Percoco, Lark Research.   All rights reserved.

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