The Eastern Company (EML) Bundle
Understanding The Eastern Company (EML) Revenue Streams
Understanding The Eastern Company’s Revenue Streams
The Eastern Company reported net sales of $71,274,757 for the third quarter of 2024, compared to $62,001,347 for the same period in 2023, reflecting a year-over-year increase of approximately 19.5%. For the first nine months of 2024, net sales amounted to $206,068,490, up from $195,062,061 in 2023, indicating a growth rate of around 5.2%.
Breakdown of Primary Revenue Sources
The primary revenue sources for the company include:
- Returnable transport packaging products: $7.4 million
- Truck mirror assemblies: $1.2 million
- Truck accessories: $0.7 million
Year-over-Year Revenue Growth Rate
In terms of revenue growth, the company experienced the following trends:
- Third Quarter 2024: Revenue increased by 19.5% compared to Q3 2023.
- First Nine Months 2024: Revenue grew by 5.2% compared to the same period in 2023.
Contribution of Different Business Segments to Overall Revenue
The contribution from various business segments to overall revenue is as follows:
| Business Segment | Revenue (2024) | Revenue (2023) | Percentage Change |
|---|---|---|---|
| Returnable Transport Packaging | $7.4 million | $4.6 million | 60% |
| Truck Mirror Assemblies | $1.2 million | $0.8 million | 50% |
| Truck Accessories | $0.7 million | $1.3 million | -46% |
Analysis of Significant Changes in Revenue Streams
Significant changes in revenue streams include:
- Increased demand for truck mirror assemblies, contributing an additional $13.3 million in revenue.
- Sales of returnable transport packaging products saw an increase of $4.6 million.
- However, there was a decline in truck accessories sales, which decreased by $6.9 million.
As of September 28, 2024, the company reported a backlog of $97.2 million, up 13% from $86.2 million as of September 30, 2023. This increase was primarily driven by heightened orders for truck mirror assemblies and returnable transport packaging products.
Net sales of existing products increased by 9% in Q3 2024, while for the first nine months of 2024, net sales decreased by 2% compared to the same period in 2023.
Price increases and new products contributed to net sales growth by 5% in Q3 2024 and 6% for the first nine months of 2024.
The historical trends in revenue demonstrate a company that is adapting to market demand while also facing challenges in certain product lines. The overall performance indicates a positive trajectory in key areas despite setbacks in others.
For further details on financial performance, please refer to the relevant financial statements.
A Deep Dive into The Eastern Company (EML) Profitability
Profitability Metrics
The profitability of the company can be analyzed through several key metrics, including gross profit margin, operating profit margin, and net profit margin. The following table summarizes these metrics for the most recent fiscal periods:
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Net Sales | $9,273,000 | $8,474,000 | $31,632,000 | $29,105,000 |
| Cost of Goods Sold | $6,895,000 | $6,374,000 | $23,561,000 | $22,206,000 |
| Gross Profit | $2,378,000 | $2,100,000 | $8,071,000 | $6,899,000 |
| Gross Margin | 25.5% | 24.9% | 25.2% | 22.9% |
| Selling & Admin Expenses | $1,344,000 | $1,100,000 | $4,786,000 | $4,050,000 |
| Operating Profit | $1,034,000 | $900,000 | $3,285,000 | $2,849,000 |
| Operating Margin | 11.1% | 10.6% | 10.4% | 9.8% |
| Net Income | $4,668,798 | $3,463,424 | $11,675,715 | $7,772,845 |
| Net Profit Margin | 50.3% | 40.6% | 36.9% | 26.7% |
Over time, the gross profit margin has shown a positive trend, increasing from 22.9% in the first nine months of 2023 to 25.2% in the same period of 2024. This improvement is attributed to effective cost management strategies and price adjustments to mitigate rising raw material costs.
Operating profit margins have also improved, increasing from 5.8% in 2023 to 8.3% in 2024, indicating enhanced operational efficiency and lower relative selling and administrative expenses as a percentage of sales.
In comparison to industry averages, the company’s profitability ratios are competitive. The average gross margin in the industry is approximately 23%, while the average operating margin is around 8%. The substantial gross and operating margins achieved indicate strong market positioning and effective management practices.
Operational efficiency is further highlighted by the decline in selling and administrative expenses as a percentage of net sales, which was 15.1% for the first nine months of 2024 compared to 14.9% for the same period in 2023. This reflects a disciplined approach to cost management while continuing to invest in product development, which represented 1.8% of net sales in 2024.
Overall, the company’s profitability metrics indicate a stable financial performance with a positive outlook for investors.
Debt vs. Equity: How The Eastern Company (EML) Finances Its Growth
Debt vs. Equity: How The Eastern Company Finances Its Growth
The Eastern Company reported significant figures regarding its debt levels and equity structure as of September 28, 2024. The total debt was approximately $60 million, with a breakdown of $30 million in long-term debt and $30 million in short-term debt. The company maintains a debt-to-equity ratio of 37.5%, which is relatively close to the industry average of 40%.
In the third quarter of 2024, the company recorded an interest expense of $709,680 and a total of $2,049,655 for the first nine months of 2024. The company’s leverage is strategically managed, with a focus on balancing debt financing and equity funding to support operational growth while maintaining financial stability.
Recent Debt Issuances and Activity
On June 16, 2023, the company entered into a credit agreement that included a term loan of $60 million, along with a revolving credit facility of $30 million. The term loan is structured with quarterly principal payments, beginning at $750,000 and adjusting over time. As of September 28, 2024, the company had utilized $3 million of the revolving credit.
Credit Ratings
The Eastern Company has not publicly disclosed a specific credit rating; however, its financial management practices and recent refinancing efforts indicate a focus on maintaining a favorable credit profile with its lenders.
Debt vs. Equity Balance
The company continues to balance its financing strategy between debt and equity. As of September 28, 2024, total shareholders’ equity was reported at $119.24 million. The current ratio stands at 2.6, indicating strong liquidity and ability to cover short-term obligations.
| Financial Metric | Value |
|---|---|
| Total Debt | $60 million |
| Long-Term Debt | $30 million |
| Short-Term Debt | $30 million |
| Debt-to-Equity Ratio | 37.5% |
| Interest Expense (Q3 2024) | $709,680 |
| Interest Expense (First 9 Months 2024) | $2,049,655 |
| Total Shareholders’ Equity | $119.24 million |
| Current Ratio | 2.6 |
Assessing The Eastern Company (EML) Liquidity
Assessing Liquidity and Solvency
The financial health of a company can be assessed through its liquidity and solvency ratios, which provide insights into its ability to meet short-term and long-term obligations.
Liquidity Ratios
The current and quick ratios are vital indicators of liquidity. As of the third quarter of 2024, the current ratio stood at 2.6, consistent with previous periods (2023: 2.6, FY 2023: 2.6). This ratio suggests that the company has sufficient current assets to cover its current liabilities.
The quick ratio, which excludes inventory from current assets, remains 1.4, indicating a healthy liquidity position as well.
Working Capital Trends
Working capital is another critical measure of liquidity. As of September 28, 2024, working capital was reported at $78.2 million, an increase from $73.5 million in the third quarter of 2023 and $69.5 million at the end of fiscal year 2023. The increase in working capital reflects improved operational efficiency and cash management strategies.
Cash Flow Statements Overview
The cash flow statement reveals the cash generated and used in operating, investing, and financing activities. Below is a summary of cash flows for the first nine months of fiscal 2024:
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Net cash provided by operating activities | $8.3 | $18.2 |
| Net cash used in investing activities | ($8.1) | ($2.4) |
| Net cash used in financing activities | ($0.5) | ($16.9) |
In the first nine months of 2024, the company generated $8.3 million from operating activities, down from $18.2 million in the same period of 2023. This decline is attributed to an increase in accounts receivable by $11.7 million due to rising sales.
Potential Liquidity Concerns or Strengths
Despite the decrease in cash flow from operations, the company maintains a strong liquidity position with a healthy current ratio and substantial working capital. The cash and cash equivalents totaled $7.6 million as of September 28, 2024, down from $8.9 million in the previous year.
Furthermore, the company has $4.0 million in outstanding commitments for capital expenditures, indicating ongoing investment in growth, which could enhance future liquidity if managed effectively.
Overall, while the cash flow from operations has diminished, the company’s liquidity ratios and working capital trends suggest a robust capacity to meet its short-term obligations.
Is The Eastern Company (EML) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis for the company involves several key financial ratios and metrics that help determine if the stock is overvalued or undervalued.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is calculated based on the latest earnings per share (EPS) of $1.87 (diluted) for the first nine months of 2024. The stock price is approximately $24.09, resulting in a P/E ratio of 12.91.
Price-to-Book (P/B) Ratio
The book value per share is calculated from total equity of $119,240,210 divided by the number of outstanding shares 6,183,179, yielding a book value per share of approximately $19.28. The P/B ratio is therefore 1.25.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value is calculated by adding market capitalization, total debt, and subtracting cash and cash equivalents. With a market cap of $148,525,000 (calculated from the stock price), total debt of $60,000,000, and cash of $7,670,541, the enterprise value is $200,854,459. The EBITDA for the last nine months is $21,327,000, resulting in an EV/EBITDA ratio of 9.42.
Stock Price Trends
The stock price has fluctuated over the last 12 months, starting at around $20.00 and reaching a high of $28.68 before settling at $24.09 as of September 28, 2024.
Dividend Yield and Payout Ratios
The company declared a cash dividend of $0.11 per share quarterly, resulting in an annual dividend of $0.44. Given the current stock price of $24.09, the dividend yield is approximately 1.83%. The payout ratio based on the earnings per share of $1.87 is approximately 23.5%.
Analyst Consensus
Analysts currently show a consensus rating of Hold for the stock, reflecting a balanced outlook based on the recent financial performance and market conditions.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 12.91 |
| P/B Ratio | 1.25 |
| EV/EBITDA Ratio | 9.42 |
| Stock Price | $24.09 |
| Dividend Yield | 1.83% |
| Payout Ratio | 23.5% |
| Analyst Consensus | Hold |
Key Risks Facing The Eastern Company (EML)
Key Risks Facing The Eastern Company
Understanding the risk factors affecting The Eastern Company is crucial for investors. This section outlines the internal and external risks that may impact the company's financial health.
Overview of Risks
The Eastern Company faces various internal and external risks, including:
- Industry Competition: The company operates in a highly competitive environment, which may exert pressure on pricing and profitability.
- Regulatory Changes: Changes in regulations, particularly regarding manufacturing standards and environmental compliance, can lead to increased operational costs.
- Market Conditions: Economic downturns may adversely affect demand for the company's products, leading to reduced sales and revenue.
Operational Risks
Recent earnings reports highlight significant operational risks:
- Supply Chain Disruptions: The company has experienced increased costs related to supply chain challenges, including tariffs on imported goods, which amounted to approximately $1.9 million in the first nine months of 2024.
- Labor Costs: Selling, general, and administrative expenses increased by 22.1% in the third quarter of 2024, primarily due to higher payroll-related expenses.
Financial Risks
The financial health of The Eastern Company is influenced by several factors:
- Debt Levels: The total debt to shareholders’ equity ratio is 37.5% as of the third quarter of 2024, indicating a moderate level of leverage.
- Interest Rate Fluctuations: The company bears interest on its debt, which could increase with rising rates. Interest expense for the third quarter of 2024 was approximately $710,000.
Strategic Risks
Strategic initiatives may expose the company to various risks:
- New Product Development: Investment in new products has decreased, with product development expenses at 1.5% of net sales for the third quarter of 2024, compared to 2.3% in the same period of 2023.
- Market Demand: The backlog of orders increased by 13% to $97.2 million as of September 28, 2024, reflecting potential future revenue but also dependency on sustained market demand.
Mitigation Strategies
The Eastern Company has implemented various strategies to mitigate risks:
- Cost Control Initiatives: The company is actively pursuing cost-saving measures to offset rising operational costs.
- Diversification: Efforts to diversify product offerings aim to reduce reliance on any single market segment.
| Risk Category | Details | Financial Impact |
|---|---|---|
| Competition | High competition in the industry | Pressure on pricing and margins |
| Regulatory Changes | Changes in manufacturing standards | Increased operational costs |
| Supply Chain | Tariffs on imports | $1.9 million in increased costs |
| Debt Levels | Total debt to equity ratio | 37.5% |
| Interest Rates | Variable interest rates on debt | $710,000 in interest expense |
| Product Development | Decrease in development spending | 1.5% of net sales |
| Backlog | Increase in orders | $97.2 million |
Future Growth Prospects for The Eastern Company (EML)
Future Growth Prospects for The Eastern Company
Analysis of Key Growth Drivers
Key growth drivers for the company include product innovations, market expansions, and strategic acquisitions. The company reported a backlog increase of $11.6 million in orders for truck mirror assemblies and $3.2 million for returnable transport packaging products as of September 28, 2024, indicating strong demand in these sectors.
Future Revenue Growth Projections and Earnings Estimates
Net sales for the first nine months of fiscal 2024 reached $11,006 million, with a gross margin of 25.2%, up from 22.9% in the same period of 2023. The company has projected an increase in net income from continuing operations to $11.7 million, or $1.87 per diluted share, compared to $7.8 million, or $1.24 per diluted share in the prior year.
Strategic Initiatives or Partnerships
The company has continued to invest in new products, with product development expenses reported at $3.7 million for the first nine months of 2024, down from $4.3 million in 2023. Strategic partnerships and an ongoing focus on operational efficiency are expected to enhance revenue growth.
Competitive Advantages
The company's competitive advantages include a strong brand presence in the truck accessories sector, a diversified product portfolio, and improved operational efficiencies. The current ratio remains stable at 2.6, indicating sufficient liquidity to support growth initiatives.
| Metric | Q3 2024 | Q3 2023 | FY 2024 (Projected) | FY 2023 |
|---|---|---|---|---|
| Net Sales | $9,273 million | $8,330 million | $11,006 million | $10,000 million |
| Gross Margin (%) | 25.5% | 24.9% | 25.2% | 22.9% |
| Net Income | $4.7 million | $3.5 million | $11.7 million | $7.8 million |
| Earnings Per Share | $0.75 | $0.55 | $1.87 | $1.24 |
Continued investment in product development and strategic market expansions are expected to drive future growth, with anticipated increases in both revenue and earnings over the coming periods.
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Updated on 16 Nov 2024
Resources:
- The Eastern Company (EML) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of The Eastern Company (EML)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View The Eastern Company (EML)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.