Industrial components supplier NN (NASDAQ:NNBR) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 12.8% year on year to $105.7 million. The company’s full-year revenue guidance of $445 million at the midpoint came in 2% below analysts’ estimates. Its GAAP loss of $0.23 per share was 15% below analysts’ consensus estimates.
Revenue: $105.7 million vs analyst estimates of $109.7 million (12.8% year-on-year decline, 3.7% miss)
EPS (GAAP): -$0.23 vs analyst expectations of -$0.20 (15% miss)
Adjusted EBITDA: $10.58 million vs analyst estimates of $11.73 million (10% margin, 9.8% miss)
The company dropped its revenue guidance for the full year to $445 million at the midpoint from $465 million, a 4.3% decrease
EBITDA guidance for the full year is $58 million at the midpoint, above analyst estimates of $53.16 million
Operating Margin: -4.5%, in line with the same quarter last year
Free Cash Flow was -$7.25 million compared to -$4.75 million in the same quarter last year
Market Capitalization: $94 million
“NN marked another quarter of solid steps forward across key areas of our transformation, and our results for the quarter have kept us on track with our full-year outlook and five-year plan. Our strategic and transformation-led progress was highlighted by growth and new wins in targeted markets, including stamped, medical, and electrical products, as well as high-value automotive” said Harold Bevis, President and Chief Executive Officer of NN.
Company Overview
Formerly known as Nuturn, NN (NASDAQ:NNBR) provides metal components, bearings, and plastic and rubber components to the automotive, aerospace, medical, and industrial sectors.
Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. NN struggled to consistently generate demand over the last five years as its sales dropped at a 1.3% annual rate. This wasn’t a great result and suggests it’s a low quality business.
NN Quarterly Revenue
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. NN’s recent performance shows its demand remained suppressed as its revenue has declined by 5% annually over the last two years.
NN Year-On-Year Revenue Growth
This quarter, NN missed Wall Street’s estimates and reported a rather uninspiring 12.8% year-on-year revenue decline, generating $105.7 million of revenue.
Looking ahead, sell-side analysts expect revenue to grow 2.2% over the next 12 months. Although this projection indicates its newer products and services will catalyze better top-line performance, it is still below average for the sector.
NN’s high expenses have contributed to an average operating margin of negative 3.8% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.
Looking at the trend in its profitability, NN’s operating margin decreased by 3 percentage points over the last five years. NN’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.
NN Trailing 12-Month Operating Margin (GAAP)
In Q1, NN generated a negative 4.5% operating margin. The company's consistent lack of profits raise a flag.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Although NN’s full-year earnings are still negative, it reduced its losses and improved its EPS by 31.6% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability.
NN Trailing 12-Month EPS (GAAP)
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For NN, EPS didn’t budge over the last two years, a regression from its five-year trend. We hope it can revert to earnings growth in the coming years.
In Q1, NN reported EPS at negative $0.23, up from negative $0.34 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street expects NN to improve its earnings losses. Analysts forecast its full-year EPS of negative $0.99 will advance to negative $0.65.
Key Takeaways from NN’s Q1 Results
We were impressed by NN’s optimistic full-year EBITDA guidance, which blew past analysts’ expectations. On the other hand, its revenue, EPS, and EBITDA missed, and it lowered its full-year revenue guidance. Overall, this was a weaker quarter. The stock traded down 11.5% to $1.62 immediately after reporting.
