Methode Electronics (NYSE:MEI) Misses Q2 CY2026 Expectations as Stock Drops 22.3%

Custom-engineered solutions manufacturer Methode Electronics (NYSE:MEI) beat Wall Street’s revenue expectations in Q2 CY2026, with sales up 10.4% year on year to $265.4 million. The company expects the full year’s revenue to be around $1.05 billion, close to analysts’ estimates. Its non-GAAP loss of $0.22 per share was 10% below analysts’ consensus estimates.

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President and Chief Executive Officer Jon DeGaynor said, "We delivered a strong start to fiscal 2027, with net sales up 10%, driven primarily by higher volumes across our industrial portfolio, led by data centers. However, one-time costs, including the impact of last year’s dataMate divestiture and our investments in talent and capabilities, more than offset the higher sales and operational improvements. Absent the impact of the divestiture, Adjusted EBITDA would have increased year-over-year."

Company Overview

Founded in 1946, Methode Electronics (NYSE:MEI) is a global supplier of custom-engineered solutions for Original Equipment Manufacturers (OEMs).

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Methode Electronics’s demand was weak and its revenue declined by 2.5% per year. This wasn’t a great result and suggests it’s a low quality business.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Methode Electronics’s annualized revenue declines of 1.8% over the last two years align with its five-year trend, suggesting its demand has consistently shrunk.

This quarter, Methode Electronics reported year-on-year revenue growth of 10.4%, and its $265.4 million of revenue exceeded Wall Street’s estimates by 11.4%.

Looking ahead, sell-side analysts expect revenue to grow 1.4% over the next 12 months. While this projection indicates its newer products and services will spur better top-line performance, it is still below average for the sector.

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Operating Margin

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Methode Electronics was profitable over the last five years but held back by its large cost base. Its average operating margin of 3.1% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Looking at the trend in its profitability, Methode Electronics’s operating margin decreased by 8.2 percentage points over the last five years. Methode Electronics’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.

In Q2, Methode Electronics generated an operating margin profit margin of negative 1.5%, down 2.3 percentage points year on year. Since Methode Electronics’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

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.

Sadly for Methode Electronics, its EPS declined by 18.3% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.

We can take a deeper look into Methode Electronics’s earnings to better understand the drivers of its performance. As we mentioned earlier, Methode Electronics’s operating margin declined by 8.2 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Methode Electronics, its two-year annual EPS declines of 15.5% show it’s still underperforming. These results were bad no matter how you slice the data.

In Q2, Methode Electronics reported adjusted EPS of negative $0.22, in line with the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Methode Electronics to improve its earnings losses. Analysts forecast its full-year EPS will improve from negative $1.08 to negative $0.26.

Key Takeaways from Methode Electronics’s Q2 Results

We were impressed by how significantly Methode Electronics blew past analysts’ revenue expectations this quarter. On the other hand, its EPS missed and its EBITDA fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 22.3% to $14.10 immediately after reporting.

Methode Electronics’s latest earnings report disappointed. One quarter doesn’t define a company’s quality, so let’s explore whether the stock is a buy at the current price. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here (it’s free).