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1. Company Snapshot

1.a. Company Description

The Eastern Company designs, manufactures, and sells engineered solutions to industrial markets in the United States and internationally.It offers turnkey returnable packaging solutions that are used in the assembly process of vehicles, aircraft, and durable goods, as well as in the production process of plastic packaging products, packaged consumer goods, and pharmaceuticals; designs and manufactures blow mold tools and injection blow mold tooling products, and 2-step stretch blow molds and related components; and supplies blow molds and change parts to the food, beverage, healthcare, and chemical industry.It also offers rotary latches, compression latches, draw latches, hinges, camlocks, key switches, padlocks, and handles, as well as development and program management services for custom electromechanical and mechanical systems; designs and manufactures proprietary vision technology for original equipment manufacturers (OEMs) and aftermarket applications; and provides aftermarket components to the heavy-duty truck market.


The Eastern Company was founded in 1858 and is based in Naugatuck, Connecticut.

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1.b. Last Insights on EML

The recent stock performance of The Eastern Company has been negatively driven by the company's lack of significant earnings growth and increasing competition in its industrial manufacturing segment. The company's most recent earnings release was delayed, with financial results for the fourth quarter and fiscal year 2024 to be released after the market close on March 11, 2025, followed by a conference call on March 12, 2025. This delay may have contributed to investor uncertainty and market volatility. Additionally, the company's dividend growth has slowed, with the 338th consecutive quarterly dividend declared at $0.11 per share, a decrease from previous years. The company's focus on cost reduction and efficiency improvements is a positive step, but more significant actions are needed to drive growth and increase shareholder value.

1.c. Company Highlights

2. Eastern Company's Q3 FY2025: Navigating Challenging Market Conditions

The Eastern Company's third-quarter fiscal year 2025 financial performance was marked by a significant decline in revenue from continuing operations, which fell 22% to $55.3 million. EBITDA was $3.5 million, resulting in earnings per share of $0.10, a substantial drop from $0.75 in the prior year. The company's gross margin was 22.3% for the third quarter, down from 25.5% in the prior year, due to increased raw material costs and reduced volumes. The actual EPS came out at $0.13, significantly lower than the estimated $0.77.

Publication Date: Nov -29

📋 Highlights
  • Revenue Decline:: Revenue from continuing operations fell 22% to $55.3 million, with EBITDA at $3.5 million.
  • OE Truck Production Drop:: OE truck production declined 36% in Q3, heavily impacting returnable packaging sales.
  • Cost and Debt Reduction:: SG&A expenses cut by $1.1 million, $1.8 million in savings from selling a unit, and $7 million in debt reduction.
  • Share Repurchases and Credit Facility:: Repurchased 118,000 shares (2% of outstanding) and secured a $100 million revolving credit facility.
  • Margin and Leverage Pressure:: Gross margin dropped to 22.3% (from 25.5%) and net income fell to $0.10/share (from $0.75/share), with a leverage ratio of 1.64x.

Operational Challenges and Market Conditions

The decline in revenue was primarily attributed to a pullback in the Class 8 truck and automotive markets, with OE truck production down 36% in the quarter. The company's returnable packaging business was heavily influenced by the North American automotive market, and the reduction in new vehicle model launches impacted sales. Despite these challenges, the company has taken proactive steps to optimize its workforce and align resources with current market conditions.

Cost Optimization and Strategic Initiatives

The company reduced SG&A expenses by $1.1 million and sold an underperforming business unit, resulting in savings of $1.8 million. Additionally, the company repurchased approximately 118,000 shares, representing almost 2% of outstanding shares, and reduced debt by $7 million. A new $100 million revolving credit facility with Citizens Bank provides additional flexibility for investments and potential M&A opportunities.

Outlook and Valuation

Looking ahead, the company expects a soft first half of 2026, with some incremental improvements towards the end of the year. Analysts estimate next year's revenue growth at 7.0%. With a P/E Ratio of 16.28 and an EV/EBITDA of 855175.88, the market seems to be pricing in a significant recovery. The company's senior net leverage ratio was 1.64 at the end of Q3 2025, indicating a relatively stable debt position. The Dividend Yield is 2.26%, providing some support to the stock.

ROIC and Debt Metrics

The company's ROIC is 0.88%, a relatively low figure, while the Net Debt / EBITDA ratio is 855169.14, indicating a high level of debt relative to EBITDA. These metrics suggest that the company still has work to do in terms of optimizing its capital structure and improving its return on invested capital.

3. NewsRoom

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FuelCell Energy Announces Fourth Quarter and Fiscal Year 2025 Results Conference Call on December 18, 2025 at 10:00 A.M. Eastern Time

Dec -04

Source: globenewswire.com

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Eastern Bank Announces The Sourcing Group As A Commercial Banking Customer

Dec -03

Source: businesswire.com

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Blackrock Silver Announces Final Assays from Eastern Expansion Drill Program at Tonopah West

Dec -02

Source: newsfilecorp.com

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Snail, Inc. to Present at NobleCon21 on December 3, 2025 at 2:00 p.m. Eastern Time

Nov -26

Source: newsfilecorp.com

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BioNTech Shares Progress on Exchange Offer for CureVac Shares and Highlights December 3, 2025, at 9:00 a.m. Eastern Time Expiration

Nov -26

Source: globenewswire.com

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Mama's Creations to Host Third Quarter Fiscal 2026 Earnings Call on December 8 at 4:30 p.m. Eastern Time

Nov -24

Source: globenewswire.com

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Alpha Modus Files Patent Infringement Lawsuit Against Inditex and Zara in the Eastern District of Texas

Nov -19

Source:

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Data Storage Corporation Reschedules 2025 Third Quarter Business Update Conference Call for November 19th at 10:00 AM Eastern Time

Nov -18

Source: globenewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.50%)

6. Segments

Engineered Solutions

Expected Growth: 4.5%

Growing demand for customized industrial solutions, increasing adoption of innovative technologies, and rising need for efficient solutions to complex commercial challenges drive the growth of Engineered Solutions segment.

7. Detailed Products

Industrial Hardware

The Eastern Company's Industrial Hardware segment manufactures and distributes a range of industrial hardware products, including hinges, latches, and other hardware components for industrial and commercial applications.

Security Products

The Security Products segment offers a range of security-related products, including locks, latches, and other security hardware for the detention and correctional industries.

Metal Products

The Metal Products segment manufactures and distributes a range of metal products, including castings, forgings, and machined parts for various industries.

Plastic Products

The Plastic Products segment offers a range of plastic products, including injection-molded parts and assemblies for various industries.

8. The Eastern Company's Porter Forces

Forces Ranking

Threat Of Substitutes

The Eastern Company faces moderate threat from substitutes due to the availability of alternative products in the market.

Bargaining Power Of Customers

The Eastern Company's customers have high bargaining power due to their ability to switch to alternative products and services.

Bargaining Power Of Suppliers

The Eastern Company has a diverse supplier base, which reduces the bargaining power of individual suppliers.

Threat Of New Entrants

The Eastern Company faces moderate threat from new entrants due to the presence of barriers to entry, such as high capital requirements and regulatory hurdles.

Intensity Of Rivalry

The Eastern Company operates in a highly competitive industry, with intense rivalry among existing players.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 31.91%
Debt Cost 7.23%
Equity Weight 68.09%
Equity Cost 9.72%
WACC 8.93%
Leverage 46.86%

11. Quality Control: The Eastern Company passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Ennis

A-Score: 6.7/10

Value: 7.2

Growth: 4.1

Quality: 7.2

Yield: 10.0

Momentum: 2.5

Volatility: 9.0

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REV Group

A-Score: 5.8/10

Value: 4.1

Growth: 6.2

Quality: 6.3

Yield: 4.0

Momentum: 10.0

Volatility: 4.0

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Kennametal

A-Score: 5.0/10

Value: 6.3

Growth: 4.2

Quality: 4.9

Yield: 6.0

Momentum: 2.5

Volatility: 6.0

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Eastern

A-Score: 4.9/10

Value: 8.4

Growth: 5.4

Quality: 4.8

Yield: 4.0

Momentum: 1.5

Volatility: 5.0

1-Year Total Return ->

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Starrett

A-Score: 4.7/10

Value: 8.4

Growth: 6.9

Quality: 6.8

Yield: 0.0

Momentum: 5.0

Volatility: 1.3

1-Year Total Return ->

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Hillman Solutions

A-Score: 3.5/10

Value: 3.4

Growth: 5.4

Quality: 3.9

Yield: 0.0

Momentum: 3.5

Volatility: 5.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

18.91$

Current Price

18.91$

Potential

-0.00%

Expected Cash-Flows