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1. Company Snapshot

1.a. Company Description

Methode Electronics, Inc.designs, engineers, and produces mechatronic products worldwide.It operates through four segments: Automotive, Industrial, Interface, and Medical.


The Automotive segment supplies electronic and electro-mechanical devices, and related products to automobile original equipment manufacturers directly or through their tiered suppliers.Its products include integrated center consoles, hidden switches, ergonomic switches, transmission lead-frames, and LED-based lighting and sensors, which incorporate magneto-elastic sensing and other technologies that monitor the operation or status of a component or system.The Industrial segment manufactures lighting solutions; industrial safety radio remote controls; braided flexible cables; current-carrying laminated busbars and devices; custom power-product assemblies, such as PowerRail solution; high-current low-voltage flexible power cabling systems; and powder-coated busbars that are used in various markets and applications comprising aerospace, cloud computing, commercial vehicles, industrial, military, power conversion, and transportation.


The Interface segment provides various copper-based transceivers and related accessories for the cloud computing hardware equipment and telecommunications broadband equipment markets; user interface solutions for the appliance, commercial food service, and point-of-sale equipment markets; and fluid-level sensors for the marine/recreational vehicle and sump pump markets.The Medical segment offers Dabir Surfaces, a surface support technology aimed at pressure injury prevention for use by patients who are immobilized or otherwise at risk for pressure injuries, including patients undergoing long-duration surgical procedures.Methode Electronics, Inc.


was incorporated in 1946 and is headquartered in Chicago, Illinois.

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1.b. Last Insights on MEI

Methode Electronics' recent performance was driven by the company's strategic review and evaluation of potential alternatives, including out-licensing opportunities and merger and acquisition possibilities. The company's consideration of these options suggests a proactive approach to maximizing the value of its assets for shareholders. Additionally, the announcement of the fourth quarter and full year fiscal 2025 results on July 9, 2025, indicates a forthcoming update on the company's financial performance, which may provide further insights into its current situation.

1.c. Company Highlights

2. Methode Electronics' Q2 FY2026 Earnings: A Mixed Bag

Methode Electronics reported its fiscal 2026 second-quarter financial results, with net sales of $247 million, up 3% sequentially, and adjusted EBITDA of $18 million, a 12% sequential increase. The company's actual EPS came out at -$0.19, missing estimates of -$0.14. The sequential increase in sales and adjusted EBITDA indicates a positive trend, but the miss on EPS is a concern. The company's Power Solutions business, which accounts for a significant portion of Methode's revenue, is expected to be flat for the full year.

Publication Date: Dec -07

📋 Highlights
  • Sequential Financial Growth: Net sales rose 3% to $247M, adjusted EBITDA up 12% to $18M.
  • Reaffirmed Guidance: Full-year sales: $900M–$1B; adjusted EBITDA: $70M–$80M; net debt down $29.6M YoY.
  • Operational Efficiency: EBITDA midpoint improvement of $32M YoY despite $100M sales decline via cost reductions (1,000 workforce cuts in Mexico/Egypt).
  • Free Cash Flow Turnaround: Full-year positive FCF anticipated vs. $15M outflow last year; Egypt gross margins nearly doubled.
  • EV Sales Composition: EV/hybrid sales: $217M in H1 (41% of total); North America EV sales at $11.5M, impacted by regional headwinds.

Operational Highlights

The company's improvement efforts are on track, with significant progress in its Egypt and Mexico facilities, where gross margins in Egypt have nearly doubled. The company expects the second half of fiscal 2026 to be stronger than the first half, driven by sequential improvements in its largest facilities and cost reductions. Free cash flow is expected to be positive for the full year, compared to an outflow of $15 million in the previous fiscal year.

Guidance and Outlook

Methode reaffirmed its full-year sales guidance of $900 million to $1 billion and adjusted EBITDA of $70 million to $80 million. The company expects to see year-over-year improvement in EBITDA, adding $32 million at midpoint guidance, despite $100 million less in sales. This improvement comes from getting cost out of the plants, including 1,000 people removed from the two big facilities in Mexico and Egypt.

Valuation Metrics

With a P/E Ratio of -3.95, P/B Ratio of 0.37, and EV/EBITDA of 33.36, the market is pricing in significant challenges for the company. The negative ROE of -9.1% and ROIC of -5.37% also indicate that the company is struggling to generate returns. However, the Dividend Yield of 5.72% and Free Cash Flow Yield of 34.36% could be attractive for income investors.

Segment Performance

The company's sales to EV and hybrid applications were $217 million in the first half, with EVs making up 41% of that. In North America, EV sales were $11.5 million. The company expects commercial vehicle volumes to come back in 2027, which will help drive revenue. Analysts estimate next year's revenue growth at -6.9%, indicating a challenging environment.

Cash Flow and Taxation

The company experienced a cash outflow in receivables in the quarter, $14 million, due to sales increase in the quarter compared to last quarter. The company expects cash taxes to be lower, with a tax expense range of $17 million to $21 million, including a $10 million to $15 million valuation allowance on deferred tax assets.

3. NewsRoom

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Methode Electronics: Transformation Not Proven Yet

Dec -05

Source: seekingalpha.com

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Why Methode Electronics Stock Plunged Today

Dec -04

Source: fool.com

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Methode Electronics, Inc. (MEI) Q2 2026 Earnings Call Transcript

Dec -04

Source: seekingalpha.com

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Methode Electronics, Inc. Reports Fiscal 2026 Second Quarter Financial Results

Dec -03

Source: globenewswire.com

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Methode Electronics Announces Second Quarter Fiscal 2026 Results Conference Call

Nov -26

Source: globenewswire.com

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Bailard Inc. Makes New $488,000 Investment in Methode Electronics, Inc. $MEI

Nov -15

Source: defenseworld.net

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Methode Electronics to Present at the Baird 2025 Global Industrial Conference

Nov -06

Source: globenewswire.com

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Notice to All Long Term Shareholders of Methode Electronics, Inc: Johnson Fistel Continues Investigation On Behalf of Your Claims

Nov -06

Source: newsfilecorp.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (8.24%)

6. Segments

Automotive

Expected Growth: 8.3%

Methode Electronics' 8.3% growth in Automotive segment is driven by increasing demand for electric vehicles, autonomous driving, and advanced safety features. OEMs' focus on electrification, connectivity, and autonomous technologies is fueling growth. Additionally, Methode's innovative solutions in areas like battery management, power distribution, and sensor integration are well-positioned to capitalize on these trends.

Industrial

Expected Growth: 8.28%

Methode Electronics' Industrial segment growth of 8.28% is driven by increasing demand for electric vehicles, rising adoption of Industry 4.0 technologies, and growing need for energy storage solutions. Additionally, the company's diversified customer base, innovative product offerings, and strategic acquisitions have contributed to its growth momentum.

Interface

Expected Growth: 8.5%

Methode Electronics' Interface segment growth of 8.5% is driven by increasing demand for electric vehicles, rising adoption of advanced driver-assistance systems (ADAS), and growing need for high-speed connectivity solutions in the automotive and industrial markets.

Eliminations/Corporate

Expected Growth: 4.83%

Methode Electronics' Eliminations/Corporate segment growth of 4.83% is driven by strategic cost savings initiatives, operational efficiencies, and effective working capital management. Additionally, the company's focus on optimizing its global footprint and streamlining operations has contributed to the segment's growth.

Medical

Expected Growth: 8.5%

Methode Electronics' Medical segment growth of 8.5% is driven by increasing demand for medical devices, expansion into emerging markets, and strategic partnerships. Additionally, the company's focus on innovative product development, such as wireless patient monitoring systems and portable defibrillators, is contributing to its growth.

7. Detailed Products

Busbars

Customizable, high-power busbars for electrical power distribution and circuit protection in various industries

Cable Assemblies

Custom-designed cable assemblies for various industries, including automotive, aerospace, and industrial

Fuses

High-reliability fuses for overcurrent protection in various industries, including automotive, aerospace, and industrial

Magnetic Products

Custom-designed magnetic products, including inductors, transformers, and chokes, for various industries

Power Distribution Modules

Customizable power distribution modules for electrical power distribution and circuit protection in various industries

Radio Frequency (RF) Components

Custom-designed RF components, including antennas, filters, and switches, for various industries

Sensor Products

Custom-designed sensor products, including temperature, pressure, and position sensors, for various industries

8. Methode Electronics, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Methode Electronics, Inc. faces moderate threat from substitutes due to the presence of alternative technologies and products in the market.

Bargaining Power Of Customers

Customers have limited bargaining power due to the specialized nature of Methode Electronics, Inc.'s products and services.

Bargaining Power Of Suppliers

Suppliers have moderate bargaining power due to the presence of multiple suppliers in the market, but Methode Electronics, Inc.'s large scale of operations gives it some negotiating power.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the industry, including significant capital requirements and regulatory hurdles.

Intensity Of Rivalry

The industry is highly competitive, with multiple players competing for market share, leading to a high intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 26.26%
Debt Cost 3.95%
Equity Weight 73.74%
Equity Cost 8.10%
WACC 7.01%
Leverage 35.61%

11. Quality Control: Methode Electronics, Inc. passed 3 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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M-tron

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Growth: 9.0

Quality: 7.8

Yield: 0.0

Momentum: 6.0

Volatility: 2.7

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Ouster

A-Score: 4.5/10

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Volatility: 0.7

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Value: 2.7

Growth: 4.0

Quality: 4.3

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Quality: 4.8

Yield: 4.0

Momentum: 1.5

Volatility: 4.0

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Methode Electronics

A-Score: 3.6/10

Value: 7.5

Growth: 1.6

Quality: 2.7

Yield: 7.0

Momentum: 1.0

Volatility: 2.0

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A-Score: 2.9/10

Value: 6.0

Growth: 4.6

Quality: 3.8

Yield: 0.0

Momentum: 1.0

Volatility: 2.0

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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

6.99$

Current Price

6.99$

Potential

-0.00%

Expected Cash-Flows