FEIM's Q4 Earnings Rise Y/Y on Satellite Growth, Stock Down 10%

Shares of Frequency Electronics, Inc. FEIM have declined 10.4% since the company reported earnings for the quarter ended April 30, 2025. This compares to a modest 0.5% gain in the S&P 500 index during the same period. Over the past month, FEIM stock has declined 6.6%, underperforming the S&P 500’s 5.4% increase, reflecting investor caution despite record quarterly financial results.For the fourth quarter of fiscal 2025, Frequency Electronics posted net income of 34 cents per share, compared to 28 cents per share in the prior-year period. (See the Zacks Earnings Calendar to stay ahead of market-making news.)The company’s revenues of $20 million marked a 28.3% increase over the $15.6 million recorded in the same quarter a year earlier. Net income for the quarter rose to $3.3 million compared to $2.6 million in the prior-year period. Operating income followed a similar trajectory, with the fourth quarter contributing $3.3 million, up from $2.5 million a year earlier.Frequency Electronics, Inc. Price, Consensus and EPS Surprise Frequency Electronics, Inc. price-consensus-eps-surprise-chart | Frequency Electronics, Inc. QuoteBusiness Mix and Key MetricsSatellite payloads were a major growth driver, generating $12.1 million in fourth-quarter revenues — 60% of total revenues — up from $6.9 million or 44% in the prior-year quarter. In contrast, non-space U.S. Government/DoD revenues declined to $7 million in the fourth quarter from $7.9 million in the prior-year quarter. Commercial and industrial sales remained a small contributor.Backlog stood at $70 million at fiscal year-end, compared to $78 million a year earlier, while net cash used in operations was $1.4 million, reversing from $8.7 million in cash provided in the previous year. The cash decline partly reflects a $9.6 million dividend paid during the year.Management CommentaryCEO Thomas McClelland called the fourth quarter the company’s highest-revenue quarter in 25 years. He credited the performance to strong execution that accelerated the recognition of revenues from contracts originally expected to extend into future years. However, he cautioned against expecting similar quarterly results in the near term, emphasizing that while long-term trends remain positive, short-term variability is likely due to changing contract award timings and evolving government procurement processes.CFO Steven Bernstein echoed these sentiments, pointing to a $13.9 million release of deferred tax valuation allowances that contributed to the full-year earnings surge. Management reaffirmed its commitment to disciplined cost controls and highlighted the importance of maintaining technical excellence through increased R&D investments, which rose from $3.4 million to $6.1 million year over year.Factors Behind the Strong PerformanceThe year’s success was largely due to performance on space programs, including higher-margin traditional satellite contracts and efficient execution. Additionally, the company benefited from external funding to supplement its internal investments in R&D. These factors combined to support elevated gross margins, which were 43% for the year, although they dipped to 37% in the fourth quarter due to project mix and timing.Fiscal 2025 UpdateRevenue reached $69.8 million, up 26.3% from $55.3 million in fiscal 2024. For the full year, net income surged to $23.8 million or $2.48 per share, a substantial increase from $5.6 million or 59 cents per share in fiscal 2024.Operating income more than doubled to $11.7 million from $5 million. Satellite payloads contributed $40.9 million or 59% of revenue, compared to $23.2 million or 42% in fiscal 2024. In contrast, non-space U.S. Government/DoD revenues came in at $26.5 million for the year, down from $29 million in fiscal 2024.Strategic Positioning and Forward OutlookFEI is actively targeting emerging opportunities in quantum sensing and alternative navigation technologies. Its compact rubidium atomic clock, branded as TURBO, is expected to launch in the current fiscal year. Bernstein projected that the company’s effective tax rate would remain in the single digits for fiscal 2026. Other DevelopmentsDuring the quarter, Frequency Electronics continued its involvement in the GPS IIIF program, confirming product deliveries under active contracts. The company also reaffirmed its plans to host the Second Annual Quantum Sensing Summit in New York City on Oct. 29-30, 2025, underlining its commitment to advancing its presence in the quantum technology domain.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the favorite stock to gain +100% or more in the months ahead. 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