Sypris Incurs Loss in Q2 Due to Tariffs, Secures Major Defense Contracts

Shares of Sypris Solutions, Inc. SYPR have declined 3.5% since the company reported its earnings for the quarter ended June 29, 2025. This compares to the S&P 500 index’s 1.2% change over the same time frame. Over the past month, the stock has declined 5.6% compared with the S&P 500’s 2.5% growth. The stock’s performance reflects a period of investor caution following a quarterly update that revealed notable headwinds in both the company’s electronics and transportation-related businesses.Sypris swung to a net loss per share of 9 cents in the second quarter of 2025 compared with breakeven results in the same quarter last year.  The company reported revenues of $31.4 million for the second quarter of 2025, down 11.5% from $35.5 million in the prior-year quarter. The company also swung to a net loss of $2.1 million, compared with essentially breakeven results in the same quarter last year. The declines were primarily tied to reduced demand stemming from tariff impacts, an unfavorable product mix and supply chain constraints.Sypris Solutions, Inc. Price, Consensus and EPS Surprise Sypris Solutions, Inc. price-consensus-eps-surprise-chart | Sypris Solutions, Inc. QuoteOther Key Business MetricsSegment-level results showed divergent performance. Revenue from Sypris Technologies dropped to $14.1 million from $17.8 million a year earlier, reflecting cyclical weakness in the commercial vehicle market and tariff-related shipment conversions. Gross profit for the unit was $2.1 million, down from $2.7 million. Meanwhile, Sypris Electronics generated $17.3 million in revenues, a slight decline from $17.7 million in the prior year, but gross profit fell sharply to $0.4 million from $2.9 million due to material availability issues and inefficiencies. Despite these near-term setbacks, order momentum was robust: electronics orders more than doubled to $47 million, boosting backlog by 26% since year-end 2024.Management CommentaryChief executive officer Jeffrey T. Gill acknowledged the challenges from tariffs and supply chain disruptions but emphasized operational excellence and program diversification as key priorities. He highlighted that secured customer funding on multi-year contracts allows Sypris to lock in inventory procurement, helping to mitigate future supply risks. Gill also noted that while Sypris Technologies faces production declines in several vehicle markets, diversification into automotive, sport-utility and off-highway programs is expected to soften the downturn. In the energy business, steady orders and opportunities linked to rising LNG demand and data center electricity needs tied to artificial intelligence were cited as areas of growth potential.Factors Influencing ResultsThe earnings shortfall was influenced by three primary factors: tariffs, which reduced transportation-related demand; production inefficiencies tied to component shortages in Sypris Electronics; and an unfavorable product mix across both business lines. Additionally, a shift to a sub-maquiladora services agreement in Mexico lowered reported revenue, though without a proportional impact on profitability. These elements combined to compress gross margins significantly, particularly within electronics operations.GuidanceManagement expressed confidence in the company’s prospects. With new program wins, long-term contracts, and a strengthened backlog, Sypris anticipates offsetting some of the expected cyclical declines in commercial vehicle demand. However, the company also cautioned that modest revenue decreases are likely due to both the sub-maquiladora arrangement in Mexico and ongoing softness in vehicle-related markets. Overall, the tone of management’s outlook suggested a near-term focus on navigating headwinds while preparing for medium-term growth fueled by defense, energy and communications contracts.Other DevelopmentsDuring the quarter, Sypris announced several significant contract awards. Sypris Electronics secured a follow-on award from a U.S. Department of Defense prime contractor for secure communications infrastructure, with deliveries beginning in 2026. The unit also received additional orders under a multi-year Navy electronic warfare program, also slated for 2026 delivery. Sypris Technologies entered a long-term agreement to supply drivetrain components for a new electrified truck by a leading global manufacturer, with production also starting in 2026. Post-quarter, the electronics segment announced further contracts to supply power modules for subsea communication networks, ensuring a steady production pipeline through 2026.Free Report: Profiting from the 2nd Wave of AI ExplosionThe next phase of the AI explosion is poised to create significant wealth for investors, especially those who get in early. It will add literally trillion of dollars to the economy and revolutionize nearly every part of our lives.Investors who bought shares like Nvidia at the right time have had a shot at huge gains.But the rocket ride in the "first wave" of AI stocks may soon come to an end. The sharp upward trajectory of these stocks will begin to level off, leaving exponential growth to a new wave of cutting-edge companies.Zacks' AI Boom 2.0: The Second Wave report reveals 4 under-the-radar companies that may soon be shining stars of AI’s next leap forward.Access AI Boom 2.0 now, absolutely free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Sypris Solutions, Inc. (SYPR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks