Twin Disc Stock Soars 44% Despite Q2 Earnings Fall Y/Y on Higher Costs

Shares of Twin Disc, Incorporated TWIN have surged 44.3% since the company reported earnings for the quarter ended June 30, 2025. This compares with a modest 0.8% gain for the S&P 500 index over the same period. Over the past month alone, Twin Disc shares climbed 41.1% versus the broader index’s 1.1% growth, reflecting significant investor enthusiasm around the company’s results and outlook.Twin Disc delivered fourth-quarter fiscal 2025 net income of 10 cents per share, down from 53 cents per share in the prior-year quarter. Sales rose 14.5% year over year to $96.7 million. Despite these gains, profitability weakened compared with a year ago. Net income attributable to TWIN for the quarter fell sharply to $1.4 million from $7.4 million in the prior-year quarter. EBITDA also declined, down 40.4% to $7 million in the quarter, as higher expenses, currency translation losses, and stock-based compensation offset revenue gains.Twin Disc, Incorporated Price, Consensus and EPS Surprise Twin Disc, Incorporated price-consensus-eps-surprise-chart | Twin Disc, Incorporated QuoteFiscal 2025 UpdateThe company swung to a net loss attributable to TWIN of $1.9 million, or a loss of 14 cents per share, compared with earnings of nearly $11 million or 79 cents per share a year earlier.For the fiscal year, revenue advanced 15.5% to $340.7 million. Gross margin contracted about 100 basis points to 27.2%, showing persistent cost pressures.EBITDA also declined 28.3% year over year to $19 million for the year.Other Key Business MetricsGross profit for the quarter rose 19.7% to $30 million, with margins expanding by 130 basis points to 31%. The improvement was supported by a favorable mix of marine and propulsion sales and inventory adjustments. Segment performance was mixed. Marine and Propulsion Systems led growth, with quarterly sales rising 12.2% year-over-year to $53 million, aided by robust government contracts and aftermarket strength. Land-Based Transmissions increased 4.5% to $26.1 million, while Industrial sales surged 82% to $13.1 million, boosted by contributions from acquisitions Katsa and Kobelt. Without these acquisitions, industrial sales were up a more modest 13.1%.Twin Disc also reported a strong six-month backlog of $150.5 million, up from $133.7 million in the prior quarter, reflecting healthy ongoing demand across marine and industrial markets. Operating cash flow for the year totaled $24 million, though free cash flow fell to $8.8 million, reflecting higher capital expenditures.Management CommentaryCEO John H. Batten characterized the quarter as the company’s strongest of the year, citing resilience across marine and propulsion markets, steady industrial recovery, and progress in electrification initiatives such as e-frac systems. He emphasized disciplined pricing and margin protection despite cost pressures and tariffs. Batten also highlighted the role of recent acquisitions in expanding the company’s footprint and diversifying end markets.CFO Jeffrey S. Knutson pointed to strong integration progress and a healthy balance sheet as enablers of future growth. He noted that inventory was well aligned with demand, and cash reserves provided flexibility for investment. While total debt increased to $31.4 million from $25.8 million last year due to acquisitions, cash stood at $16.1 million, leaving the company with net debt of $15.3 million.Factors Influencing Headline NumbersThe decline in net income and EBITDA despite revenue growth was attributed to multiple headwinds. Foreign currency translation losses and stock-based compensation weighed heavily, while marketing, engineering and administrative expenses climbed more than 20% year over year in the quarter, largely due to acquisitions and higher wage and benefit costs.Additionally, oil and gas demand in China remained challenged by tariff uncertainties, pressuring organic growth, which declined 8.4% in the quarter.GuidanceManagement reaffirmed long-term targets through fiscal 2030, which include reaching $500 million in revenue, achieving gross margins of 30%, and converting more than 60% of operating cash flow into free cash flow.Management also reiterated its focus on leveraging defense demand tailwinds, expanding hybrid and electric system capabilities, and optimizing global operations.Other DevelopmentsStrategic acquisitions remained central to Twin Disc’s growth story. The integration of Katsa and Kobelt contributed significantly to industrial sales and broadened the company’s product and geographic reach. These acquisitions were part of the company’s efforts to diversify beyond oil and gas and strengthen its position in hybrid and marine technologies. The balance sheet data indicated the associated increase in long-term debt, reflecting the financing of these deals.Beyond Nvidia: AI's Second Wave Is HereThe AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. Little-known AI firms tackling the world's biggest problems may be more lucrative in the coming months and years.See "2nd Wave" AI stocks now >>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 Twin Disc, Incorporated (TWIN): 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