Standex Posts Record Margins, Outlines Expansion Plans Amid Tariff Headwinds
NEW YORK – Standex International Corporation (NYSE: SXI) demonstrated robust operational resilience in its fiscal third quarter, posting record adjusted margins even as organic sales faced pressure. The diversified industrial manufacturer's results, released Friday, were buoyed by its recent acquisitions and a strategic pivot towards high-growth end markets like electrical infrastructure, commercial space, and defense.
CEO David Dunbar highlighted a "second consecutive quarter" of record adjusted operating margin, which climbed to 19.4%. This performance, he noted, was achieved despite an 8.1% organic revenue decline, underscoring the success of price and productivity initiatives. "Our teams have demonstrated their ability to navigate difficult market conditions," Dunbar stated during the earnings call.
A key growth driver has been the Amran/Narayan Group, acquired last year, which exceeded expectations with sales over $33 million and a healthy book-to-bill ratio of 1.04. The company is now accelerating expansion plans for this unit, including a new greenfield site in Europe requested by major OEMs, expected to be operational within six months. Additionally, the recent $56.5 million acquisition of aerospace component maker McStarlite is seen as a strategic "bolt-on" that expands Standex's addressable market in engineering technologies by over $300 million.
CFO Ademir Sarcevic provided the financial details: consolidated revenue rose 17.2% year-over-year to $207.8 million, heavily fueled by acquisitions. While free cash flow dipped to $3.5 million due to one-time costs and longer customer payment terms from new acquisitions, the company maintains strong liquidity of approximately $170 million.
The looming shadow of new global tariffs was a recurring theme. Management, however, sought to assuage investor concerns, emphasizing a "in-region, for-region" business model that limits exposure. Only about 6% of the cost of goods sold for U.S. operations comes from Chinese imports. "The overall impact at a corporate level is de minimis," Dunbar concluded, though he acknowledged the Scientific segment faces a steeper challenge in offsetting tariff costs.
Looking ahead, Standex provided a cautiously optimistic outlook for Q4, expecting "slightly to moderately higher" revenue and margins. The company remains on track toward its long-term fiscal 2028 targets, including sales exceeding $1.15 billion. Leadership expressed confidence in returning to organic growth in fiscal 2026, particularly within its core Electronics segment, which is seeing a 10% year-over-year increase in organic bookings.
Market Voices: Analysts and Observers Weigh In
Eleanor Vance, Portfolio Manager at Broadhaven Capital: "Standex is executing a textbook portfolio transformation. The margin expansion despite top-line headwinds is impressive. Their acquisitions aren't just for scale; they're buying technological capability and entry into tightly held aerospace and electrical OEM networks. The European expansion for Amran/Narayan is a logical, customer-driven move that should lock in long-term contracts."
Marcus Thorne, Independent Manufacturing Analyst: "I'm skeptical of the 'de minimis' tariff talk. While 6% of COGS sounds small, it's a concentrated risk in specific segments. Their hope to cover 70% of the Scientific segment's tariff impact through price and productivity feels optimistic in a competitive market. The debt load has also ballooned to $470 million net debt from just $10 million a year ago. The story is promising, but the leverage and macro sensitivity warrant a cautious eye."
Rebecca Choi, Editor at Industrial Pulse: "The real story here is the strategic repositioning. Sales into fast-growth markets like data center power, renewable energy, and space now make up 29% of the total. That's a meaningful shift from their more cyclical historical base. It shows a company not just weathering a downturn, but actively reshaping its future revenue streams."
David Dunbar: "We came out of the COVID downturn a much stronger company, and I anticipate the same results during this disruption. We are confident in our agility, resilience, and business-by-business execution."