Frequency Electronics Inc (NASDAQ:FEIM) Stock Plummets 15.5% on Q1 FY2026 Earnings Miss

Frequency Electronics Inc (NASDAQ:FEIM) reported first-quarter fiscal 2026 earnings that fell short of analyst expectations, triggering a sharp decline in its stock during after-hours trading. The company’s revenue and earnings per share both came in below consensus estimates, though management attributed the results to timing issues and expressed confidence in the firm’s long-term trajectory.

Earnings and Revenue Performance

For the quarter ended July 31, 2025, Frequency Electronics posted revenue of $13.8 million, a decrease from the $15.1 million reported in the same period last year. This result also fell short of the analyst estimate of $16.83 million. Similarly, diluted earnings per share came in at $0.07, compared to $0.25 in the prior-year period and well below the estimated $0.37.

Key financial highlights from the quarter include:

• Operating income of $0.4 million, down from $2.4 million in Q1 FY2025
• Net income of $0.6 million, compared to $2.4 million a year earlier
• Net cash provided by operating activities was $1.2 million, versus a net cash usage of $1.5 million in the same quarter last year
• Backlog remained robust at approximately $71 million, up slightly from $70 million at the end of the previous quarter

Market Reaction and Price Action

The market responded negatively to the earnings miss, with the stock dropping approximately 15.5% in after-hours trading. This sharp decline suggests investor disappointment with both the top and bottom-line results, particularly given that the company had exceeded expectations in recent quarters. The sell-off contrasts with the stock's positive performance over recent weeks, which had seen gains of 4.3% over the past week and 9.2% over the past month, indicating that investors had likely been anticipating stronger results.

Management Commentary and Outlook

CEO Tom McClelland characterized the quarterly results as "a timing issue" rather than a reflection of underlying business weakness. He attributed the revenue shortfall to two primary factors: some revenue that was pulled forward into the fourth quarter of fiscal 2025, and customer-driven delays on several key programs. McClelland emphasized that these were not cancellations or contract reductions, and expressed expectation that at least one program would be "expanded significantly" in the near term.

The company's leadership remains optimistic about future prospects, pointing to:

• A historically high backlog of $71 million
• Active bidding on new programs, including some described as "significantly larger than typical contract wins"
• Continued growth opportunities in both space and defense markets
• Expansion into quantum sensing with a new Boulder, Colorado facility

Notably, management did not provide specific quantitative guidance for the coming quarters, making direct comparison with analyst estimates difficult. Current analyst projections for Q2 FY2026 anticipate revenue of $17.44 million and EPS of $0.44, while full-year estimates stand at $78.61 million in revenue and $1.71 in EPS.

Strategic Initiatives and Capital Return

In a show of confidence in the company's outlook, Frequency Electronics announced a $20 million share repurchase authorization, approximately equal to the combined value of two special dividends paid in recent years. This move signals management's belief that the stock is undervalued and represents a commitment to returning capital to shareholders while continuing to invest in growth initiatives.

The company continues to invest in emerging technologies, particularly quantum sensing, and will host its second annual Quantum Sensing Summit in October. These efforts, coupled with the company's debt-free balance sheet, provide a foundation for long-term growth despite the current quarter's disappointing results.

For more detailed earnings information and analyst estimates, readers can review the earnings and estimates page.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Readers should conduct their own research and consult with a qualified financial advisor before making investment decisions.