Methode Electronics Inc.(NYSE: MEI) stock plunged 6.9% on June 21st, 2018 (as of 21 Jun, 1:56 PM GMT-4; Source: Google finance). Year over year, FY18 fourth-quarter net income was negatively affected by increased intangible asset amortization expense related to acquisitions of $1.4 million, increased wages and other compensation expenses of $1.1 million, increased investment in Dabir Surfaces of $0.9 million, increased travel expense of $0.5 million, customer pricing reductions and unfavorable commodity pricing of certain raw materials. MEI’s consolidated gross margins as a percentage of net sales fell slightly to 24.9 percent in the FY18 fourth quarter from 25.1 percent in the FY17 period. Gross margins declined primarily due to unfavorable sales mix related to newly acquired businesses in the Automotive segment. This was substantially offset by a favorable sales mix in the Interface segment and higher sales volumes in the Power Products segment.
On the other hand, the company’s net income rose $13.7 million to $36.8 million in the fourth quarter of Fiscal 2018 from income of $23.1 million, in the same period of FY17. Year over year, FY 18 fourth-quarter net income benefitted from lower tax expense of $10.7 million, higher sales in the Automotive (inclusive of new acquisitions) and Power Products segments, increased international government grants of $2.2 million and lower legal fees of $0.5 million. MEI in the fourth quarter of FY 18 has reported the adjusted earnings per share of 98 cents, while the adjusted revenue growth of 13.3 percent to $249 million in the fourth quarter of FY 18.
For FY 19, MEI expects sales to be in the range of $950 million to $970 million, pre-tax income in the range of $127 million to $134 million and earnings per share to be in the range of $2.81 to $2.96. The company further expects price reductions of approximately $14.0 million on purchased displays negotiated by a customer in the Automotive segment. A significant amount of previously announced Automotive new business are not launching until late fourth quarter of FY19. The delayed launch to Fiscal 2020 of a laundry program in the Interface segment which will result in lower than expected revenues of $7 million in Fiscal 2019 and pre-tax expense of approximately $6.5 million for initiatives to reduce overall costs and improve operational profitability.