Alamo (NYSE:ALG) Misses Q4 CY2025 Revenue Estimates, Stock Drops

Specialized equipment manufacturer for infrastructure and vegetation management Alamo Group (NYSE:ALG)

in Q4 CY2025, with sales falling 3% year on year to $373.7 million. Its non-GAAP profit of $1.70 per share was 25.9% below analysts’ consensus estimates.

Is now the time to buy Alamo?

Robert Hureau, Alamo Group's President, and Chief Executive Officer commented, "Fiscal year 2025 was a year of transition as we position our Company for long term growth and success. Over the past few months, we've taken several decisive steps to strengthen our foundation including restructuring certain manufacturing facilities, reshaping the organizational structure, sharpening our commercial and operational priorities, accelerating our M&A engine and setting a clear vision for the future. Despite the challenges in the quarter, I'm excited about where we are taking our company and the success that lies ahead."

Company Overview

Expanding its markets through acquisitions since its founding, Alamo (NSYE:ALG) designs, manufactures, and services vegetation management and infrastructure maintenance equipment for governmental, industrial, and agricultural use.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Alamo’s sales grew at a mediocre 6.6% compounded annual growth rate over the last five years. This was below our standard for the industrials sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Alamo’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 2.6% annually.

This quarter, Alamo missed Wall Street’s estimates and reported a rather uninspiring 3% year-on-year revenue decline, generating $373.7 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 7.9% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and indicates its newer products and services will catalyze better top-line performance.

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Operating Margin

Alamo’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 10% over the last five years. This profitability was solid for an industrials business and shows it’s an efficient company that manages its expenses well. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Analyzing the trend in its profitability, Alamo’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q4, Alamo generated an operating margin profit margin of 6%, down 2.9 percentage points year on year. Since Alamo’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Alamo’s EPS grew at a remarkable 12.6% compounded annual growth rate over the last five years, higher than its 6.6% annualized revenue growth. However, we take this with a grain of salt because its operating margin didn’t improve and it didn’t repurchase its shares, meaning the delta came from reduced interest expenses or taxes.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

Alamo’s two-year annual EPS declines of 9.8% were bad and lower than its two-year revenue losses.

We can take a deeper look into Alamo’s earnings to better understand the drivers of its performance. Alamo’s operating margin has declined over the last two years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q4, Alamo reported adjusted EPS of $1.70, down from $2.39 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Alamo’s full-year EPS of $9.25 to grow 31.7%.

Key Takeaways from Alamo’s Q4 Results

We struggled to find many positives in these results. Its revenue missed and its EBITDA fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 5.2% to $206.99 immediately following the results.

Alamo’s latest earnings report disappointed. One quarter doesn’t define a company’s quality, so let’s explore whether the stock is a buy at the current price. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock.