Testing and calibration equipment company Transcat (TRNS 0.18%) easily beat quarterly expectations and forecast continued strength into its new fiscal year. Investors are taking notice, sending Transcat shares up as much as 13% at the open and up 8% as of 10:45 a.m. ET.
Strong earnings and margin growth
Transcat provides calibration and testing services primarily to the life sciences industry, as well as to the aerospace, defense, energy, and utilities sector. The company earned $0.66 per share in its fiscal fourth quarter ending March 30 on revenue of $70.9 million, surpassing Wall Street's $0.53 per share on sales of $68 million estimate.
Consolidated adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) grew by 29.8% in the quarter, and EBITDA margin expanded by 200 basis points, fueled by a combination of strong organic growth and the benefit of acquisitions.
"Adjusted EBITDA growth of 30% for the fourth quarter reflects our ability to leverage organic service revenue growth and the successful integration of acquired companies," CEO Lee D. Rudow said in a statement. "Fourth-quarter consolidated revenue was up 14%, with gross margin expansion of 300 basis points year over year driven by our widened breadth of service offerings, excellent performance in the higher-margin rental business, and execution of automation and process improvement initiatives."
Is Transcat a buy following its strong earnings report?
Rudow is forecasting further gains in fiscal 2025 thanks to predictable, recurring revenue streams from highly regulated markets including life sciences. The rental business is a good hedge against potential economic headwinds, as it tends to hold up better through the cycle.
This is an under-the-radar stock serving an important role to a number of massive and growing industries. If Transcat can continue to execute as it did in the most recent quarter, the stock can go higher from here.
