Record orders at Taylor Devices (TAYD) have not yet translated into a sales recovery: quarterly revenue came in well below Freedom Broker’s expectations. Analysts Sergey Glinyanov and Zhanaidar Zulpaydar cut the target price from $70 to $65 and downgraded the rating from Buy to Hold.
Taylor Devices manufactures dampers and energy absorption systems that protect buildings, bridges, industrial and military equipment from vibrations and shock loads. The bulk of sales comes from aerospace and defense customers.
Revenue fell 26%, profitability deteriorated
According to the company’s quarterly report, revenue for Q1 of fiscal 2027 declined 26% year over year to $7.3 million. This is 44% below Freedom’s forecast of $13.1 million. Management attributed the decline to a significant portion of orders arriving closer to the end of the prior fiscal year, with the related sales not reflected in the reporting quarter.
Freedom’s estimates show gross margin falling from 44.8% to 29.6%. In addition to lower sales, margin was affected by the mix of delivered products and R&D spending on new solutions. A 7% reduction in selling, general and administrative expenses was not enough to offset the drop in gross profit.
Earnings per share were $0.14 versus Freedom’s forecast of $0.82. The core business ended the quarter essentially around break-even, and nearly all pre-tax profit was generated by other income, mainly interest.
Defense remains the core of the business
Aerospace and defense revenue fell 17% year over year to about $4.2 million. However, its share of sales increased from 51% to 58% due to a deeper downturn in other segments.
Sales of solutions for buildings and structures dropped 49% to about $1.9 million. Analysts link the weakness in this business to high financing costs and unfavorable currency dynamics, which are constraining construction activity.
The industrial segment increased revenue by 8% to about $1.2 million, although this growth only partially offset declines in other segments.
Backlog hits a record, but execution takes time
Confirmed orders rose from $52.8 million at the end of the prior fiscal year to $55.2 million. Freedom views this as a sign of sustained demand for the company’s products.
However, some contracts span multiple years. Therefore, a record backlog does not mean all associated revenue will appear in the coming quarters. The reporting period results showed that analysts had expected accumulated orders to convert into sales too quickly.
New multi-year contracts in the U.S. defense sector support Taylor Devices’ medium-term outlook, experts say. To validate a recovery scenario, they need to see consistent sales growth while new orders continue to come in.
Freedom revised its forecasts
Analysts now expect Taylor Devices’ fiscal 2027 revenue to be $52.1 million with adjusted EBITDA of $11.5 million. For fiscal 2028, they forecast $64.2 million and $16.7 million, respectively. EBITDA represents earnings before interest, taxes and depreciation.
Freedom maintains a positive medium-term view on the company but factors in later revenue realization and weak quarterly earnings. The main risks remain contract execution delays, the timing of defense funding approvals, and weakness in the construction market.
Previously, in August, Freedom Broker upgraded its rating on Taylor Devices shares to Buy and raised the target price to $70, expecting a sales recovery driven by an expanded order backlog. The new report showed that this process is taking longer than anticipated.
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