Graham Corporation faced a negative market reaction following its Q2 results, despite posting double-digit sales growth and notable margin improvement. Management pointed to strong aftermarket performance and increased demand in both energy and defense markets as key drivers. CEO Matthew Malone emphasized that aftermarket sales surged 33% year-over-year, supporting gross margin expansion. However, Malone acknowledged the unusually high aftermarket mix this quarter may not be sustained, and highlighted that future quarters could see more normalized margins as business mix shifts and lower-margin projects are delivered.
Is now the time to buy GHM? Find out in our full research report (it’s free).
Graham Corporation (GHM) Q2 CY2025 Highlights:
- Revenue: $55.49 million vs analyst estimates of $56.59 million (11.1% year-on-year growth, 1.9% miss)
- EPS (GAAP): $0.42 vs analyst estimates of $0.24 (78.7% beat)
- Adjusted EBITDA: $6.84 million vs analyst estimates of $5.29 million (12.3% margin, 29.3% beat)
- The company reconfirmed its revenue guidance for the full year of $230 million at the midpoint
- EBITDA guidance for the full year is $25 million at the midpoint, above analyst estimates of $24.52 million
- Operating Margin: 8.8%, up from 6.2% in the same quarter last year
- Backlog: $482.9 million at quarter end, up 21.7% year on year
- Market Capitalization: $550.9 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Graham Corporation’s Q2 Earnings Call
- Russell Stanley (Beacon Securities) pressed for details on the sustainability of elevated margins. CEO Matthew Malone said the high aftermarket mix may not persist and expects margins to normalize as lower-margin work increases.
- Robert Brooks (Northland Capital Markets) asked about momentum in small modular nuclear reactors. Malone described current activity as early-stage and development-oriented, with significant but longer-term growth potential.
- Joseph Gomes (NOBLE Capital) questioned when the new cryogenic testing facility would meaningfully contribute to revenue. Malone said further details will be shared next quarter, pending safe and successful facility ramp-up.
- Tony Bancroft (Gabelli Funds) queried how Graham plans to capitalize on growing naval dry dock demand. Malone explained that execution and internal investment are key to absorbing additional work and competing for future opportunities.
- Gary Schwab (Valley Forge Capital Management) asked about mitigating tariff risk. Malone outlined use of in-country subcontractors and protective contract clauses to reduce exposure, but acknowledged ongoing monitoring is necessary.
Catalysts in Upcoming Quarters
Going forward, our analysts will watch (1) the pace of backlog conversion to revenue, especially from defense contracts; (2) the operational impact and customer adoption of the Batavia and cryogenic testing facilities; and (3) the business mix between aftermarket and project work, which will influence margins. We are also tracking tariff developments and progress in international and new energy markets as additional drivers of performance.
Graham Corporation currently trades at $50.19, down from $57.48 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).
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