Graham (NYSE: GHM) reported Q2 EPS of $0.27, $0.20 better than the analyst estimate of $0.07. Revenue for the quarter came in at $28 million versus the consensus estimate of $23.13 million.

• Second quarter sales of $28 million yielded $0.27 earnings per share
• Orders were $35.0 million in the quarter; Backlog improved sequentially to $114.9 million
• Revenue guidance increased to $93 million to $97 million and gross margin expectation improved to 21% to 23%

James R. Lines, Graham’s President and Chief Executive Officer, commented, “Results in the second quarter benefited from strong defense industry sales, including a materials only order. We also had the benefit of improved efficiencies in both our supply chain and our production facilities which enabled us to accelerate conversion of both large and short cycle orders in the quarter. As a result, higher volume drove operating leverage which is inherent in our business model.”

Mr. Lines continued, “We had strong orders in the quarter of $35 million. This order level was driven by our strategy to further our geographic market reach and diversify our end markets, which includes increasing our participation in the defense industry. We remain confident in our ability to achieve the long-term goal of significantly growing our business organically, as well as continuing to consider acquisition opportunities.”

GUIDANCE:

Graham sees FY2021 revenue of $93-97 million, versus the consensus of $91.3 million.

Increasing Fiscal 2021 Guidance

Mr. Lines concluded, “Nearly all of our expected second half revenue this year is already in backlog, giving us solid confidence to increase guidance for fiscal 2021. Orders in the second quarter add to fiscal 2022 revenue potential. The strength of revenue next fiscal year will depend upon orders during the next three quarters.”

Graham is increasing revenue guidance for fiscal 2021 while raising expectations for gross margin and tightening the range for SG&A expense. This guidance is based on the assumption that Graham is able to operate its production facility at full capacity, has access to its global supply chain including its subcontractors, and experiences minimal or no additional COVID-19 related disruptions or any other unforeseen events.

• Revenue between $93 million and $97 million
• Gross margin between 21% and 23%
• SG&A expense between $17.0 million and $17.5 million
• Effective tax rate of approximately 22%

For earnings history and earnings-related data on Graham (GHM) click here.