Matthews International Corp reported a Q3 2026 net loss of $23.7 million amid challenges in engineering and rising input costs, significantly missing earnings expectations.
Matthews International Corp reported a Q3 2026 net loss of $23.7 million, or $0.75 per share, missing expectations significantly as analysts anticipated a profit of $0.06 per share. The loss was attributed to underperformance in the engineering segment, higher input costs, and ongoing challenges in the memorialization business amid historically low death rates.
Key Takeaways
- Net loss of $23.7 million, or $0.75 per share, down from a net income of $15.4 million, or $0.49 per share, in Q3 2025
- Consolidated sales fell to $246 million, a decrease from $349 million a year ago, primarily due to divestitures
- Memorialization revenue increased slightly to $208 million, but segment adjusted EBITDA dropped to $42.2 million, down from $42.8 million year-over-year
- Industrial Technologies segment recorded sales of $38 million, down sharply from $87.9 million a year ago, reflecting divestitures and reduced engineering orders
- Adjusted EBITDA for Q3 2026 was $35 million, compared to $44.6 million in the same quarter last year
Declining Engineering Segment Drives Losses
The engineering segment of Matthews International Corp faced substantial challenges this quarter, with sales declining significantly. Sales for the Industrial Technologies segment fell from $87.9 million to $38 million year-over-year, primarily due to the divestiture of tooling and warehouse automation businesses. The segment also reported an adjusted EBITDA loss of $5.4 million, a stark contrast to the $9 million profit recorded a year ago.
Management noted that delays in order conversions, particularly within energy storage solutions, are expected to continue through the rest of the fiscal year due to industry overcapacity. CEO Joe Bartolesi remarked on the commissioning of a new mass production machine, which has attracted unprecedented interest from auto manufacturers and battery suppliers, suggesting a potential turnaround in 2027.
Memorialization Business Faces Input Cost Pressure
Despite a slight increase in memorialization revenue to $208 million, the segment's adjusted EBITDA decreased to $42.2 million due to soaring input costs and decreased casket volumes. The overall death rate in the U.S. has reached record lows, negatively impacting casket sales and cemetery memorial volumes. The company is facing escalating costs for copper, steel, and labor, which have outpaced the speed of price adjustments made to customers.
“We are taking alternative action within our businesses to mitigate the impact of tariffs, but we will also find ways to cover those as well,” stated Bartolesi during the call.
Management has indicated that they are evaluating further strategic actions to address these headwinds, as they expect the fourth quarter traditionally to benefit from stronger cemetery and bronze product demand.
Guidance Adjusted Amid Uncertainty
Management has revised its guidance for adjusted EBITDA down to a range of $158 million to $162 million for fiscal 2026, reflecting challenges primarily in the engineering segment and delays in realizing synergies from the Propelis acquisition. This guidance marks a departure from previous expectations, with an estimated $5 million shortfall attributed to delays in the SAP implementation project. They still anticipate achieving a run rate of $130 million in annualized adjusted EBITDA for Propelis by the end of calendar year 2026.
Analyst Q&A Reveals Ongoing Strategic Review
During the Q&A session, analysts pressed management on the implications of lower order volumes and the impact of ongoing litigation with Tesla on customer relationships. Bartolesi noted that while the arbitration liability phase is complete, the litigation has caused some hesitance among potential customers, particularly with the automotive OEMs, though he feels the company is moving past that concern.
When asked about the future of the engineering segment, he emphasized that the company remains optimistic about the DBE technology, citing increased interest from major automotive manufacturers in controlling their battery production capabilities.
Frequently Asked Questions
Did Matthews International Corp beat earnings estimates in Q3 2026?
No, Matthews International reported a net loss of $23.7 million, or $0.75 per share, missing analysts' expectations of a profit of $0.06 per share.
What were the total sales for Matthews International in Q3 2026?
Total consolidated sales for Q3 2026 were $246 million, significantly lower than the $349 million reported in the same quarter last year, mainly due to recent divestitures.
How did the memorialization segment perform in Q3 2026?
The memorialization segment reported revenue of $208 million, a slight increase from $204 million a year prior, but adjusted EBITDA fell to $42.2 million from $42.8 million due to rising input costs.
What is the outlook for the engineering segment?
The engineering segment continues to face challenges, with management indicating that delays in order conversions will extend through the fiscal year, but they remain optimistic about future demand for DBE technology among automotive manufacturers.
In summary, Matthews International Corp faces significant structural challenges, particularly within its engineering segment, as it navigates declining sales and rising costs. The company's efforts to stabilize its operations will be critical in the upcoming quarters, especially as it aims to regain investor confidence amid ongoing uncertainties.
This analysis is based on public earnings call materials and is not investment advice.
