Key Tronic 2025 Q3 Earnings Revenue Decline Amid Tariff Disruptions

Key Tronic (KTCC) reported its fiscal 2025 Q3 earnings on May 13th, 2025. The total revenue of Key Tronic decreased by 21.4% to $111.97 million in 2025 Q3, down from $142.43 million in 2024 Q3. Despite the revenue decline, Key Tronic narrowed losses to $0.06 per share in 2025 Q3 from a loss of $0.21 per share in 2024 Q3. The company successfully reduced its net loss to $604,000, marking an improvement from the $2.22 million net loss reported in 2024 Q3.

The earnings results fell short of expectations, reflecting the ongoing impact of global tariff fluctuations. Key Tronic opted not to provide guidance for Q4 2025 due to economic uncertainties, indicating caution ahead. However, the company remains optimistic about future growth as new facilities in Arkansas and Vietnam are expected to become operational in fiscal 2026, potentially boosting demand for contract manufacturing.

Revenue

Key Tronic's revenue for fiscal 2025 Q3 declined by 21.4% to $111.97 million, reflecting the challenging environment posed by global tariffs.

Earnings/Net Income

Key Tronic narrowed its loss to $0.06 per share in Q3 2025, significantly improving from a loss of $0.21 per share in Q3 2024. This indicates a positive trajectory in earnings performance.

Post-Earnings Price Action Review

The strategy of buying Key Tronic shares after a revenue announcement and holding for 30 days has yielded moderate returns over the past five years. Despite some resilience, the strategy's returns have been modest, with an average annual return of 3.5%. The maximum drawdown of -18.3% in May 2020 highlights its vulnerability to market volatility during economic downturns. The Sharpe ratio of 0.95 suggests reasonable returns relative to portfolio volatility but indicates that the strategy may not offer significant capital appreciation in bullish markets. With a beta of 1.2, the strategy aligns with market performance but carries slightly higher volatility. Overall, this conservative approach prioritizes stability and is suitable for investors seeking regular income and moderate returns, though it may not be ideal for those pursuing high-risk, high-reward opportunities.

CEO Commentary

Brett Larsen, President and CEO, remarked on the significant impact of tariff fluctuations, stating, "The rapid, unprecedented changes in tariffs have significantly impacted the demand from our customers during the quarter." He highlighted the company's strategic initiatives in expanding production capacity in Arkansas and Vietnam, which are designed to provide flexibility amidst these uncertainties. Larsen expressed optimism about the future, noting, "We believe Key Tronic remains well positioned for increased growth and profitability over the longer term," as the company continues to streamline operations and win new business in various sectors, including telecommunications and energy storage.

Guidance

Key Tronic has opted not to provide revenue or earnings guidance for Q4 2025 due to ongoing economic and political uncertainties. However, the company anticipates that their new facilities in the U.S. and Vietnam will become operational in the first half of fiscal 2026, which they believe will allow them to benefit from customer demand for rebalancing contract manufacturing. The CEO underscored that while the current economic climate presents challenges, there is a strong pipeline of potential new business that positions them for future growth.

Additional News

In recent weeks, Key Tronic announced strategic expansions in Arkansas and Vietnam, aiming to enhance manufacturing flexibility in response to global tariff disruptions. The company is investing over $28 million in its new flagship manufacturing and research location in Arkansas, expected to create over 400 new jobs in the next five years. Additionally, Key Tronic plans to significantly increase manufacturing capacity in its Vietnam facility, positioning itself for growth in response to shifting production away from China and Mexico. These expansions reflect the company's proactive approach to managing tariff-related uncertainties and supporting long-term growth across diversified sectors.