CMCO Q2 Earnings Review: Tariffs Pressure Margins, Backlog Reaches New High

Columbus McKinnon reported Q2 CY2025 revenue of $235.9 million, a 1.6% YoY decline, but exceeded analyst estimates. Non-GAAP profit was $0.50 per share, a 7% beat. The backlog reached a new high of $360.1 million. However, tariffs pressured margins, and operating margin dropped to 3.4% from 8.5% last year. Management expects margin recovery to be gradual and targets tariff cost neutrality by the second half of the year.

Columbus McKinnon (NASDAQ:CMCO), a leading manufacturer of material handling equipment, reported its Q2 CY2025 results on July 2, 2025. Despite exceeding market revenue expectations, the company faced a 1.6% year-on-year (YoY) decline in sales, totaling $235.9 million. This performance fell short of analyst estimates by $5.0 million, but still represented a 2.2% beat [1].

The company's non-GAAP profit of $0.50 per share was 7% above analyst consensus estimates. Adjusted EBITDA was $30.77 million, which was a 1.1% miss compared to analyst estimates of $31.1 million. The operating margin dropped to 3.4%, down from 8.5% in the same quarter last year, primarily due to persistent tariff pressures and a challenging macroeconomic environment [1].

The company's backlog reached a new high of $360.1 million at the end of the quarter, driven by strong project-related order growth, particularly in sectors such as battery production, e-commerce, and aerospace. This growth was attributed to a 23% year-over-year increase in the backlog, with about 70-80% of it expected to be actionable within the next year [1].

Columbus McKinnon's CEO, David Wilson, highlighted that short-cycle orders were down due to the implementation of tariff surcharges and broader policy uncertainty, particularly impacting the company’s U.S. and European operations. Tariffs were identified as a significant headwind to operating profit and margins, with a $4.2 million impact on gross profit. The company is implementing price increases and supply chain adjustments to mitigate these costs [1].

Looking ahead, Columbus McKinnon's guidance is shaped by ongoing tariff mitigation efforts, expected stabilization of short-cycle demand, and a record project backlog. Management anticipates a gradual margin recovery, with tariff cost neutrality targeted for the second half of the year and full margin neutrality expected in the following year [1].

The pending Kito Crosby acquisition is also expected to expand the company's capabilities and support its Intelligent Motion strategy. The acquisition is anticipated to scale the business, enable synergies, and accelerate strategic initiatives, though near-term leverage is projected to rise modestly post-close [1].

Columbus McKinnon currently trades at $13.58, down from $16.83 just before the earnings announcement. The stock experienced a negative market reaction due to the year-on-year sales decline and the sharp drop in operating margin [1].

References:
[1] https://finance.yahoo.com/news/cmco-q2-deep-dive-tariffs-044152006.html