Graham Third Quarter 2025 Earnings: EPS Beats Expectations, Revenues Lag

In the third quarter of 2025, Graham Corporation (NYSE: GHM) reported earnings that beat expectations but fell short on revenue growth. The company's earnings per share (EPS) surged 600% to $0.14, while revenue increased a more modest 7.3% to $47.0 million. This discrepancy can be attributed to several factors, including improved gross margin, operational efficiency, and grant reimbursement.

Gross profit margin expanded by 260 basis points to 24.8% compared to the prior year, driven by leverage on higher volume, better execution, and improved pricing. This increase, partially offset by higher incentive compensation, contributed significantly to the growth in EPS. Additionally, the company received a $2.1 million grant from the BlueForge Alliance to reimburse the cost of defense welder training programs and related equipment, contributing $0.3 million to the gross profit in the third quarter of fiscal 2025.

Operational efficiency played a significant role in Graham's strong performance, with the company's continually improving execution across its business driving margin expansion through improved product mix and operational efficiency. This is evident in the 143% increase in operating profit to $2.21 million and the 300 basis points increase in net margin to 3.4%.

Despite the strong EPS growth, revenue growth lagged behind expectations. This can be attributed to the lumpy nature of large capital projects and the timing of key project milestones. However, the company's strong backlog of $385 million, with 80% from the defense business, provides excellent visibility into future operations and stability.

Graham's strategic investments in people, processes, and technology have both short-term and long-term impacts on its profitability and growth prospects. In the short term, these investments have increased SG&A expenses by $0.9 million, impacting short-term profitability. However, these investments are expected to drive long-term sustainable growth, with the company's goal of achieving an 8% to 10% organic revenue growth annually.

In conclusion, Graham Corporation's third quarter 2025 earnings demonstrated strong EPS growth driven by improved gross margin, operational efficiency, and grant reimbursement. However, revenue growth lagged behind expectations due to the lumpy nature of large capital projects. The company's strategic investments in people, processes, and technology are expected to drive long-term sustainable growth, despite the short-term impact on profitability.