Miller Industries: Undervalued Amid Recovery Uncertainty

Miller Industries trades at a significant valuation discount compared to both historical norms and its sector peers, creating a potential opportunity offset by near-term economic uncertainty. The company's price-to-earnings (P/E) ratio stands at 11.15 as of September 2025. This current multiple is well below its own 10-year historical average of 13.01 and remarkably low against the broader Consumer Cyclical sector average of 20.54. The gap is substantial, representing a 46% discount to the sector average. Even compared to specific peers, Miller's valuation appears more attractive. Oshkosh Corp, for instance, trades at a P/E of 13.58, while American Axle's P/E is 17.11. Despite this relative affordability, investors must weigh this gap against prevailing economic headwinds. The discount may reflect concerns about the timing and sustainability of the cyclical recovery needed for earnings to normalize, meaning the low multiple could persist if demand softens further or input costs remain elevated.

Operational Performance: Mixed Resilience

Full-year 2024 sales grew 9% to $1.26 billion, with net income rising 8.9% to $63.5 million according to the company's report-a solid result given a 25.1% Q4 sales decline to $221.9 million from leaner chassis shipments as reported in the Q4 earnings release. This full-year resilience comes from higher body sales and margin optimization, with the military sector providing key demand support.

The company maintained its dividend and repurchased $2.9 million in shares, showing confidence amid broad macroeconomic uncertainty.

Q4 gross margin improved to 15.1% from 13.0% in 2023, driven by better product mix and cost discipline. However, SG&A expenses rose due to executive compensation and new initiatives -a headwind that partially offset the margin gains. This contrast highlights how operational leverage helped buffer the sales drop, but new investments are already creating pressure.

The company reduced inventories by $21.3 million in Q1 2025, adding to previous shareholder returns of $4.4 million. Management projects $950-1.0 billion revenue and $2.90-3.20 EPS for 2025, betting on stabilized chassis markets and new product launches. However, regulatory uncertainty around ACT and CARB compliance, plus tariffs and rising ownership costs, remain real risks and. While military demand offers tailwinds, the path to recovery hinges on navigating these macro and policy headwinds without derailing margin progress.

Recovery Drivers and Constraints

Miller Industries faces a mixed recovery landscape in 2025. Military demand is growing robustly and is expected to provide a stable revenue base, helping offset weakness in the auto sector. However, progress remains contingent on navigating regulatory complexities and cost pressures.

Military contract demand is emerging as a reliable growth engine. The CEO has expressed confidence in 2025, citing military contract growth as a key factor in the company's outlook as reported in the Q4 earnings release. This trend is positioned to stabilize revenue amid broader market challenges. Strategic focus on channel inventory normalization further supports this recovery path as noted in market analysis.

Regulatory developments present both opportunity and risk. The company expects CARB-approved chassis by late 2025, which could unlock substitution demand. However, regulatory uncertainty creates timeline risks that might delay full recovery benefits. The ACT compliance process remains a critical uncertainty affecting near-term planning.

Cost pressures continue to weigh on margins. Tariffs are increasing chassis production costs, squeezing profitability. The company is mitigating through supply chain diversification and price adjustments, but without supply chain restructuring, margin pressure persists. This constraint interacts with the company's recent operational challenges, as normalized operations haven't fully resolved demand absorption issues despite sales improvements.

The recovery trajectory suggests military demand provides foundational stability, but regulatory delays and tariff impacts could slow momentum. The company's ability to execute its diversification strategy and navigate compliance timelines will determine whether it can translate current drivers into sustained revenue growth.

Risk Framework and Scenario Analysis

Miller Industries' recovery hinges on navigating several execution risks that could alter its growth trajectory. The company's $950 million–$1.0 billion revenue guidance for 2025 implies 24–32% year-over-year growth, which is contingent on chassis shipments returning to pre-disruption volumes as stated in the earnings report. While Q1 2025 sales declined 35.5% YoY to $225.7 million, this reflected normalization after supply chain disruptions rather than weak underlying demand as reported in market data. However, regulatory uncertainty around the Advanced Clean Trucks (ACT) mandate and California Air Resources Board (CARB) timelines remains a critical path risk. Delays could stall the company's substitution demand strategy, forcing greater reliance on capital-intensive auto cycle exposure.

Margin expansion faces similar execution challenges. The 16% gross margin target assumes favorable product mix and cost control, but SG&A expenses rose due to new initiatives and executive compensation as detailed in the Q4 earnings release. While Q1 2025 margins improved to 15% through product mix optimization, inflationary pressures on materials and logistics could erode this progress. Inventory reductions of $21.3 million in Q1 demonstrate working capital discipline, but unforeseen supply chain shocks could quickly reverse this trend. Military contract growth provides some insulation from these risks, but tariff impacts and rising ownership costs continue to weigh on discretionary spending.

The path to sustained growth remains sensitive to both external regulatory forces and internal execution cadence. Even with normalized chassis shipments and military demand, margin performance could falter if cost inflation outpaces pricing power. Conversely, accelerated regulatory approval could unlock substitution demand ahead of schedule, creating upside potential. Investors should monitor two key triggers: chassis shipment volumes against historical baselines, and ACT/CARB compliance timelines from state regulators.