Northern Technologies International: Q1 2025 Earnings Beat Expectations, EPS Lags

Northern Technologies International Corporation (NASDAQ: NTIC) reported its first quarter fiscal 2025 earnings on January 8, 2025, with revenues beating expectations but earnings per share (EPS) falling short. The company's record first-quarter consolidated sales were driven by Natur-Tec® all-time record quarterly sales, stable ZERUST® oil and gas and ZERUST® industrial sales, and growth in NTIC China. However, operating expenses increased due to strategic investments in ZERUST® oil and gas sales infrastructure, partially offsetting a 200-basis point year-over-year improvement in gross margin.

NTIC's consolidated net sales increased by 5.7% year-over-year to a record $21,338,000, driven by a 22.8% increase in Natur-Tec product net sales to a quarterly record of $5,863,000. ZERUST® industrial net sales increased by 0.4% to $13,962,000, while ZERUST® oil and gas net sales increased by 0.7% to $1,514,000. NTIC China net sales increased by 8.6% to $3,995,000, approaching quarterly sales levels last experienced in fiscal 2021 and 2022 (NTIC's press release).

However, net income attributable to NTIC decreased to $561,000, compared to $896,000 in the same period last fiscal year, reflecting a decline in EPS from $0.09 to $0.06. This decrease was primarily due to a 14.0% increase in operating expenses, which were primarily associated with investments to support anticipated ZERUST® oil and gas growth in the second half of fiscal year 2025 (NTIC's press release).

Despite the decline in net income and EPS, NTIC's strategic investments in ZERUST® oil and gas sales infrastructure are expected to support future growth, particularly in the second half of fiscal 2025. The company's record first-quarter consolidated sales and solid start to fiscal 2025 are encouraging, and NTIC continues to believe that fiscal 2025 will be another strong year of sales growth and higher profitability (NTIC's press release).

In conclusion, Northern Technologies International Corporation reported strong first-quarter fiscal 2025 earnings, with revenues beating expectations but EPS falling short. The company's strategic investments in ZERUST® oil and gas sales infrastructure led to an increase in operating expenses, partially offsetting a 200-basis point year-over-year improvement in gross margin. NTIC's record first-quarter consolidated sales were driven by Natur-Tec® all-time record quarterly sales, stable ZERUST® oil and gas and ZERUST® industrial sales, and growth in NTIC China. Investors will be keen to see how these investments translate into future profitability and whether NTIC can meet its annual EPS estimate of $0.67.