Is Now the Time to Buy Rogers (ROG) Amid Earnings Disappointments and Leadership Uncertainty? A Value Investor's Perspective on Dislocated Pricing in Cyclical Sectors

The industrial sector has long been a proving ground for value investors, where cycles of boom and bust create opportunities to acquire undervalued assets at dislocated prices. Rogers Corporation (ROG), a manufacturer of engineered materials for EVs, aerospace, and industrial applications, finds itself at an inflection point. Recent earnings misses, leadership uncertainty, and a 30% decline in its stock price over six months have sparked debate: Is this a buying opportunity, or a warning sign? For investors with a long-term horizon and a tolerance for volatility, the answer may lie in the interplay of structural tailwinds and strategic recalibration.

A Mixed Earnings Report and Strategic Shifts

Rogers' Q2 2025 earnings report was a study in contrasts. While the company's GAAP net loss of $4.00 per share—a casualty of $67.3 million in restructuring and impairment charges—sent its stock down 1.23% in after-hours trading, its revenue of $202.8 million exceeded expectations. Adjusted earnings of $0.34 per share, though below the $0.50 forecast, pointed to operational resilience. The gross margin improvement to 31.6% underscored the company's ability to navigate pricing pressures in power substrates, a critical component for EVs.

Historically, a simple buy-and-hold strategy around ROG's earnings releases from 2022 to the present has shown mixed but notable patterns. While the stock typically experiences short-term volatility—dropping 1.23% in after-hours trading for Q2 2025—the 10-day win rate following earnings releases has averaged 57.14%, with a 42.86% hit rate over 3 days and 30 days. Investors who held the stock for 10 days post-earnings historically saw a positive return in nearly 60% of cases, despite an average 10-day decline of -1.29%. These results suggest that while the market often overreacts immediately after earnings, a medium-term horizon could offer better alignment with the company's strategic adjustments.

The leadership transition to interim CEO Ali Elhaj adds another layer of complexity. Elhaj's emphasis on “speed of execution” and “organizational agility” signals a pivot from legacy challenges to a more dynamic cost-saving strategy. The $12–20 million in annual savings from restructuring, coupled with $28.1 million in share repurchases in Q2, reflects a commitment to capital efficiency. Yet, the stock's 42% decline year-to-date—despite a $1.218 billion market cap—raises questions about whether the market is overcorrecting.

Value Investing Metrics: A Tale of Two Ratios

For value investors, the interplay between free cash flow and valuation multiples is critical. Rogers generated $5.6 million in free cash flow in Q2 2025, a modest improvement from Q1 but below the $8.8 million in the same period in 2024. While this suggests operational headwinds, the company's cash reserves of $157.2 million and absence of significant debt provide a buffer. The P/E ratio, however, is a mixed bag: a GAAP loss yields a negative multiple, but adjusted earnings of $0.34 imply a forward P/E of roughly 190x, based on the current stock price of $66.52. This disconnect between GAAP and adjusted metrics highlights the challenge of valuing a company in transition.

Cyclical Tailwinds: EV Growth and Supply Chain Realignment

The EV market, a key growth driver for Rogers, is poised for sustained expansion. Global sales are projected to exceed 20 million units in 2025, with China alone accounting for 14 million. Rogers' materials are integral to power substrates and thermal management systems, areas where demand is expected to outpace supply. Yet, the company faces regional imbalances: while China's EV market surges, North America and Europe grapple with slower adoption and regulatory uncertainty.

The EV sector's cyclical nature also creates dislocated pricing opportunities. As automakers scale production, suppliers like Rogers must balance capacity constraints with margin preservation. Rogers' restructuring efforts, including cost reductions in its Curamik® business, aim to align with this dynamic. The projected $12–20 million in annual savings, if achieved, could offset margin pressures and free up capital for R&D or further share buybacks.

Leadership Uncertainty: A Double-Edged Sword

Ali Elhaj's interim role introduces short-term uncertainty but also a chance for strategic clarity. His focus on “local expertise” and “global competitiveness” aligns with the need for agility in a fragmented industrial sector. However, the absence of a long-term CEO could delay major initiatives, such as expanding into high-growth markets or accelerating R&D. Investors must weigh the risk of operational inertia against the potential for cost discipline and improved execution.

Is Now the Time to Buy?

For value investors, the answer hinges on three factors:
1. Margin of Safety: At $66.52, ROG trades at a discount to its 52-week high of $114.05 and within the InvestingPro-identified undervaluation range. The stock's beta of 3.09 indicates high volatility, but this also means potential for outsized gains if the company executes its cost-saving and market-penetration strategies.
2. Catalysts for Re-rating: The EV market's growth trajectory, coupled with Rogers' restructuring savings, could drive a re-rating if the company meets its Q3 guidance of $200–$215 million in revenue. A return to positive GAAP earnings in 2026 would further validate the investment thesis.
3. Risk Mitigation: Diversification into non-EV sectors, such as aerospace and industrial markets, provides a buffer against sector-specific downturns. The company's $76 million remaining share repurchase program also offers a floor for the stock price.

Conclusion: A Calculated Bet on Resilience

Rogers Corporation is a case study in the challenges and opportunities of investing in cyclical industrial sectors. The earnings miss and leadership transition have created a dislocated pricing environment, but the company's strategic focus on cost efficiency, EV-driven demand, and a strong balance sheet positions it for long-term growth. For investors willing to stomach near-term volatility, ROG could represent a compelling entry point—provided the management team delivers on its restructuring promises and the EV sector continues its upward trajectory.

In the words of a certain New York Times columnist: “The best investments often come when the market is most afraid. The key is to distinguish between a temporary setback and a fundamental breakdown.” For Rogers, the line between the two may narrow in the coming quarters.
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