Matthews International Corp. :MATW-US: Earnings Analysis: Q4, 2017 By the Numbers : November 23, 2017

Matthews International Corp. reports financial results for the quarter ended September 30, 2017.

We analyze the earnings along side the following peers of Matthews International Corp. – Service Corporation International, Carriage Services Inc. and Hillenbrand, Inc. (SCI-US, CSV-US and HI-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 396.06 million, Net Earnings of USD 19.64 million.
  • Gross margins narrowed from 38.95% to 38.78% compared to the same period last year, operating (EBITDA) margins now 15.05% from 14.82%.
  • Year-on-year change in operating cash flow of 10.49% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings declined although operating margins improved from 10.52% to 10.71%.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-09-30 2017-06-30 2017-03-31 2016-12-31 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 396.06 389.63 380.92 349 377
Revenue Growth (%YOY) 5.06 1.98 3.74 -1.48 2.35
Earnings (mil) 19.64 29.49 14.92 9.09 23.86
Earnings Growth (%YOY) -17.69 23.29 3.92 96.97 40.6
Net Margin (%) 4.96 7.57 3.92 2.6 6.33
EPS 0.6 0.91 0.46 0.28 0.74
Return on Equity (%) 2.53 4.02 2.14 1.3 3.4
Return on Assets (%) 3.51 5.35 2.79 1.73 4.53

Access our Ratings and Scores for Matthews International Corp.

Market Share Versus Profits

Revenues History
Earnings History

MATW-US’s change in revenue this period compared to the same period last year of 5.06% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that MATW-US is holding onto its market share. Also, for comparison purposes, revenues changed by 1.65% and earnings by -33.39% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year earnings decline was driven by the drop in gross margins from 38.95% to 38.78%. This drop in earnings would have been worse were in not for operational cost control activities, which helped the operating margins (EBITDA margins) improve from 14.82% to 15.05%. For comparison purposes, gross margins were 36.98% and EBITDA margins were 15.89% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

MATW-US’s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days are now 73.06 days from 78.28 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

MATW-US’s change in operating cash flow of 10.49% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


Despite an overall improvement in operating (EBIT) margins, the company’s earnings fell. EBIT margins went from 10.52% to 10.71%. The decline in earnings appears to be largely because of one-time items. Pretax margins declined from 8.86% to 6.21%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Matthews International Corp.

Company Profile

Matthews International Corp. engages in the provision of brand solutions, memorialization products, and industrial products. It operates through the following segments: SGK Brand Solutions, Memorialization, Industrial Technologies. The SGK Brand Solutions segment involves in graphics imaging business, including Schawk, and the merchandising solutions operations. The Memorialization segment offers cemetery products, funeral home products, and cremation operations. The Industrial Technologies segment offers includes company’s marking and automation products and fulfillment systems. The company was founded by John Dixon Matthews in 1850 and is headquartered in Pittsburgh, PA.

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