Sypris Solutions, Inc. :SYPR-US: Earnings Analysis: 2016 By the Numbers : March 31, 2017

Sypris Solutions, Inc. reports financial results for the year ended December 31, 2016.

We analyze the earnings along side the following peers of Sypris Solutions, Inc. – Jabil Circuit, Inc., Stoneridge, Inc., Meritor, Inc., Dana Incorporated, American Axle & Manufacturing Holdings, Inc., Ducommun Incorporated, WABCO Holdings Inc., IEC Electronics Corp., Allison Transmission Holdings, Inc. and Wabash National Corporation (JBL-US, SRI-US, MTOR-US, DAN-US, AXL-US, DCO-US, WBC-US, IEC-US, ALSN-US and WNC-US) that have also reported for this period.

Highlights

  • Gross margins widened from 0.22% to 0.82% compared to the same period last year, operating (EBITDA) margins now -16.67% from -13.26%.
  • Year-on-year change in operating cash flow of -43.56% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth due to contribution of one-time items.

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

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 91.8 145.32 354.78 310.71 341.6
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 5.86 -27.22 -1.24 -9.93 9.77
Earnings Growth (YOY) 121.53 -2100.16 87.55 -201.62 15.87
Net Margin 6.38 -18.73 -0.35 -3.2 2.86
EPS 0.3 -1.38 -0.06 -0.51 0.13
Return on Equity 25.58 -81.73 -2.4 -16.67 15.84
Return on Assets 8.96 -27.52 -0.9 -6.47 5.81

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Earnings Growth Analysis

The company’s earnings growth has been influenced by the year-on-year improvement in gross margins from 0.22% to 0.82%. However the company’s overhead costs have prevented it from fully capitalizing on these gross margin improvements. In fact, the company’s operating margins (EBITDA margins) showed no improvement over the same period last year.

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

SYPR-US‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 79.49, compared to last year’s level of 36.88 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

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.

SYPR-US‘s change in operating cash flow of -43.56% 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

Margins

The company’s operating (EBIT) margins contracted from -19.48% to -23.52%. In spite of this, the company’s earnings rose. This was influenced primarily by one-time items, which improved pretax margins from -17.36% to 6.91%.

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

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Company Profile

Sypris Solutions, Inc. engages in the provision of technology-based outsourced services and specialty products. It operates through Sypris Technologies and Sypris Electronics business segments. The Sypris Technologies segment involves in the selling of goods and manufacturing services for truck components and assemblies. The Sypris Electronics segment includes manufacturing services, technical services, and products to customers in the market for aerospace and defense electronics. The company was founded in 1997 and is headquartered in Louisville, KY.

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