The sequential revenue improvement and backlog growth suggest a potential bottom in demand, but the 68% net income collapse and 240 bps gross margin compression signal ongoing operational weakness. Monitor Q2 2026 for racks business recovery and margin stabilization before considering a position. The $67M revolver availability provides a liquidity buffer, but no catalyst for near-term upside is evident.
Price Chart
Executive Summary
Eastern Co reported Q1 2026 net sales of $59.7M, down 5.7% YoY from $63.3M, and net income of $0.6M ($0.11/diluted share), down 68% from $1.9M ($0.31) in Q1 2025. Gross margin contracted to 20.0% from 22.4% due to lower volume, pricing pressure, and labor inefficiencies, while adjusted EBITDA fell 35% to $3.0M. The sequential revenue improvement from Q4 2025 and backlog growth to $82.2M are positive, but the sharp earnings decline and margin compression make this a clearly bearish report.
Key Financial Metrics
Key Facts
- Q1 2026 net sales $59.7M, down 5.7% YoY from $63.3M
- Net income $0.6M ($0.11/diluted share), down 68% from $1.9M ($0.31) YoY
- Gross margin 20.0% vs 22.4% YoY, driven by lower volume, pricing pressure, and labor inefficiencies
- Adjusted EBITDA from continuing ops $3.0M, down 35% from $4.6M YoY
- Backlog grew to $82.2M from $81.1M at year-end 2025, but down from $85.9M a year ago
- Company reduced debt by $1.0M and repurchased 21,120 shares for $422,355 in Q1
- Racks business underperformance impacted net income; management expects impact contained to H1 2026
- No formal guidance provided; management commentary points to improving demand environment in H2 2026
Financial Impact
Net income declined ~68% YoY to $0.6M; adjusted EBITDA fell 35% to $3.0M; gross margin contracted 240 bps to 20.0%
Risk Factors
- Continued softness in returnable transport packaging demand
- Racks business underperformance may extend beyond H1 2026
- Pricing pressure and labor inefficiencies could persist, further compressing margins
- No formal guidance provided, creating uncertainty around earnings trajectory
Market Snapshot
Investment Themes
Documents Analyzed
This report is based on 6 SEC documents filed with EDGAR.
| Document | Accession Number |
|---|---|
| 8-K Filing (Primary) | 0001654954-26-004737 |
| Document: eml_8k.htm | 0001654954-26-004737 |
| Document: 0001654954-26-004737-index-headers.html | 0001654954-26-004737 |
| Document: 0001654954-26-004737-index.html | 0001654954-26-004737 |
| Document: 0001654954-26-004737.txt | 0001654954-26-004737 |
| 8-K Data (Synthetic) | 0001654954-26-004737 |
Filters
| Type | Now | ||||
|---|---|---|---|---|---|
Sep 17, 2026 5w ago | Insider Cluster | $24.66 | awaiting T+60 | — | $24.13 (−2.15%) |
Aug 14, 2026 10w ago | Institutional Cluster | $25.11 | awaiting T+60 | — | $24.13 (+3.90%) |
Aug 11, 2026 10w ago | 8-K | $25.65 | awaiting T+60 | — | $24.13 (+5.93%) |
Jun 2, 2026 20w ago | 8-K | $21.54 $26.03 | ▲ +20.82% | ▲ +19.70% | $24.13 (+12.02%) |
May 12, 2026 23w ago | 8-K | $20.82 $24.90 | ▼ −19.60% | ▼ −15.16% | $24.13 (−15.90%) |
Mar 23, 2026 31w ago | DEFA14A | $20.64 $23.68 | ▲ +14.73% | ▲ +0.40% | $24.13 (+16.91%) |
Mar 16, 2026 32w ago | Insider Cluster | $20.53 $21.90 | ▲ +6.67% | ▼ −3.81% | $24.13 (+17.54%) |
Mar 9, 2026 33w ago | Insider Cluster | $19.15 $21.61 | ▲ +12.85% | ▲ +1.05% | $24.13 (+26.01%) |
Mar 6, 2026 33w ago | Insider Cluster | $18.54 $21.52 | ▲ +16.07% | ▲ +3.29% | $24.13 (+30.15%) |
US Market Status
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