Transcat beats revenue estimates but misses earnings targets
Laboratory services firm reaffirms fiscal 2026 guidance despite net loss as service growth rebounds
Transcat reported quarterly revenue that exceeded analyst expectations, though earnings per share fell short as the laboratory instrumentation and calibration services provider recorded a net loss compared with a year-earlier profit.
The Rochester, New York-based company generated $83.9 million in revenue for its fiscal third quarter, surpassing the $80.6 million consensus estimate and representing a 25.6 percent increase from the same period last year, according to company data filed with the Securities and Exchange Commission. The top-line performance was driven primarily by strength in the company's core services business, where organic growth returned to 7 percent.
Despite the revenue beat, Transcat posted adjusted earnings per share of 26 cents, missing analyst expectations of 31.5 cents. The company recorded a GAAP net loss of $1.1 million, reversing from net income of $2.4 million in the prior year's third quarter. Adjusted EBITDA rose 27.2 percent to $10.1 million, reflecting improved operational efficiency in the services segment.
Management reaffirmed its fiscal 2026 service revenue expectations and anticipates high single-digit organic growth in the fourth quarter. The guidance comes as the company carries $99.9 million in debt with a leverage ratio of 2.00, metrics that investors will monitor for potential impact on future capital allocation decisions.
Transcat shares have traded below their 200-day moving average of $73.44 in recent sessions, though the stock remains above its 50-day average of $58.50. The company's current market capitalization stands at $562.6 million, with shares changing hands at $63.33 as of Tuesday afternoon trading. The stock has retreated significantly from its 52-week high of $97.08, but remains well above the year's low of $50.23.
The mixed earnings report highlights Transcat's ongoing transition following a period of strategic expansion. Revenue growth of 21.3 percent year-over-year in the most recent quarter suggests the company's investments in service capabilities and geographic expansion are gaining traction, even as profitability metrics face pressure from integration costs and increased debt servicing obligations.
Analysts maintain a largely constructive outlook on the stock, with a consensus target price of $108 implying approximately 71 percent upside from current levels. The analyst consensus comprises two buy ratings and one hold recommendation, according to market data. Institutional investors control 98.95 percent of outstanding shares, indicating high conviction among large money managers despite recent volatility.
Transcat's forward price-to-earnings ratio of 25.0 suggests investors are pricing in significant earnings growth over the coming year. The company's trailing multiple of 49.43 reflects depressed recent earnings that management expects to normalize as integration efforts progress and the service business continues its recovery.
The calibration and metrology services industry has experienced consolidation in recent years, with Transcat pursuing acquisitions to expand its geographic footprint and service offerings. The company's ability to sustain service organic growth at 7 percent while integrating acquisitions will be a key factor in determining whether it can meet analyst expectations for fiscal 2026.
Investors will focus on fourth-quarter execution, particularly the company's ability to convert revenue growth into improved profitability and reduce the leverage ratio from current levels. The high single-digit organic growth guidance for the final quarter suggests management remains confident in the underlying demand environment across Transcat's core end markets, which include pharmaceuticals, biotechnology, and manufacturing sectors.