Albany (AIN)

Industrial equipment and engineered products manufacturer Albany (NYSE:AIN) fell short of the markets revenue expectations in Q3 CY2025, with sales falling 12.4% year on year to $261.4 million. Its non-GAAP profit of $0.71 per share was 2.6% below analysts’ consensus estimates.

Company Overview

Founded in 1895, Albany (NYSE:AIN) is a global textiles and materials processing company, specializing in machine clothing for paper mills and engineered composite structures for aerospace and other industries.

Automation that increases efficiency and connected equipment that collects analyzable data have been trending, creating new demand for general industrial machinery companies. Those who innovate and create digitized solutions can spur sales and speed up replacement cycles, but all general industrial machinery companies are still at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.

Competitors offering similar products include Hexcel (NYSE:HXL), Ducommun (NYSE:DCO), and Park Aerospace (NYSE:PKE).

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, Albany’s 4.3% annualized revenue growth over the last five years was sluggish. This was below our standard for the industrials sector and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Albany’s recent performance shows its demand has slowed as its annualized revenue growth of 2.5% over the last two years was below its five-year trend.

Albany also breaks out the revenue for its most important segments, Machine Clothing and Engineered Composites, which are 66.9% and 33.1% of revenue. Over the last two years, Albany’s Machine Clothing revenue (paper manufacturing belts) averaged 7.7% year-on-year growth. On the other hand, its Engineered Composites revenue (aerospace components) averaged 3% declines.

This quarter, Albany missed Wall Street’s estimates and reported a rather uninspiring 12.4% year-on-year revenue decline, generating $261.4 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 6.6% over the next 12 months. While this projection suggests its newer products and services will spur better top-line performance, it is still below average for the sector.

For industrials businesses, cost of sales is usually comprised of the direct labor, raw materials, and supplies needed to offer a product or service. These costs can be impacted by inflation and supply chain dynamics in the short term and a company’s purchasing power and scale over the long term.

Albany’s gross margin is good compared to other industrials businesses and signals it sells differentiated products, not commodities. As you can see below, it averaged an impressive 33.7% gross margin over the last five years. That means for every $100 in revenue, roughly $33.68 was left to spend on selling, marketing, R&D, and general administrative overhead.

Albany’s gross profit margin was negative 19.1% this quarter. Albany’s full-year margin has also been trending down over the past 12 months, decreasing by 13.6 percentage points. If this move continues, it could suggest deteriorating pricing power and higher input costs (such as raw materials and manufacturing expenses).

Albany has managed its cost base well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 11.6%. This result isn’t too surprising as its gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Albany’s operating margin decreased by 22.3 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q3, Albany generated an operating margin profit margin of negative 44.6%, down 53 percentage points year on year. Since Albany’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Albany, its EPS declined by 7.4% annually over the last five years while its revenue grew by 4.3%. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

We can take a deeper look into Albany’s earnings to better understand the drivers of its performance. As we mentioned earlier, Albany’s operating margin declined by 22.3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Albany, its two-year annual EPS declines of 14.9% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q3, Albany reported adjusted EPS of $0.71, down from $0.80 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Albany’s full-year EPS of $2.59 to grow 29.1%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Albany has shown impressive cash profitability, enabling it to ride out cyclical downturns more easily while maintaining its investments in new and existing offerings. The company’s free cash flow margin averaged 8.8% over the last five years, better than the broader industrials sector.

Taking a step back, we can see that Albany’s margin dropped by 9.9 percentage points during that time. Continued declines could signal it is in the middle of an investment cycle.

Albany’s free cash flow clocked in at $25.91 million in Q3, equivalent to a 9.9% margin. This cash profitability was in line with the comparable period last year and above its five-year average.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Albany historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 9.1%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Albany’s ROIC has decreased significantly over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Albany reported $108.3 million of cash and $480.6 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $213.7 million of EBITDA over the last 12 months, we view Albany’s 1.7× net-debt-to-EBITDA ratio as safe. We also see its $6.78 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We struggled to find many positives in these results. Its Engineered Composites revenue missed and its revenue fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 1.8% to $53.62 immediately following the results.

Updated: December 4, 2025 at 10:19 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Albany.

Albany falls short of our quality standards. First off, its revenue growth was uninspiring over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its sturdy operating margins show it has disciplined cost controls, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its declining EPS over the last five years makes it a less attractive asset to the public markets.

Albany’s P/E ratio based on the next 12 months is 17x. This valuation multiple is fair, but we don’t have much confidence in the company. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $53.50 on the company (compared to the current share price of $48.63).