Columbus McKinnon (CMCO)

Material handling equipment manufacturer Columbus McKinnon (NASDAQ:CMCO) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 7% year on year to $246.9 million. Its non-GAAP profit of $0.60 per share was 3.4% above analysts’ consensus estimates.

Company Overview

With 19 different brands across the globe, Columbus McKinnon (NASDAQ:CMCO) offers material handling equipment for the construction, manufacturing, and transportation 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 Terex (NYSE:TEX), Manitowoc (NYSE:MTW), and Hyster-Yale (NYSE:HY)

A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Columbus McKinnon’s 3.5% annualized revenue growth over the last five years was sluggish. This fell short of our benchmark for the industrials sector and is a rough starting point 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. Columbus McKinnon’s recent performance shows its demand has slowed as its annualized revenue growth of 1.4% over the last two years was below its five-year trend.

This quarter, Columbus McKinnon missed Wall Street’s estimates and reported a rather uninspiring 7% year-on-year revenue decline, generating $246.9 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 3.1% over the next 12 months. Although this projection indicates its newer products and services will fuel better top-line performance, it is still below average for the sector.

Gross profit margin is a critical metric to track because it sheds light on its pricing power, complexity of products, and ability to procure raw materials, equipment, and labor.

Columbus McKinnon’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 35.7% gross margin over the last five years. That means for every $100 in revenue, roughly $35.74 was left to spend on selling, marketing, R&D, and general administrative overhead.

This quarter, Columbus McKinnon’s gross profit margin was 32.3%, down 3 percentage points year on year. Columbus McKinnon’s full-year margin has also been trending down over the past 12 months, decreasing by 2.2 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and manufacturing expenses).

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Columbus McKinnon has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 8.4%, higher than the broader industrials sector.

Analyzing the trend in its profitability, Columbus McKinnon’s operating margin decreased by 3.2 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 Q1, Columbus McKinnon generated an operating profit margin of 2%, down 8.1 percentage points year on year. Since Columbus McKinnon’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.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Columbus McKinnon, its EPS declined by 2.2% annually over the last five years while its revenue grew by 3.5%. This tells us the company became less profitable on a per-share basis as it expanded.

Diving into the nuances of Columbus McKinnon’s earnings can give us a better understanding of its performance. As we mentioned earlier, Columbus McKinnon’s operating margin declined by 3.2 percentage points over the last five years. Its share count also grew by 19.5%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Columbus McKinnon, its two-year annual EPS declines of 8.2% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q1, Columbus McKinnon reported EPS at $0.60, down from $0.75 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 3.4%. Over the next 12 months, Wall Street expects Columbus McKinnon’s full-year EPS of $2.48 to grow 8.3%.

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.

Columbus McKinnon has shown mediocre cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 5.8%, subpar for an industrials business.

Taking a step back, we can see that Columbus McKinnon’s margin dropped by 10.8 percentage points during that time. This along with its unexciting margin put the company in a tough spot, and shareholders are likely hoping it can reverse course. If the trend continues, it could signal it’s becoming a more capital-intensive business.

Columbus McKinnon’s free cash flow clocked in at $29.47 million in Q1, equivalent to a 11.9% 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).

Columbus McKinnon historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.2%, 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. Over the last few years, Columbus McKinnon’s ROIC averaged 2.8 percentage point decreases each year. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Columbus McKinnon reported $63.8 million of cash and $471 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 $150.5 million of EBITDA over the last 12 months, we view Columbus McKinnon’s 2.7× net-debt-to-EBITDA ratio as safe. We also see its $15.7 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.

It was encouraging to see Columbus McKinnon beat analysts’ EBITDA expectations this quarter. We were also happy its EPS outperformed Wall Street’s estimates. On the other hand, its revenue slightly missed. Overall, this quarter could have been better. The stock traded down 1.1% to $17.55 immediately following the results.

Updated: June 14, 2025 at 11:35 PM EDT

Are you wondering whether to buy Columbus McKinnon or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

We cheer for all companies making their customers lives easier, but in the case of Columbus McKinnon, we’ll be cheering from the sidelines. First off, its revenue growth was weak over the last five years, and analysts don’t see anything changing over the next 12 months. And while its gross margins indicate healthy unit economics, the downside is its declining EPS over the last five years makes it a less attractive asset to the public markets. On top of that, its cash profitability fell over the last five years.

Columbus McKinnon’s P/E ratio based on the next 12 months is 5.6x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $27.50 on the company (compared to the current share price of $15.62).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.