Transcat’s fourth quarter saw a positive market reaction, with underlying growth fueled by strong demand in both its core calibration services and distribution businesses. Management pointed to robust order realization in highly regulated industries such as life sciences and aerospace, along with continued momentum in instrument rentals and successful integration of recent acquisitions. CEO Lee Rudow credited these factors with helping the company return to historic organic growth levels. The company also noted that onboarding of new customers, while supporting future growth, temporarily weighed on service margins.
Is now the time to buy TRNS? Find out in our full research report (it’s free for active Edge members).
Transcat (TRNS) Q4 CY2025 Highlights:
- Revenue: $83.86 million vs analyst estimates of $80.58 million (25.6% year-on-year growth, 4.1% beat)
- Adjusted EPS: $0.26 vs analyst expectations of $0.32 (17.5% miss)
- Adjusted EBITDA: $10.07 million vs analyst estimates of $10.78 million (12% margin, 6.6% miss)
- Operating Margin: 1%, down from 3.1% in the same quarter last year
- Market Capitalization: $744.8 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Transcat’s Q4 Earnings Call
- Greg Palm (Craig-Hallum): asked about specific drivers of service growth. CFO Thomas Barbato explained that delayed orders ramped up as expected and additional deals closed during the quarter, supporting the return to high single-digit growth.
- Greg Palm (Craig-Hallum): inquired about the magnitude and timeline of start-up costs from onboarding new customers. Barbato noted the costs are not substantial and should normalize as partnerships mature, similar to past experiences.
- Greg Palm (Craig-Hallum): questioned the long-term opportunity in the AI, data center, and power generation markets. Barbato said targeted investments in rentals aligned with these sectors are generating results and could bring recurring calibration service opportunities.
- Maxwell Michaelis (Lake Street Capital): asked if the high single-digit service growth trend would continue next quarter and beyond. Barbato reiterated guidance for high single-digit growth and noted a strong pipeline for ongoing expansion.
- Edward Jackson (Northland): sought perspective on the impact of increased manufacturing and defense spending on long-term growth. CEO Lee Rudow stated that onshoring and rising capital expenditure in regulated industries are positive for Transcat and support recurring revenue growth.
Catalysts in Upcoming Quarters
In the coming quarters, our analysts will be monitoring (1) the pace of new customer onboarding and its impact on service margins, (2) execution of geographic expansion into targeted regions such as Northern California and Dallas, and (3) continued integration of recent acquisitions for both sales and cost synergies. We are also watching for signs of normalized margins as onboarding costs subside and the outcome of the CEO succession process.
Transcat currently trades at $79.45, up from $63.33 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).
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