Atkore (ATKR)

Electrical safety company Atkore (NYSE:ATKR) reported Q3 CY2025 results exceeding the market’s revenue expectations, but sales fell by 4.6% year on year to $752 million. Its non-GAAP profit of $0.69 per share was 45.1% below analysts’ consensus estimates.

Company Overview

Protecting the things that power our world, Atkore (NYSE:ATKR) designs and manufactures electrical safety products.

Like many equipment and component manufacturers, electrical systems companies are buoyed by secular trends such as connectivity and industrial automation. More specific pockets of strong demand include Internet of Things (IoT) connectivity and the 5G telecom upgrade cycle, which can benefit companies whose cables and conduits fit those needs. But like the broader industrials sector, these companies are also at the whim of economic cycles. Interest rates, for example, can greatly impact projects that drive demand for these products.

Competitors of Atkore include Hubbell (NYSE:HUBB), Pentair (NYSE:PNR), and Legrand (EPA:LR).

A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Luckily, Atkore’s sales grew at a solid 10.1% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Atkore’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 10% over the last two years.

This quarter, Atkore’s revenue fell by 4.6% year on year to $752 million but beat Wall Street’s estimates by 2.5%.

Looking ahead, sell-side analysts expect revenue to decline by 1.3% over the next 12 months. Although this projection is better than its two-year trend, it’s hard to get excited about a company that is struggling with demand.

Cost of sales for an industrials business 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.

Atkore’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 $35.70 was left to spend on selling, marketing, R&D, and general administrative overhead.

In Q3, Atkore produced a 19.7% gross profit margin, down 7.8 percentage points year on year. Atkore’s full-year margin has also been trending down over the past 12 months, decreasing by 9.9 percentage points. If this move continues, it could suggest deteriorating pricing power 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.

Atkore has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 21.8%. This result isn’t too surprising as its gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Atkore’s operating margin decreased by 26.5 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, Atkore generated an operating margin profit margin of negative 7.5%, down 20.5 percentage points year on year. Since Atkore’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.

Atkore’s decent 9.6% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

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.

Atkore’s two-year annual EPS declines of 44.4% were bad and lower than its two-year revenue losses.

We can take a deeper look into Atkore’s earnings to better understand the drivers of its performance. Atkore’s operating margin has declined over the last two 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.

In Q3, Atkore reported adjusted EPS of $0.69, down from $2.43 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Atkore’s full-year EPS of $5.99 to shrink by 9.6%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Atkore has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 14.9% over the last five years.

Taking a step back, we can see that Atkore’s margin dropped by 7 percentage points during that time. Continued declines could signal it is in the middle of an investment cycle.

Atkore’s free cash flow clocked in at $188.2 million in Q3, equivalent to a 25% margin. This result was good as its margin was 5.5 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends trump fluctuations.

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).

Although Atkore hasn’t been the highest-quality company lately, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 36.4%, splendid for an industrials business.

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, Atkore’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Atkore reported $506.7 million of cash and $928.1 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 $386.4 million of EBITDA over the last 12 months, we view Atkore’s 1.1× net-debt-to-EBITDA ratio as safe. We also see its $17.42 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 enjoyed seeing Atkore beat analysts’ revenue expectations this quarter. We were also glad its full-year EBITDA guidance slightly exceeded Wall Street’s estimates. On the other hand, its EBITDA missed and its EPS fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 9.2% to $60.41 immediately following the results.

Updated: December 4, 2025 at 9:05 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 Atkore.

Atkore falls short of our quality standards. Although its revenue growth was solid over the last five years, it’s expected to deteriorate over the next 12 months and its diminishing returns show management's prior bets haven't worked out. And while the company’s impressive operating margins show it has a highly efficient business model, the downside is its projected EPS for the next year is lacking.

Atkore’s P/E ratio based on the next 12 months is 12.8x. 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 $64 on the company (compared to the current share price of $64.57).