Luxfer (LXFR)

Speciality material and gas containment company Luxfer (NYSE:LXFR) met Wall Street’s revenue expectations in Q3 CY2025, but sales fell by 6.5% year on year to $92.9 million. Its non-GAAP profit of $0.30 per share was 20% above analysts’ consensus estimates.

Company Overview

With its magnesium alloys used in the construction of the famous Spirit of St. Louis aircraft, Luxfer (NYSE:LXFR) offers specialized materials, components, and gas containment devices to various 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 Worthington (NYSE:WOR), Constellium (NYSE:CSTM), and Dynamic Materials (NASDAQ:BOOM).

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Luxfer’s 3.9% 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. Luxfer’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 2.5% annually.

This quarter, Luxfer reported a rather uninspiring 6.5% year-on-year revenue decline to $92.9 million of revenue, in line with Wall Street’s estimates.

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

Luxfer has bad unit economics for an industrials company, giving it less room to reinvest and develop new offerings. As you can see below, it averaged a 22.6% gross margin over the last five years. That means Luxfer paid its suppliers a lot of money ($77.43 for every $100 in revenue) to run its business.

Luxfer produced a 23.4% gross profit margin in Q3, in line with the same quarter last year. On a wider time horizon, Luxfer’s full-year margin has been trending up over the past 12 months, increasing by 2 percentage points. If this move continues, it could suggest better unit economics due to some combination of stable to improving pricing power and input costs (such as raw materials).

Luxfer has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 9.2%, higher than the broader industrials sector.

Looking at the trend in its profitability, Luxfer’s operating margin decreased by 4.9 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.

This quarter, Luxfer generated an operating margin profit margin of 5.8%, down 4.5 percentage points year on year. Since Luxfer’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.

Luxfer’s weak 3.4% 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 shorter period to see if we are missing a change in the business.

Luxfer’s two-year annual EPS growth of 16.3% was great and topped its two-year revenue performance.

We can take a deeper look into Luxfer’s earnings to better understand the drivers of its performance. While we mentioned earlier that Luxfer’s operating margin declined this quarter, a two-year view shows its margin has expanded. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q3, Luxfer reported adjusted EPS of $0.30, down from $0.33 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Luxfer’s full-year EPS of $1.11 to grow 2.7%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Luxfer has shown weak cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 4.6%, subpar for an industrials business.

Taking a step back, we can see that Luxfer’s margin dropped by 1.8 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 in the middle of an investment cycle.

Luxfer’s free cash flow clocked in at $10.3 million in Q3, equivalent to a 11.1% margin. This result was good as its margin was 1.2 percentage points higher than in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends carry greater meaning.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Luxfer hasn’t been the highest-quality company lately because of its poor revenue and EPS performance, it historically found a few growth initiatives that worked. Its five-year average ROIC was 13.7%, higher than most industrials businesses.

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

Luxfer reported $6 million of cash and $43.3 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 $53.2 million of EBITDA over the last 12 months, we view Luxfer’s 0.7× net-debt-to-EBITDA ratio as safe. We also see its $3.5 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 were impressed by how significantly Luxfer blew past analysts’ EBITDA expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 2.7% to $13.60 immediately after reporting.

Updated: December 3, 2025 at 10:36 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Luxfer, you should also grasp the company’s longer-term business quality and valuation.

We cheer for all companies making their customers lives easier, but in the case of Luxfer, we’ll be cheering from the sidelines. To kick things 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 solid ROIC suggests it has grown profitably in the past, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its projected EPS for the next year is lacking.

Luxfer’s P/E ratio based on the next 12 months is 11.3x. This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $17 on the company (compared to the current share price of $12.86).

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.