ROG Q2 Deep Dive: Cost Actions and Operational Changes Amid EV Headwinds

Engineered materials manufacturer Rogers (NYSE:ROG) beat Wall Street’s revenue expectations in Q2 CY2025, but sales fell by 5.3% year on year to $202.8 million. Guidance for next quarter’s revenue was better than expected at $207.5 million at the midpoint, 0.9% above analysts’ estimates. Its non-GAAP profit of $0.34 per share was 32% below analysts’ consensus estimates.

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StockStory’s Take

Rogers delivered second quarter results that exceeded Wall Street’s revenue expectations, prompting a positive market reaction. Management attributed the performance to rising demand in industrial, portable electronics, aerospace and defense, and advanced driver-assistance systems (ADAS) end markets. However, the company faced challenges in its electric vehicle (EV) segment, particularly due to regional disparities in EV growth and competitive pressures in Europe, leading to lower demand and pricing pressure for power substrates. Interim CEO Ali El-Haj highlighted ongoing organizational changes aimed at increasing execution speed and accountability.

Looking ahead, Rogers’ forward guidance is driven by expectations of continued improvement in gross margins and profitability, supported by cost containment and restructuring initiatives. Management believes that ramping up manufacturing in China, reducing European capacity, and accelerating new product introductions will position the company for more sustainable growth. CFO Laura Russell noted that anticipated savings from restructuring and ongoing operational improvements are expected to benefit margins, even as challenges in the EV market persist. El-Haj emphasized the importance of faster product development cycles and shorter lead times to better meet customer needs.

Key Insights from Management’s Remarks

Management connected the second quarter’s results to operational changes and shifting EV market dynamics, while outlining steps for cost management and accelerated execution.

• Leadership transition underway: Interim CEO Ali El-Haj stepped in, focusing on leveraging existing strengths while speeding execution and improving internal accountability, with no major strategic overhaul planned.
• EV market divergence: The curamik business faced lower demand and pricing pressure as EV production slowed in North America and Europe but remained strong in China, prompting regional capacity adjustments.
• Manufacturing realignment: Rogers is expanding manufacturing in China and reducing it in Europe to align with EV market trends, aiming for annual cost savings exceeding $13 million and a more competitive cost structure.
• End-market recovery: Industrial, aerospace and defense, and ADAS sectors showed quarter-on-quarter growth, with industrial seeing double-digit gains and portable electronics benefitting from seasonal demand.
• Product and R&D focus: Management identified accelerating product development and next-generation launches as critical to capturing new opportunities, particularly in data centers, industrial automation, and evolving ADAS applications.

Drivers of Future Performance

Rogers’ updated guidance is shaped by restructuring actions, operational improvements, and the evolving demand landscape across global end markets.

• Cost savings from restructuring: Management expects recent European restructuring and ongoing cost containment measures to drive margin improvements, with total annual run-rate savings projected at $45 million by 2026, though the full impact will phase in over time.
• Shift to local-for-local manufacturing: Expanding the Suzhou, China facility and rebalancing European operations are designed to better serve growing Asian demand and mitigate exposure to slower EV markets in the West, supporting both growth and margin resilience.
• Accelerated product cycles: Management is prioritizing faster product development and reducing lead times by up to 50-60%, aiming to improve customer responsiveness and capture new design wins, especially in industrial and electronics applications.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory team will closely monitor (1) the impact of European restructuring and ramp-up of Chinese manufacturing on margins, (2) the pace of new product introductions and design wins in industrial, data center, and ADAS markets, and (3) evidence of stabilization or recovery in EV-related demand. Execution of lead time reductions and realization of targeted cost savings will be essential to tracking Rogers’ progress.

Rogers currently trades at $74.54, up from $65.58 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).

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