Omega Flex's Q3 Earnings Slip Y/Y Due to Elevated Costs

Shares of Omega Flex, Inc. OFLX have declined 4.6% since the company reported its earnings for the quarter ended Sept. 30, 2025. This compares to the S&P 500 index’s 0.6% decline over the same time frame. Over the past month, the stock has declined 11.7% compared with the S&P 500’s 1.8% growth, signaling a significantly weaker sentiment surrounding the company’s recent performance and outlook.

Omega Flex reported third-quarter 2025 earnings per share (EPS) of 37 cents, down from 46 cents in the prior-year quarter. 

Revenues of $24.2 million represented a 2.6% decrease from $24.9 million in the same period a year ago. Net income attributable to the company declined to $3.7 million from $4.6 million, a drop of 20.1%.

Omega Flex, Inc. Price, Consensus and EPS Surprise

Omega Flex, Inc. price-consensus-eps-surprise-chart | Omega Flex, Inc. Quote

Operating Margins Under Pressure

Operating profit for the third quarter dropped to $4.2 million from $5.5 million, a decline of 23.5%. Gross profit margin narrowed to 60.2% from 61.7% in the prior year, reflecting a combination of higher staffing-related expenses — particularly employee benefits — and increased tariff costs. The company’s efforts to manage expenses were evident in relatively stable selling expenses, which came in at $5 million, nearly flat year over year. However, selling expenses rose slightly as a percentage of revenue, moving from 20% to 20.6%.

General and administrative expenses rose 6.1% to $4.1 million in the third quarter, driven by higher benefits-related costs. This increase was partly offset by lower incentive-based compensation. Administrative costs represented 16.8% of revenues in the quarter, up from 15.5% in the third quarter of 2024. Engineering expenses saw a notable jump of 24.9%, reaching $1.3 million. The increase stemmed from new product development and certification expenses, as well as added staffing. Engineering costs accounted for 5.5% of revenues in the latest quarter, up from 4.3% a year earlier.

Management Commentary

In its quarterly discussion, Omega Flex emphasized that softer demand in the residential construction market, largely driven by high construction and housing costs, was the main contributor to lower unit sales volume. The company continues to focus on its core product offerings, including its TracPipe CSST and CounterStrike systems used for flexible gas piping, as well as the MediTrac corrugated medical tubing designed for healthcare facilities. Management highlighted that the MediTrac product line offers faster installation than traditional rigid copper pipe, which may present future growth opportunities despite the current market headwinds.

Factors Influencing Results

The decline in both revenues and profitability can be attributed to multiple operational and external challenges. These included elevated employee-related costs, including rising benefit expenses, and the impact of tariffs on imported materials. Additionally, interest income declined to $0.5 million from $0.6 million due to moderating market rates, which weighed on the company’s non-operating income. Currency fluctuations also had a modest impact. The company reported a small foreign exchange loss of $1,000 in the third quarter, in contrast to a $0.02 million gain a year earlier. This reflects the movement of the U.S. dollar relative to the British pound and euro, currencies relevant to Omega Flex’s UK and French operations.

Financial Position

Omega Flex maintained a strong liquidity position, ending the quarter with $49.4 million in cash and no outstanding borrowings under its $15 million revolving credit facility. Management stated it believes its cash reserves and available credit will be sufficient to meet the company’s capital needs over at least the next twelve months. It also acknowledged that future capital requirements will depend on revenue growth, expansion initiatives and any potential investments or acquisitions.

Other Developments

The company continued its policy of regular dividend payments, declaring 34 cents per share for the third quarter. This brought total dividends declared for the first nine months of 2025 to $1.02 per share, slightly above the $1.01 declared during the same period in 2024. Total dividend payments for the year-to-date period amounted to $10.3 million, consistent with historical payout patterns.

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This article originally published on Zacks Investment Research (zacks.com).

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