CMCO Q1 Earnings Call: Tariff Pressures, Backlog Growth, and Pending Acquisition Shape Outlook

Material handling equipment manufacturer Columbus McKinnon (NASDAQ:CMCO) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 7% year on year to $246.9 million. Its non-GAAP EPS of $0.60 per share was 3.4% above analysts’ consensus estimates.

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StockStory’s Take

Columbus McKinnon’s first quarter results reflected the effects of shifting demand patterns and operational changes across its business. Management attributed the year-over-year sales decline to softer short-cycle order activity, which CEO David Wilson linked to “near-term policy uncertainty and channel consolidation that has led to channel inventory reductions.” The company also saw a higher mix of longer-cycle project-related business, particularly in its precision conveyance segment, which contributed to a 15% increase in backlog but limited near-term revenue conversion. Operational execution improvements, such as ramping up the Monterrey, Mexico facility and consolidating North American production, also played a role in shaping the quarter’s margin profile.

Looking forward, Columbus McKinnon’s guidance is shaped by ongoing macroeconomic and policy uncertainty, especially regarding tariff impacts and demand volatility. Management’s outlook includes the expectation that tariff-related costs will weigh on margins and adjusted earnings in the first half of the year, with mitigation efforts such as pricing actions, supply chain adjustments, and surcharges planned to offset these headwinds over time. CEO David Wilson emphasized that “we expect tariffs to be a headwind to margin and adjusted EPS in the first half of the year and are targeting the achievement of tariff cost neutrality by the second half.” Additionally, the company’s pending acquisition of Kito Crosby, expected to close by year-end, is seen as a key lever for scaling operations and accelerating strategic priorities, though its financial impact is not yet included in guidance.

Key Insights from Management’s Remarks

Management attributed the quarter’s results to weaker short-cycle sales, a shift toward longer-cycle project orders, and continued cost management efforts amid tariff uncertainty.

• Short-cycle demand softness: Orders for short-cycle products remained flat year-over-year, with continued pressure from policy and macroeconomic uncertainty. This led to reduced sales volume, as inventory reductions continued across distribution channels.
• Project-related order growth: Orders for project-related and precision conveyance solutions saw notable strength. Management highlighted robust demand in end markets such as battery production, life sciences, e-commerce, and aerospace, helping drive a 15% increase in backlog.
• Operational changes in manufacturing: The transition of production to the Monterrey, Mexico facility and the closure of two smaller North American plants impacted gross margins. Management noted underutilization during the ramp-up period but expects improved efficiency as volumes increase.
• Tariff headwinds and mitigation efforts: Tariffs on imports from China and the EU contributed to margin compression. Management outlined a mitigation plan involving price increases, surcharges, and supply chain adjustments, acknowledging a lag before these actions fully offset higher input costs.
• Pending Kito Crosby acquisition: The company continued to advance integration planning for the Kito Crosby deal, with most regulatory approvals received. Management expects the combination to enable cost synergies, expand geographic reach, and strengthen its position in key industrial segments.

Drivers of Future Performance

Management expects ongoing tariff impacts and the mix of project versus short-cycle orders to be the main themes shaping results through the rest of the year.

• Tariff mitigation and pricing actions: Columbus McKinnon plans to address tariff-related cost pressures through a combination of surcharges, selective price increases, and supply chain shifts. Management warned that while these measures are underway, there will be a timing gap before cost neutrality is achieved, potentially affecting volume if higher prices impact competitiveness.
• Backlog conversion and project execution: A strong backlog, driven by precision conveyance and long-cycle project orders, is expected to support revenue as these orders convert over the coming quarters. Management anticipates some lumpiness in project delivery timing but believes ongoing demand in targeted end markets like automation and defense will provide additional support.
• Integration of Kito Crosby: The pending acquisition is expected to generate operational synergies, expand the product portfolio, and accelerate the company’s intelligent motion strategy. However, management emphasized that financial benefits from the acquisition will not be realized until after closing, which is anticipated by year-end.

Catalysts in Upcoming Quarters

In the next few quarters, the StockStory team will be watching (1) the pace and effectiveness of tariff mitigation strategies, (2) the conversion of backlog—especially in precision conveyance and project-related segments—into revenue, and (3) progress toward closing and integrating the Kito Crosby acquisition. We will also monitor how adjustments in pricing and supply chain management influence both volume and profitability as macro conditions evolve.

Columbus McKinnon currently trades at a forward P/E ratio of 5.8×. Should you double down or take your chips? See for yourself in our full research report (it’s free).

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