Kimball Electronics
NASDAQ: KE
$24.88 ▼ -0.03  (-0.12%)
At close: Jul 24, 2026 · 3:59 PM UTC
Financial Ratios
Market Cap609.52 Mn
P/E23.42
P/S0.42
Div. Yield0.00
ROIC (Qtr)0.00
Total Debt (Qtr)162.53 Mn
Revenue Growth (1y) (Qtr)-5.79
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About

Kimball Electronics delivers a package of value that includes durable, high-reliability electronics, higher level and final assemblies, and contract manufacturing organization solutions. The company provides engineering and supply chain support for the production of electronic assemblies and other products, including medical devices, medical disposables, and precision molded plastics. Kimball Electronics serves customers primarily in automotive, medical, and industrial…

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Sector: Industrials Industry: Electrical Equipment & Parts CIK: 0001606757

Investment Thesis

▲ Bull case
  • The medical vertical is showing robust underlying momentum with normalized year over year sales growth of 17% and sequential growth of 10% marking three consecutive quarters of double digit expansion. Growth in Asia exceeded 20% in the quarter reflecting the export strength of the Thailand facility and aligning with global outsourcing trends for drug delivery and diagnostic devices. Management’s target of adding five new medical customers per year is on track and the Indianapolis CMO facility is slated to begin production before year end providing additional capacity to accommodate these new logos and lift and shift opportunities. The combination of organic customer wins and active tuck in M&A discussions positions the medical segment to become a larger share of total revenue and to drive margin expansion once the fixed cost base is absorbed by higher volume.
  • The balance sheet remains strong with cash of $14.9 million and a renewed $300 million revolver providing $358.5 million of total liquidity giving the company ample dry powder to fund capex working capital needs and potential acquisitions. Operating cash flow has been positive for nine consecutive quarters and cash conversion days improved to 90 days down nine days year over year reflecting tighter working capital management and reduced inventory which fell $23.3 million or eight% year over year. Capital expenditures are guided to $50 million to $60 million for the full year with most of the spend directed to leasehold improvements at the Indianapolis facility and scaling new programs in Europe keeping investment focused on growth initiatives. Share repurchases continue with $4 million deployed this quarter and $6.5 million remaining under the authorization demonstrating confidence in intrinsic value while still leaving cash for strategic uses.
  • Geographic diversification provides a buffer against regional weakness with Europe showing strong automotive growth of 20% in Poland and Romania and the industrial segment seeing a rebound in public safety and smart meter sales in that region. The automotive vertical while pressured by lower demand for electronic steering in North America due to legislative changes remains well positioned for next generation braking and steering programs and could benefit if macroeconomic conditions improve or if higher gasoline prices renew consumer interest in EV platforms. The industrial segment’s offsetting strengths in public safety and smart meters coupled with an ongoing recovery in Europe suggest the near term decline may be more cyclical than structural. Overall the company’s mix of North America Asia and Europe each representing roughly one third of sales reduces reliance on any single market and supports steady top line performance.
  • Management commentary indicates that pricing in the medical CMO space remains aggressive fair but still rational supported by the need for multiple suppliers in the supply chain which should limit margin erosion from competitive bidding. The effective tax rate is expected to fall to approximately 30% for the full fiscal year down from 34.9% in the quarter and from 46.6% a year ago providing a modest boost to net income. Guidance for fiscal 2026 has been affirmed with revenue of $1.4 billion to $1.46 billion and adjusted operating income margin expected at the high end of the 4.2% to 4.5% range implying Q4 sales of $370 million to $380 million and margin of 4.4% to 4.6%. The company’s track record of nine straight quarters of positive operating cash flow and improving working capital metrics demonstrates operational discipline that can sustain growth even in a modest macro environment.
▼ Bear case
  • The new Indianapolis medical facility is expected to weigh on gross margin with a projected 40 to 50 basis point impact in fiscal 2027 as fixed costs are incurred before sufficient revenue is generated to absorb them. Management noted that the margin drag will persist until fiscal 2028 when higher volume is expected to start covering the expense. This near term headwind could offset the benefits of medical segment growth and keep overall profitability below historical levels. Investors should watch the ramp up schedule and any delays in customer qualification that could prolong the margin pressure.
  • Automotive sales are being held back by reduced demand for electronic steering in North America following legislative changes that cut EV incentives and the company has acknowledged that demand for awarded programs has not met expectations. While Europe showed growth of 20% in Poland and Romania the declines in Asia and North America outweigh that strength leaving the vertical down three% year over year. The segment’s performance remains tightly linked to macroeconomic factors such as gasoline prices and consumer sentiment which could keep the recovery uncertain. If the macro environment does not improve the automotive vertical may continue to be a drag on consolidated results.
  • Industrial results were hurt by lower demand for HVAC systems in North America and the public safety and smart meter offset may be threatened by a protracted war in the Middle East that could disrupt European demand for those products. The company noted that the near term outlook for the industrial segment could be affected by geopolitical instability adding another layer of uncertainty beyond the cyclical HVAC downturn. Inventory reductions of eight% year over year may reflect destocking rather than underlying demand strength raising questions about the sustainability of the recent working capital improvements. Continued reliance on inventory drawdowns to boost cash flow could limit the ability to support future production increases.
  • Selling general and administrative expenses rose to 3.7% of sales from 3% a year ago as the company invests in business transformation and IT initiatives and if revenue growth does not keep pace this higher cost base could compress operating margins. The company’s ability to add five new medical customers per year is a key assumption for future growth and any shortfall in new logo acquisition would directly affect the top line and the utilization of the Indianapolis facility. While the balance sheet shows improvement with debt down about nine% year over year the revolver renewal provides liquidity but the absolute cash position remains modest at $14.9 million leaving little buffer for unexpected costs or capex overruns. Share repurchases of $4 million this quarter use cash that could alternatively be directed toward debt reduction or growth investments.

Geographical Breakdown of Revenue (2025)

Product and Service Breakdown of Revenue (2025)

Peer Comparison

Companies in the Electrical Equipment & Parts
S.No. Ticker Company Market CapP/EP/STotal Debt (Qtr)
1 ELVA Electrovaya Inc. 424.38 Bn51,112.155,957.020.03 Bn
2 VRT Vertiv Holdings Co 116.45 Bn74.7210.742.92 Bn
3 BE Bloom Energy Corp 61.23 Bn10,149.4525.00-
4 HUBB Hubbell Inc 25.93 Bn28.494.332.57 Bn
5 NVT nVent Electric plc 25.66 Bn2,566.345.931.56 Bn
6 AEIS Advanced Energy Industries Inc 11.88 Bn-9,900.656.241.14 Bn
7 AYI Acuity Inc. (De) 9.90 Bn585.612.150.70 Bn
8 POWL Powell Industries Inc 9.42 Bn47.258.32-