Mayville Engineering Company, Inc. MEC is scheduled to report its fourth-quarter 2023 results on Mar 5, after market close.

In the last reported quarter, earnings topped the Zacks Consensus Estimate by 10.5%, while the net sales missed the same by 0.8%. Moreover, on a year-over-year basis, the top line grew, but the bottom line declined.

MEC’s earnings surpassed expectations in three out of the trailing four quarters and met on the remaining one occasion, the average surprise being 11.4%.

How Are Estimates Placed?

The Zacks Consensus Estimate for fourth-quarter 2023 earnings per share has remained unchanged at 14 cents over the past 60 days. The current estimate suggests a decline of 36.4% from the year-ago quarter’s reported value of earnings of 22 cents per share.

Mayville Engineering Company, Inc. Price and EPS Surprise

Mayville Engineering Company, Inc. price-eps-surprise | Mayville Engineering Company, Inc. Quote

The consensus mark for net sales is pegged at $157.1 million, suggesting growth of 22.2% from the year-ago reported figure of $128.5 million.

Key Factors to Consider

Mayville’s net sales for the to-be-reported quarter are expected to have increased year over year on the back of improved customer interests and order activity. This uptrend is likely to have been reflected by increased volumes in commercial vehicle, military, powersports and agriculture (to a lesser extent) end markets. Also, the completion of the Mid-States Aluminum acquisition in the prior quarter is likely to have aided the company's top-line growth in the fourth quarter.

However, soft contributions from the construction end market and macroeconomic slowdown have been concerning. The company expects that the United Auto Workers strike with one of its customers is likely to have negatively impacted volume growth in the fourth quarter of 2023 to some extent. This trend is likely to continue until a mutual agreement is reached. Nonetheless, the aforementioned tailwinds and volume growth prospects across the end markets are most likely to have more than offset these headwinds.

Meanwhile, the bottom line of the company is expected to have declined year over year due to unabsorbed fixed costs, increased interest and labor expenses, along with an increase in selling, general and administrative costs. That said, the company expects the continuous execution of the MBX initiatives is likely to have partially supported margin expansion and working capital efficiency in the fourth quarter of 2023. The MBX initiatives include sustained volume growth, value-based pricing, improved asset optimization and process improvements.