Industrial components supplier NN (NASDAQ: NNBR) missed Wall Street’s revenue expectations in Q2 CY2025, with sales falling 12.3% year on year to $107.9 million. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $445 million at the midpoint. Its GAAP loss of $0.26 per share was 60% below analysts’ consensus estimates.

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Harold Bevis, President and Chief Executive Officer, said, “NN delivered a solid quarter for gross margins, operating income, adjusted operating income, and adjusted EBITDA. We are pleased with our reported results, new business acquisition, and new business launches. We leveraged the soft market environment to upsize our business development activities and investments. Our soft top-line centers around certain automotive customers. Conversely, we have been able to partially offset this weakness through the contribution of new business launches and precious metals pass-through pricing.”

Company Overview

Formerly known as Nuturn, NN (NASDAQ: NNBR) provides metal components, bearings, and plastic and rubber components to the automotive, aerospace, medical, and industrial sectors.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Unfortunately, NN struggled to consistently increase demand as its $433.7 million of sales for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and is a sign of poor business quality.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. NN’s recent performance shows its demand remained suppressed as its revenue has declined by 6.6% annually over the last two years.

This quarter, NN missed Wall Street’s estimates and reported a rather uninspiring 12.3% year-on-year revenue decline, generating $107.9 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 3.4% over the next 12 months. Although this projection suggests its newer products and services will fuel better top-line performance, it is still below the sector average.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

NN’s high expenses have contributed to an average operating margin of negative 3.3% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

Analyzing the trend in its profitability, NN’s operating margin decreased by 5.2 percentage points over the last five years. NN’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

NN’s operating margin was negative 1.4% this quarter. The company's consistent lack of profits raise a flag.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Although NN’s full-year earnings are still negative, it reduced its losses and improved its EPS by 30.6% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For NN, EPS didn’t budge over the last two years, a regression from its five-year trend. We hope it can revert to earnings growth in the coming years.

In Q2, NN reported EPS at negative $0.26, down from negative $0.12 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects NN to improve its earnings losses. Analysts forecast its full-year EPS of negative $1.13 will advance to negative $0.59.

Key Takeaways from NN’s Q2 Results

We were impressed by NN’s optimistic full-year EBITDA guidance, which blew past analysts’ expectations. We were also glad its full-year revenue guidance was in line with Wall Street’s estimates. On the other hand, its revenue missed and its EPS fell short of Wall Street’s estimates. Overall, this quarter was mixed. The stock traded up 2.3% to $2.20 immediately after reporting.

Should you buy the stock or not? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.