Specialized equipment manufacturer for infrastructure and vegetation management Alamo Group (NYSE:ALG) met Wall Street’s revenue expectations in Q1 CY2025, but sales fell by 8.1% year on year to $391 million. Its non-GAAP profit of $2.65 per share was 20.1% above analysts’ consensus estimates.

Is now the time to buy Alamo? Find out in our full research report.

Alamo (ALG) Q1 CY2025 Highlights:

Revenue: $391 million vs analyst estimates of $391.1 million (8.1% year-on-year decline, in line) Adjusted EPS: $2.65 vs analyst estimates of $2.21 (20.1% beat) Adjusted EBITDA: $57.29 million vs analyst estimates of $51.23 million (14.7% margin, 11.8% beat) Operating Margin: 11.4%, in line with the same quarter last year Backlog: $702.7 million at quarter end Market Capitalization: $2.08 billion

Jeff Leonard, Alamo Group's President and Chief Executive Officer commented, "The Company's first quarter results reflected another strong performance from our Industrial Equipment Division and notable performance improvement in our Vegetation Management Division."

Company Overview

Expanding its markets through acquisitions since its founding, Alamo (NSYE:ALG) designs, manufactures, and services vegetation management and infrastructure maintenance equipment for governmental, industrial, and agricultural use.

Sales Growth

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Alamo’s 6.3% annualized revenue growth over the last five years was mediocre. This fell short of our benchmark for the industrials sector and is a tough starting point for our analysis.Alamo Quarterly Revenue

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Alamo’s recent performance shows its demand has slowed as its revenue was flat over the last two years.Alamo Year-On-Year Revenue Growth

This quarter, Alamo reported a rather uninspiring 8.1% year-on-year revenue decline to $391 million of revenue, in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 2.8% over the next 12 months. While this projection indicates its newer products and services will fuel better top-line performance, it is still below average for the sector.

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Operating Margin

Alamo has managed its cost base well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 10.1%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Analyzing the trend in its profitability, Alamo’s operating margin rose by 1.6 percentage points over the last five years, as its sales growth gave it operating leverage.Alamo Trailing 12-Month Operating Margin (GAAP)

This quarter, Alamo generated an operating profit margin of 11.4%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Alamo’s EPS grew at a solid 10.7% compounded annual growth rate over the last five years, higher than its 6.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.Alamo Trailing 12-Month EPS (Non-GAAP)

Diving into the nuances of Alamo’s earnings can give us a better understanding of its performance. As we mentioned earlier, Alamo’s operating margin was flat this quarter but expanded by 1.6 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

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 Alamo, 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 Q1, Alamo reported EPS at $2.65, down from $2.67 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Alamo’s full-year EPS of $9.77 to grow 4.6%.

Key Takeaways from Alamo’s Q1 Results

We were impressed by how significantly Alamo blew past analysts’ EBITDA expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Zooming out, we think this was a solid print. The stock traded up 4.2% to $185.95 immediately after reporting.

Alamo may have had a good quarter, but does that mean you should invest right now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.

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