Espey Manufacturing generated net income of $2.8 million, or $0.99 per share, in Q2, up 47% from $1.9 million a year earlier, on net sales of $12.1 million, down 10.8% year over year. The stock declined 12.8% after the report compared with a 2% drop in the S&P 500 during the same period.

Gross profit rose to $4.2 million from $3.2 million, lifting gross margin to 34.7% from 23.2%, driven by favorable product mix, labor efficiencies and process improvements, partially offset by higher costs on fixed-price engineering contracts. SG&A expenses held flat at $1.1 million, with higher ESOP contributions and salaries balanced by lower stock option charges.

Total backlog reached $134.7 million, up from $120.1 million a year earlier, with $88.8 million tied to three major customers and $26.8 million expected to ship by June 30, 2026. New orders of $16.3 million in the first half trailed last year’s $46.9 million, which included two large multi-year awards.

Management forecasts higher full-year revenues based on existing backlog and expects net income to approximate fiscal 2025 levels, despite lighter first-half sales. The company identified ongoing inflationary pressures, tariffs and potential supply chain or labor constraints as risks but does not foresee a material impact on operating income under current conditions.