Eastern Co. Q3 Profit Plunges Amid Sales Decline, Discontinued Ops Boost Net

TL;DR

**EML's core business is bleeding, but the Big 3 Mold sale is a one-time band-aid; stay away until they show organic growth.**

AI Summary

EASTERN CO reported a significant decline in net sales and net income from continuing operations for both the three and nine months ended September 27, 2025. Net sales for the three months decreased by 22.4% to $55,336,452 from $71,274,757 in the prior year, while net sales for the nine months fell by 7.1% to $191,437,750 from $206,068,490. Net income from continuing operations plummeted by 87.6% to $578,936 for the three months and by 59.0% to $4,782,054 for the nine months. The company's operating profit also saw a substantial reduction, dropping 74.6% to $1,722,713 for the quarter and 50.4% to $8,505,969 for the nine-month period. Discontinued operations, primarily the sale of Big 3 Precision Mold Services, Inc. (Big 3 Mold) on April 30, 2025, resulted in a net gain of $1,180,739 for the nine months of 2025, a stark contrast to the $21,517,715 net loss in the prior year. Despite the operational downturn, the company's total assets decreased to $220,049,740 from $235,308,747, and total liabilities decreased to $95,767,297 from $114,617,348, largely due to the removal of discontinued operations' assets and liabilities. Cash and cash equivalents declined to $9,227,940 from $14,010,388 at the end of 2024.

Why It Matters

Eastern Co.'s significant drop in continuing operations revenue and profit signals potential headwinds for its core businesses, which could impact future investor returns and employee stability. The strategic divestiture of Big 3 Mold, while improving the net income figure for the nine-month period, masks underlying operational challenges in its remaining segments. Investors should scrutinize whether the remaining businesses can regain growth momentum in a competitive landscape. The reduction in total liabilities and assets post-divestiture suggests a leaner company, but its ability to generate sustainable cash flow from continuing operations will be key to long-term value creation and market positioning against rivals.

Risk Assessment

Risk Level: high — The company experienced a substantial 22.4% decline in net sales for the three months ended September 27, 2025, and an 87.6% drop in net income from continuing operations to $578,936. This significant deterioration in core business performance, coupled with a 50.4% decrease in operating profit for the nine-month period, indicates high operational risk and potential challenges in maintaining profitability.

Analyst Insight

Investors should exercise caution and consider reducing exposure to EML. The sharp decline in continuing operations revenue and profit suggests fundamental business challenges that the Big 3 Mold divestiture only temporarily masks. Wait for clear signs of organic growth and improved profitability in the remaining segments before considering an investment.

Financial Highlights

revenue

$55.3M

operating Margin

3.1%

total Assets

$220.0M

net Income

$578,936

eps

$0.10

gross Margin

22.3%

cash Position

$9.2M

revenue Growth

-22.4%

Key Numbers

• $55.3M — Net Sales (Q3 2025) (Decreased 22.4% from $71.3M in Q3 2024)
• $0.10 — Basic EPS from Continuing Operations (Q3 2025) (Decreased from $0.75 in Q3 2024)
• $578,936 — Net Income from Continuing Operations (Q3 2025) (Decreased 87.6% from $4,668,798 in Q3 2024)
• $1,722,713 — Operating Profit (Q3 2025) (Decreased 74.6% from $6,794,952 in Q3 2024)
• $191.4M — Net Sales (9 Months 2025) (Decreased 7.1% from $206.1M in 9 Months 2024)
• $4,782,054 — Net Income from Continuing Operations (9 Months 2025) (Decreased 59.0% from $11,675,715 in 9 Months 2024)
• $1,180,739 — Net Income on Discontinued Operations (9 Months 2025) (Improved from a loss of $21,517,715 in 9 Months 2024)
• $9,227,940 — Cash and Cash Equivalents (Sept 27, 2025) (Decreased from $14,010,388 at Dec 28, 2024)
• $12,628,155 — Net Cash Used in Financing Activities (9 Months 2025) (Increased from $513,301 in 9 Months 2024)
• 6,068,650 — Shares Outstanding (Sept 27, 2025) (Slightly decreased from 6,163,138 at Dec 28, 2024)

Key Players & Entities

• EASTERN CO (company) — registrant
• Big 3 Precision Mold Services, Inc. (company) — discontinued operation
• Bloomberg (company) — publisher
• SEC (regulator) — filing authority
• $55,336,452 (dollar_amount) — net sales for three months ended September 27, 2025
• $71,274,757 (dollar_amount) — net sales for three months ended September 28, 2024
• $578,936 (dollar_amount) — net income from continuing operations for three months ended September 27, 2025
• $4,668,798 (dollar_amount) — net income from continuing operations for three months ended September 28, 2024
• $1,180,739 (dollar_amount) — net income on discontinued operations for nine months ended September 27, 2025
• $21,517,715 (dollar_amount) — net loss on discontinued operations for nine months ended September 28, 2024

FAQ

Risk Factors

• Significant Decline in Sales and Profitability [high — operational]: Net sales decreased by 22.4% to $55.3M in Q3 2025 and 7.1% to $191.4M for the nine months. Net income from continuing operations saw a drastic drop of 87.6% to $578,936 for the quarter and 59.0% to $4.8M for the nine months. This severe operational downturn indicates potential issues with product demand, market share, or competitive pressures.
• Deteriorating Cash Position [high — financial]: Cash and cash equivalents declined to $9.2M as of September 27, 2025, from $14.0M at the end of 2024. This reduction, coupled with a significant increase in net cash used in financing activities to $12.6M for the nine months of 2025 (up from $0.5M in 2024), suggests potential cash flow challenges and increased reliance on financing.
• Increased Financing Activities [medium — financial]: Net cash used in financing activities surged to $12,628,155 for the nine months ended September 27, 2025, a substantial increase from $513,301 in the prior year. This indicates the company is likely drawing more on credit facilities or issuing debt to manage its operations and cash flow.
• Impact of Discontinued Operations [medium — operational]: While the sale of Big 3 Precision Mold Services, Inc. resulted in a net gain of $1.2M for the nine months of 2025, contrasting with a $21.5M loss in the prior year, the core business operations are experiencing significant declines. The removal of discontinued operations' assets and liabilities has reduced total assets and liabilities, but the underlying performance of continuing operations remains a concern.

Industry Context

EASTERN CO operates in an industry that is likely experiencing competitive pressures and potential shifts in demand, as evidenced by the significant revenue decline. The company's performance suggests it may be struggling to maintain market share or adapt to evolving market conditions compared to its peers.

Regulatory Implications

The company must ensure compliance with all financial reporting regulations, particularly regarding the accurate presentation of continuing and discontinued operations. Any misstatement or failure to disclose material information could lead to regulatory scrutiny and penalties.

What Investors Should Do

1. Investigate the root causes of the significant decline in net sales and operating profit for continuing operations.
2. Analyze the company's cash flow generation and liquidity management strategies.
3. Assess the long-term strategic outlook for EASTERN CO's core business segments.

Key Dates

• 2025-04-30: Sale of Big 3 Precision Mold Services, Inc. — This event significantly impacted the company's financial statements, leading to a net gain on discontinued operations for the nine months of 2025 and a reduction in assets and liabilities.
• 2025-09-27: End of Third Quarter 2025 — Reporting period for the 10-Q, showing substantial declines in net sales, operating profit, and net income from continuing operations compared to the prior year.
• 2024-09-28: End of Third Quarter 2024 — Prior year comparison period, highlighting the significant year-over-year deterioration in financial performance for continuing operations.

Glossary

Continuing Operations

Refers to the ongoing business activities of a company that are expected to continue into the future, as opposed to operations that have been or will be disposed of. (The financial performance of EASTERN CO's continuing operations has significantly declined, which is a key concern for investors.)

Discontinued Operations

Represents a component of an entity that has been disposed of or is classified as held for sale, and that represents a separate major line of business or geographical area of operations. (The sale of Big 3 Mold Services, Inc. is a significant discontinued operation that has impacted the overall net income and balance sheet figures.)

Operating Profit

The profit of a business before deducting interest and tax expenses. It is calculated as revenue minus cost of goods sold and operating expenses. (EASTERN CO's operating profit has fallen sharply, indicating a core issue with the profitability of its ongoing business activities.)

Cash and Cash Equivalents

Includes cash on hand, bank deposits, and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (The decline in cash and cash equivalents to $9.2M suggests a tightening liquidity position for the company.)

Year-Over-Year Comparison

Compared to the prior year, EASTERN CO has experienced a significant downturn in its core business. Net sales for the nine months ended September 27, 2025, decreased by 7.1% to $191.4M, and net income from continuing operations plummeted by 59.0% to $4.8M. This contrasts with the prior year's performance, which, despite a large loss from discontinued operations, showed stronger results from ongoing business activities. The company's cash position has also weakened, with cash and cash equivalents down from $14.0M to $9.2M, while financing activities have become a much larger source of cash outflow.

Key Financial Figures

• $60,963 — enefit costs, net of taxes of: 2025 - $60,963 and $182,888 respectively; 2024 - $71,3
• $182,888 — , net of taxes of: 2025 - $60,963 and $182,888 respectively; 2024 - $71,355 and $214,0
• $71,355 — 0,963 and $182,888 respectively; 2024 - $71,355 and $214,065 respectively 205,727 23
• $214,065 — 82,888 respectively; 2024 - $71,355 and $214,065 respectively 205,727 237,501 617,1

Filing Documents

• eml_10q.htm (10-Q) — 981KB
• eml_ex31.htm (EX-31) — 19KB
• eml_ex32.htm (EX-32) — 7KB
• 0001654954-25-012582.txt ( ) — 4921KB
• eml-20250927.xsd (EX-101.SCH) — 44KB
• eml-20250927_lab.xml (EX-101.LAB) — 303KB
• eml-20250927_cal.xml (EX-101.CAL) — 63KB
• eml-20250927_pre.xml (EX-101.PRE) — 242KB
• eml-20250927_def.xml (EX-101.DEF) — 115KB
• eml_10q_htm.xml (XML) — 782KB

Financial Statements (unaudited)

Financial Statements (unaudited) 3 Condensed Consolidated Statements of Operations 3 Condensed Consolidated Statements of Comprehensive Income 4 Condensed Consolidated Balance Sheets 5 Condensed Consolidated Statements of Cash Flows 7 Notes to Condensed Consolidated Financial Statements 8 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 20 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 29 Item 4 .

Controls and Procedures

Controls and Procedures 29 PART II OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 30 Item 1A .

Risk Factors

Risk Factors 30 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 30 Item 3 . Defaults Upon Senior Securities 30 Item 4. Mine Safety Disclosures 30 Item 5. Other Information 30 Item 6 . Exhibits 31

SIGNATURES

SIGNATURES 32 - 2 - Table of Contents PART 1 – FINANCIAL INFORMATION

– FINANCIAL STATEMENTS

ITEM 1 – FINANCIAL STATEMENTS THE EASTERN COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended Nine Months Ended September 27, 2025 September 28, 2024 September 27, 2025 September 28, 2024 Net sales $ 55,336,452 $ 71,274,757 $ 191,437,750 $ 206,068,490 Cost of products sold ( 42,971,012 ) ( 53,085,087 ) ( 147,613,222 ) ( 154,161,980 ) Gross margin 12,365,440 18,189,670 43,824,528 51,906,510 Product development expense ( 995,771 ) ( 1,077,930 ) ( 3,136,673 ) ( 3,739,214 ) Selling and administrative expenses ( 9,646,956 ) ( 10,316,788 ) ( 32,181,886 ) ( 31,014,022 ) Operating profit 1,722,713 6,794,952 8,505,969 17,153,274 Interest expense ( 688,425 ) ( 709,680 ) ( 2,019,365 ) ( 2,049,655 ) Other expenses, net ( 157,640 ) ( 82,703 ) ( 282,136 ) ( 92,415 ) Income from continuing operations before income taxes 876,648 6,002,569 6,204,468 15,011,204 Income tax expense ( 297,712 ) ( 1,333,771 ) ( 1,422,414 ) ( 3,335,489 ) Net income from continuing operations $ 578,936 $ 4,668,798 $ 4,782,054 $ 11,675,715 Discontinued Operations (see Note B) Loss from operations of discontinued unit $ - $ ( 766,990 ) $ ( 520,006 ) $ ( 2,750,844 ) (Loss) gain on classification as held for sale - ( 23,087,775 ) 2,016,696 ( 23,087,775 ) Income tax benefit (expense) - 3,888,522 ( 315,951 ) 4,320,904 Net (Loss) income on discontinued operations $ - $ ( 19,966,243 ) $ 1,180,739 $ ( 21,517,715 ) Net income (loss) $ 578,936 $ ( 15,297,445 ) $ 5,962,793 $ ( 9,842,000 ) Earnings per share from continuing operations: Basic $ 0.10 $ 0.75 $ 0.78 $ 1.88 Diluted $ 0.10 $ 0.75 $ 0.78 $ 1.87 (Loss) earnings per share from discontinued operations: Basic $ - $ ( 3.22 ) $ 0.19 $ ( 3.46 ) Diluted $ - $ ( 3.21 ) $ 0.19 $ ( 3.45 ) Total earnings (loss) per

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