Electronics manufacturing services provider Benchmark (NYSE:BHE) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 6.5% year on year to $631.8 million. Next quarter’s revenue guidance of $640 million underwhelmed, coming in 4.3% below analysts’ estimates. Its non-GAAP profit of $0.52 per share was 4% above analysts’ consensus estimates.

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“I am pleased by Benchmark’s ability to continue to execute to our long-term objectives despite this dynamic market, as evidenced by our sixth consecutive quarter of greater than 10% non-GAAP gross margins while we again generated over $27 million of free cash flow even with a sequential decline of revenue in the first quarter,” said Jeff Benck, Benchmark’s President and CEO.

Company Overview

Operating as a critical behind-the-scenes partner for complex technology products since 1979, Benchmark Electronics (NYSE:BHE) provides advanced manufacturing, engineering, and technology solutions for original equipment manufacturers across aerospace, medical, industrial, and technology sectors.

Sales Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years.

With $2.61 billion in revenue over the past 12 months, Benchmark is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale.

As you can see below, Benchmark grew its sales at a tepid 3.7% compounded annual growth rate over the last five years. This shows it failed to generate demand in any major way and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. Benchmark’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 5.8% annually.

This quarter, Benchmark missed Wall Street’s estimates and reported a rather uninspiring 6.5% year-on-year revenue decline, generating $631.8 million of revenue. Company management is currently guiding for a 3.9% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 9.1% over the next 12 months, an improvement versus the last two years. This projection is noteworthy and suggests its newer products and services will catalyze better top-line performance.

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Operating Margin

Benchmark was profitable over the last five years but held back by its large cost base. Its average operating margin of 3.4% was weak for a business services business.

On the plus side, Benchmark’s operating margin rose by 1.6 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, Benchmark generated an operating profit margin of 1.9%, down 2.4 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.

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.

Benchmark’s EPS grew at a spectacular 13.4% compounded annual growth rate over the last five years, higher than its 3.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Benchmark’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Benchmark’s operating margin declined this quarter but expanded by 1.6 percentage points over the last five years. Its share count also shrank by 1.3%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

In Q1, Benchmark reported EPS at $0.52, up from $0.51 in the same quarter last year. This print beat analysts’ estimates by 4%. Over the next 12 months, Wall Street expects Benchmark’s full-year EPS of $2.27 to grow 13.8%.

Key Takeaways from Benchmark’s Q1 Results

It was encouraging to see Benchmark beat analysts’ EPS expectations this quarter. On the other hand, its revenue missed and its revenue and EPS guidance for next quarter fell slightly short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock remained flat at $38.27 immediately following the results.

Benchmark didn’t show it’s best hand this quarter, but does that create an opportunity to buy the stock right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.