OSI Systems (OSIS 15.58%) — now that’s a blast from the past. It’s been close to a decade since I last wrote about the maker of X-ray and metal detector systems for air traveler and cargo screening. And yet, OSI Systems was making headlines after reporting a powerful sales and earnings beat Thursday morning.
As of 12:36 p.m. ET, OSI stock was up 15.3%.
OSI Systems’ fiscal Q2 earnings
OSI reported its fiscal 2025 second-quarter results Thursday morning, posting record revenues of $419.8 million, up 12% year over year and well ahead of the $406.6 million Wall Street analysts had predicted. Similarly, OSI’s earnings were $2.42 per share, more than the Street’s $2.33 consensus estimate.
That’s the good news.
The bad news is that OSI’s “$2.42 per share” profit was a pro forma number. Calculated according to generally accepted accounting principles (GAAP), earnings were $2.22 per share, up just 5% year over year. Still, it’s worth noting that OSI was up front about this: The report discussed the GAAP figure before mentioning the non-GAAP number.
I consider this a transparent and shareholder-friendly move, so kudos to OSI for that.
Is OSI Systems stock a buy?
And there’s always the chance that OSI’s GAAP numbers will improve to levels more closely resembling its adjusted results. Management raised its forecast for fiscal 2025 sales, predicting growth of 9.5% to 11.1%, which is as much as a full percentage point better than previous guidance. Management also said its book-to-bill ratio in fiscal Q2 was 1.2, which supports the premise that its sales will grow in future quarters.
Management’s guidance on earnings growth is that it will exceed sales growth, landing in the 11.9% to 15.6% range. Granted, that, too, is looking at non-GAAP earnings. But it’s worth noting that in fiscal Q2, OSI generated $47 million in free cash flow, delivering a money-making quarter after four straight quarters of burning cash.
That’s an improvement for OSI. I only hope the company can keep it up.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
