How does Kimball Electronics' profitability metrics compare to key competitors in the electronics manufacturing services (EMS) sector?

Profitability snapshot

Kimball Electronics posted FY 2025 net sales of $1.49 bn and operating income of $45.5 m, giving a GAAP operating margin of ≈3.1 %. Its non‑GAAP (adjusted) operating income rose to $61.3 m, translating to an adjusted margin of ≈4.1 %. In the most recent quarter the margin was a little higher – $16.5 m on $380.5 m of sales ≈ 4.3 %.

How this stacks up against the EMS peer group

Kimball’s GAAP margin is ≈1–2 pp lower than the larger Jabil and Flex peers and sits just a touch below the mid‑size tier (Celestica, Benchmark). Its adjusted margin is roughly 0.5–1 pp behind those peers, indicating that cost‑structure and pricing leverage remain tighter for Kimball.

Trading implications

• Margin compression risk: The EMS market is still price‑sensitive, and Kimball’s sub‑3.5 % GAAP margin suggests limited head‑room to absorb further cost‑inflation or pricing pressure. This downside risk tends to keep the stock on the more defensive side of the sector.
• Potential upside on margin expansion: The quarter‑to‑quarter improvement (GAAP margin up from ~2.9 % in FY 2024 to ~4.3 % in Q4) shows the company can eke out incremental gains. If Kimball can sustain a 100‑basis‑point margin expansion into FY 2026, the valuation gap to peers narrows and could justify a neutral‑to‑light‑long stance.
• Relative positioning: Given the lower profitability profile, a relative‑value approach works best—target Kimball only if it trades at a steeper earnings‑yield discount to the EMS index or peers. Otherwise, a underweight to the broader EMS basket may be prudent until clearer guidance on cost‑control or higher‑margin mix (e.g., more high‑value medical or aerospace contracts) materializes.