Vertically integrated manufacturing solutions provider Mayville Engineering Company (NYSE: MEC) missed Wall Street’s revenue expectations in Q2 CY2025, with sales falling 19.1% year on year to $132.3 million. The company’s full-year revenue guidance of $545 million at the midpoint came in 8.4% below analysts’ estimates. Its non-GAAP profit of $0.10 per share was 67.4% above analysts’ consensus estimates.

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StockStory’s Take

Mayville Engineering’s second quarter was marked by ongoing demand weakness across several of its core end markets, which management attributed to continued inventory destocking and production cuts by major customers. CEO Jagadeesh Reddy explained that the most notable decline came from commercial vehicles, where channel inventories remain elevated and production schedules have been scaled back more aggressively than expected. Reddy noted, “We have had numerous conversations with our customers…customers are really taking out significant number of production days.” The quarter saw muted performance, with some stabilization in construction and agriculture but no major signs of recovery in these segments.

Looking ahead, Mayville Engineering’s revised outlook reflects persistent softness in end-market demand and uncertainty around regulatory and tariff environments. Management is not forecasting demand recovery in the second half of the year, instead focusing on cost control and operational efficiencies. CFO Rachele Lehr highlighted ongoing integration costs tied to the Accu-Fab acquisition and indicated further footprint consolidation efforts. Reddy expressed caution, stating, “Given the uncertainty with tariffs, freight rates, and 2027 regulations, we do not expect a pre-buy in 2025 or 2026.”

Key Insights from Management’s Remarks

Management pointed to weak commercial vehicle orders, the integration of Accu-Fab, and early progress in cost containment as central to the quarter’s results and outlook revision.

• Commercial vehicle market pressure: Mayville Engineering experienced a sharper-than-anticipated decline in orders from commercial vehicle customers, driven by persistent inventory overhangs and production down days. Management cited customer-specific examples, such as one major client reducing capacity by 35% in July, contributing significantly to the downward revenue revision.

• Accu-Fab acquisition integration: Early efforts to integrate Accu-Fab focused on operational efficiencies and leveraging cross-selling opportunities, especially in the critical power and data center segments. Reddy called this “one of the most consequential M&A transactions” in the company’s history, noting that Accu-Fab is expected to meaningfully diversify revenue and customer mix.

• Cost control and footprint optimization: The company initiated the consolidation of three warehouses and a manufacturing facility to rationalize assets and lower fixed costs. These actions are expected to produce annual fixed cost savings of about $2 million, though they will result in one-time expenses of $5–7 million over the next year and a half.

• End-market variation: Management reported ongoing softness in agriculture, though it is believed to be at or near the bottom, while construction and powersports showed some early signs of stabilization. Military and aftermarket segments provided modest support, but were not enough to offset overall weakness.

• Reshoring and tariffs impact: Mayville Engineering is seeing increased interest in domestic steel and aluminum fabrication, driven in part by tariff-related uncertainty. The company reported a significant uptick in requests for quotations for U.S.-based supply, particularly in aluminum extrusions, benefiting its Mid-States Aluminum division.

Drivers of Future Performance

Mayville Engineering’s guidance is shaped by ongoing end-market weakness, integration of Accu-Fab, and a disciplined approach to cost management.

• End-market demand uncertainty: Management expects demand in commercial vehicles, powersports, and agriculture to remain muted for the remainder of the year, with no significant recovery anticipated until at least 2026. The lack of a pre-buy event tied to 2027 EPA regulations further clouds the outlook.

• Accu-Fab synergy realization: The integration of Accu-Fab is projected to add $28–32 million in incremental revenue this year, with early cross-selling wins in the data center and critical power markets. Management believes this acquisition increases the company’s addressable market by 60% and sets the foundation for mid-term growth.

• Cost optimization initiatives: Facility consolidation and fixed cost reduction are expected to improve long-term operating leverage, though near-term margins will reflect one-time integration and restructuring costs. Management continues to target normalized SG&A at 4.5–5.5% of sales once these efforts are complete.

Catalysts in Upcoming Quarters

In the upcoming quarters, our team will be monitoring (1) progress on Accu-Fab integration and realization of cross-selling synergies in data center and critical power markets, (2) evidence of stabilization or recovery in commercial vehicle, powersports, and agriculture end markets, and (3) the effectiveness of facility consolidation in reducing fixed costs. We will also pay close attention to the impact of tariffs and regulatory changes on demand for U.S.-based manufacturing.

Mayville Engineering currently trades at $13.68, down from $16.71 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).

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