On August 6, Matthews International (NASDAQ:MATW) delivered fiscal third-quarter results that read as two different companies stapled together. The company lowered its adjusted EBITDA guidance for fiscal 2026 to a range of $158 million to $162 million, even as it pulled in $25 million from a stake redemption in its Propelis joint venture and used the proceeds to keep chipping away at debt. Add a fresh European restructuring plan and a next-generation battery manufacturing line to the mix, and the picture only gets more complicated before it gets clearer.
The Turnaround Bulls Are Watching
Debt reduction has become the clearest bright spot in the Matthews story. The company cut debt by $12 million in the third quarter alone and by $144 million over the first nine months of fiscal 2026, a pace that matters given how much of the last two years has gone into reshaping the balance sheet. Some of that progress traces back to Propelis, the joint venture that emerged from the SGK divestiture, which redeemed a portion of Matthews’ preferred equity interest in the third quarter and handed the company $25 million in cash, most of it directed straight at debt paydown.
The Memorialization segment posted higher sales for both the third quarter and the first nine months of fiscal 2026 compared with a year earlier, largely on the strength of the Dodge Company acquisition, which management says has already delivered the bulk of its targeted cost synergies. Product Identification sales grew 5% in the quarter, and the business is drawing real customer interest in its MPERIA Axian Inkjet systems. A new partnership with Linx Printing Technologies is meant to widen that product’s reach into the UK and France.
Matthews is also not walking away from its longer-term battery ambitions. During the quarter it launched MEODEO, a full-scale dry electrode battery manufacturing demonstration line in Vreden, Germany, giving customers a path from lab testing up to gigafactory-scale production. That sits alongside a restructuring plan in the European engineering business expected to save $10 million a year, part of a broader simplification effort that has already included the divestitures of SGK, warehouse automation, and the European packaging business.
Where The Pressure Keeps Building
The guidance cut is the headline number for a reason. Matthews now expects fiscal 2026 adjusted EBITDA of $158 million to $162 million, and management pointed to continued delays in the energy storage solutions business that are expected to last through the rest of the fiscal year. A significant new coating and converting order was won during the quarter, but it has not yet contributed meaningfully to results, leaving that part of the business still waiting on the growth it was supposed to deliver.
Memorialization’s higher sales mask a harder underlying trend. Volumes of caskets and cemetery memorials kept falling as estimated US casketed deaths declined, and input costs rose faster than the price increases the company could pass through. The Industrial Technologies segment reported lower sales overall, weighed down by the divestiture of the warehouse automation business and by ongoing difficulties in the engineering business, including the continuing dispute with Tesla. The European restructuring meant to fix that unit is expected to cost about $10 million in total, of which roughly $5 million already hit third-quarter results.
Propelis, the joint venture Matthews now leans on for a chunk of its earnings, has not delivered synergies as quickly as hoped either. Management pointed to a $5 million shortfall against its full-year forecast tied directly to the slower pace of synergy realization, even while describing margins there as improving from the first calendar quarter to the second.
Skepticism Baked Into The Stock
15 hedge funds held Matthews heading into the most recent quarter, down from 16 the quarter before, a modest but real pullback in institutional conviction. Short interest sits at 15.86% of the float, a level that points to a substantial bear camp already positioned against the stock. That combination suggests that the market has not fully bought into the turnaround story yet. With guidance just cut and several moving pieces still unresolved, that skepticism is not coming out of nowhere.
Two Stories, One Stock
Matthews is trying to delever, simplify, and modernize all at once, and the third quarter showed real progress on some fronts and setbacks on others. Debt keeps falling, the Dodge acquisition keeps paying off, and Product Identification keeps growing, evidence that parts of the business are healthier than the guidance cut alone suggests. Yet the energy storage delays, the Memorialization volume decline, and a Propelis payoff running behind schedule are the reasons that guidance came down in the first place.
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