OSI Systems (NASDAQ: OSIS) shares fell 8.75% to $199.00 in Friday trading following fourth-quarter results that missed revenue expectations and included fiscal 2027 guidance below analyst estimates.

The decline followed a sharp 13.41% drop to $188.84 in after-hours trading Thursday. The stock had closed regular session down 1.28% at $218.09. Shares are now trading near their 52-week low of $197.27.

The sell-off was driven by quarterly revenue of $484 million, which missed the $529.7 million estimate by 8.6%. This decline of 4% year-over-year was attributed to delivery delays in the Security division due to Middle East conflicts. Approximately $50 million in planned deliveries were shifted beyond the June 30 fiscal year-end. These revenues are deferred, not lost, and remain in the backlog.

Despite the top-line miss, the company reported fourth-quarter non-GAAP diluted earnings per share (EPS) of $3.78, beating the consensus estimate of $3.77. Full-year non-GAAP EPS reached $10.35, an 11% rise from $9.36 in FY25. GAAP diluted EPS for Q4FY26 stood at $3.27, up 8% from $3.03 in Q4FY25.

Financial Performance

Full-year revenue grew 4% to a record $1.79 billion. The Security division's revenue declined 7%, reflecting both Middle East delays and a difficult comparison against higher Mexico program revenues in the prior-year quarter. Gross margin expanded to 34.7% in Q4 from 33.3% in the prior-year quarter, driven by a favorable product mix.

Segment Highlights

The Security division maintained healthy bookings. Recent wins include two five-year IDIQ contracts with Customs and Border Protection (CBP), one with a ceiling of approximately $200 million for relocatable passenger vehicle inspection systems and another with a ceiling of roughly $85 million for van-mounted mobile X-ray inspection systems. A task order valued at about $21 million has already been received.

The Optoelectronics and Manufacturing division saw revenues rise approximately 5% year-over-year in Q4, with full-year growth of 9% to $451 million. Its adjusted operating margin increased to 14.7% in Q4 from 13.6% in the prior-year quarter. The Healthcare division delivered revenues up approximately 5%, with its adjusted operating margin expanding significantly to 10% from 1% in the prior-year quarter.

What the Numbers Show

A key divergence exists between the company's top-line performance and its cash generation capabilities. While Q4 revenue contracted by 4%, operating cash flow surged to a record $182 million, up from just $0.6 million in the corresponding quarter of FY25. This surge was partly driven by collecting $159 million from its largest customer in Mexico during Q4. The receivable balance from this customer declined from $345 million (40% of total AR) at the end of Q3 to $190 million (25% of total AR) at the end of Q4, indicating significant working capital efficiency and reduced concentration risk.

Balance Sheet and Capital Allocation

OSI Systems ended fiscal 2026 with $359.8 million in cash and cash equivalents, a substantial increase from $106.4 million a year earlier. The company repurchased 564,880 shares for $123.6 million during the fourth quarter at an average price of about $219 per share. The board authorized an additional 1 million shares for repurchase, leaving approximately 1.1 million shares available under the program.

Long-term debt increased as the company refinanced and expanded its credit facilities. Bank lines of credit were reduced to zero. Net leverage stood at approximately 2.1 at the end of Q4. The total backlog reached a record $1.9 billion as of June 30, 2026.

Outlook and Technicals

For fiscal 2027, OSI Systems guided for revenues between $1.875 billion and $1.930 billion, representing a year-over-year growth rate of 5.0% to 8.1%. This range is below the $1.94 billion analysts had modeled. Non-GAAP diluted EPS is projected between $11.13 and $11.49, versus the $11.44 analyst estimate.

Technically, the stock is sitting roughly 11.5% beneath its 20-day moving average of $225.25 and more than 21% below its 200-day average of $254.50. The relative strength index sits at 29.84, deep in oversold territory. Resistance sits at $225, while support is near the 52-week low of $197.27.

Analyst Reactions

Following the earnings announcement, several analysts adjusted their forecasts:

• Oppenheimer analyst Christopher Glynn maintained the stock with an Outperform rating and lowered the price target from $320 to $300.
• B. Riley Securities analyst Josh Nichols reiterated the stock with a Buy rating and lowered the price target from $320 to $265.

OSI Systems (NASDAQ: OSIS) issued fiscal year 2027 guidance that falls below analyst expectations for both earnings per share and revenue. The company’s outlook signals a cautious stance on near-term performance relative to market consensus.

The firm projects adjusted earnings per share (EPS) for FY2027 in the range of $11.13 to $11.49. This range sits below the analyst estimate of $11.44, indicating that even the upper bound of the company’s guidance narrowly misses market expectations, while the lower bound represents a more significant deviation.

Revenue Outlook

For the same period, OSI Systems forecasts sales between $1.875 billion and $1.930 billion. Analysts had estimated revenue at $1.941 billion. The entire projected revenue band falls short of the consensus figure, suggesting potential headwinds in order conversion or pricing power that management is factoring into its full-year view.

What the Numbers Show

The guidance indicates a divergence between management’s internal projections and external analyst models. With both the top-line revenue and bottom-line EPS estimates missing consensus, the data suggests analysts may have been overly optimistic about growth trajectories or margin expansion for the upcoming fiscal year. The narrow miss on the high end of the EPS range versus a wider gap on the low end highlights uncertainty in profitability drivers.