Resideo Technologies, Inc. (NYSE: REZI), predominantly a security and safety products company with two major divisions, including Products and Solutions (manufacturing) and ADI (distribution), announced the financial results for its first quarter of fiscal 2026 this week. The company reported that revenues beat previously forecasted guidance, and adjusted earnings grew as well.
And yet the market reacted strongly, with the value of Resideo’s stock crashing almost 18% on the day after it released its results. Read on to see why the stock declined.
Read why the value of Resideo stock crashed the day after it released its results…
Before I forget, let me remind readers that Resideo has filed the necessary paperwork to sever the company into two independent businesses – Products and Solutions and ADI. This separation is expected to be completed this year sometime around the middle of the third quarter to the middle of the fourth quarter.
Resideo is On Integrators’ Radar
Furthermore, let me also remind you that in 2024, Resideo acquired Snap One, including Control4. This put them on my radar, as well as the radar of many in the custom integration business.
I will do a more complete report on Resideo’s first quarter results later, but I couldn’t help but see its stock crash this week and did a quick study to find out what is going on. Apparently, I wasn’t the only one to see this, as investment company Motley Fool wrote about the stock crashing on Wednesday, as well.
A Good Thing for Investors?
At first, the situation seems confusing. Resideo released results that beat market expectations, typically a good thing for investors. Resideo even reaffirmed its optimistic outlook for the full year of 2026. What’s not to like? Plenty…apparently.
The company also revealed some problems. First, they released lower-than-anticipated guidance for the second quarter results, a downward revision that investors DON’T like.
Margins are Being Compressed from Rising Charges; High-End Residential Sales Softening
Secondly, Resideo executives revealed that profit margins are being pressured by rising freight charges and rising fuel costs. ADI reported that its adjusted EBITDA, a measure of profit, declined by a concerning 8% in the first quarter.
To make matters worse, CEO Jay Geldmacher revealed that “the high-end residential audio visual market has been softening.” Oh-oh…Houston, we have a problem. Rising costs compressing margins is one thing…but when you combine that with a slowing demand from a profitable business segment (high-end residential AV) the problem suddenly gets much bigger.
Guidance for Q2 Came In Under Analysts’ Expectations
Resideo kept its full-year guidance in place, but admitted it was counting on a big back half to make the year. In the meantime, it released guidance for the second quarter of net revenue of $1.916 billion to $1.94 billion and adjusted EPS of $0.71 to $0.75.
What’s wrong with the company’s Q2 guidance? What’s wrong is that Wall Street analysts had expected Resideo Q2 revenues of $1.978 billion and an adjusted EPS of $0.84, according to S&P Global Market Intelligence. So that’s a big miss.
Resideo Announces It Will Raise Prices
Don’t worry, Resideo executives said, we’re going to raise our prices to offset the cost gains. Hmmm, so you’re going to raise prices at a time when you are already feeling the pressure of falling demand in a profitable category? As the Motley Fool puts it, “That remains to be seen…”
It was for all of these reasons that the value of Resideo stock dropped nearly 18% in just one day, and remained essentially flat the day after that.
Learn more about Resideo by visiting resideo.com.
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