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OSI Systems NASDAQ: OSIS reported record fiscal 2026 revenue, earnings and operating cash flow, while fourth-quarter sales fell short of expectations after conflict-related delays in the Middle East pushed roughly $50 million of planned Security division deliveries beyond the company’s June 30 fiscal year-end.

Chief Financial Officer Alan Edrick said the delayed revenue represented deferred deliveries rather than lost orders. The affected projects remain in backlog and are expected to be completed on a later schedule, he said.

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For the fiscal year ended June 30, OSI reported record revenue of $1.79 billion, up 4% from the prior year, and record non-GAAP earnings per share of $10.35, up 11%. Fourth-quarter revenue was $484 million, down about 4% year over year, while non-GAAP EPS rose 17% to a record $3.78.

Backlog reaches record level The company ended fiscal 2026 with approximately $1.9 billion in backlog, its highest level to date. Edrick said full-year book-to-bill was “a little bit north of one,” while fourth-quarter book-to-bill was just below one. He described bookings as particularly strong in Optoelectronics and solid in Security and Healthcare.

President and CEO Ajay Mehra said demand remained strong across the company’s portfolio despite near-term disruptions in the Middle East. He said the Security division faced delivery headwinds during the quarter, while Optoelectronics posted broad-based growth and Healthcare improved.

“The security-related deliveries that were pushed out remain in backlog and are expected to be completed in future quarters,” Mehra said.

Management said the delayed deliveries were primarily to customers in the Middle East. Edrick said that, after the third-quarter report, the company had expected a significant portion of those orders to be delivered in the fourth quarter. OSI now expects a substantial portion, though not all, to be delivered in the second half of fiscal 2027.

Security awards and defense opportunities Since the fiscal year-end, U.S. Customs and Border Protection has awarded OSI two five-year indefinite-delivery, indefinite-quantity contracts. One has a ceiling of approximately $200 million for relocatable Rapiscan passenger vehicle inspection systems, while the other has a ceiling of roughly $85 million for van-mounted mobile X-ray inspection systems.

The company has received delivery orders under both contracts, including a task order valued at about $21 million. Mehra said OSI is the sole awardee under both IDIQ contracts. Management expects a portion of the orders already in hand to contribute to fiscal 2027 revenue, but said the larger contribution is expected in fiscal 2028 and beyond.

Edrick noted that the ceiling values of the IDIQ contracts do not immediately enter backlog. Instead, firm delivery or task orders are added to backlog as they are received.

In the company’s radio-frequency business, OSI previously received an indefinitized contract action with a not-to-exceed value of approximately $235 million for production and integration of homeland defense over-the-horizon radar transmit subsystems. Edrick said roughly 80% of that award entered backlog in the fiscal third quarter and will be delivered over the next couple of years.

Mehra said OSI also participates in the SHIELD IDIQ vehicle supporting Golden Dome-related initiatives. He described customer engagement in the RF portfolio as the highest the company has seen for that product line and said the business is expected to experience strong growth into fiscal 2028.

Margins, cash flow and shareholder returns Fourth-quarter non-GAAP operating margin expanded 200 basis points to 17.7%. Security adjusted operating margin increased to 20.8% from 20.4%, while Optoelectronics margin rose to 14.7% from 13.6%. Healthcare adjusted operating margin increased to 10% from 1% in the prior-year quarter, supported by higher revenue and operating leverage.

Optoelectronics and Manufacturing generated 9% full-year revenue growth to $451 million, according to Mehra. Edrick said the business has been attracting a stronger customer profile and that management intends to pair fiscal 2027 revenue growth with further operating-margin expansion, though quarterly results may vary with product and customer mix.

Service revenue rose 13% for the full year to $441 million. While total service revenue was relatively flat in the fourth quarter, Edrick said Security service revenue increased 9% year over year excluding installation activity tied to Mexico contracts in the prior-year period. OSI expects strong double-digit service revenue growth in fiscal 2027.

Operating cash flow reached a record $182 million in the fourth quarter and $276 million for the year, helped by collections across the business. The company collected $159 million from its largest Mexico customer during the fourth quarter, reducing that customer’s accounts receivable balance to $190 million from $345 million at the end of the third quarter.

OSI ended the year with $360 million in cash, compared with $106 million a year earlier, and no borrowings under its lines of credit. During fiscal 2026, the company repurchased and retired 1.1 million shares. In the fourth quarter alone, it repurchased about 565,000 shares for $123.6 million, or an average of roughly $219 per share. The board authorized an additional 1 million shares for repurchase, leaving about 1.1 million shares available under the program.

Fiscal 2027 outlook OSI forecast fiscal 2027 revenue of $1.875 billion to $1.93 billion, representing growth of 5% to 8.1%, and non-GAAP diluted EPS of $11.13 to $11.49, representing growth of 7.5% to 11%.

Management said the outlook incorporates a conservative approach to Middle East deliveries and future orders amid the conflict. It also includes only a portion of the CBP delivery orders already received rather than the full ceiling value of the agency’s IDIQ awards.

The company expects fiscal 2027 growth to be strongest in the second half. Edrick also said OSI expects strong operating and free cash flow during the year and anticipates free cash flow could exceed 100% of net income.

About OSI Systems (NASDAQ:OSIS)OSI Systems, Inc NASDAQ: OSIS is a publicly traded technology company founded in 1987 and headquartered in Hawthorne, California. The company designs, develops and manufactures advanced security and inspection systems, optoelectronic devices and medical imaging equipment. Over its history, OSI Systems has grown its product offerings through internal research and development as well as strategic acquisitions, expanding its capabilities in mission-critical sensing and inspection technologies.

OSI Systems operates three primary business segments.

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HAWTHORNE, Calif.--(BUSINESS WIRE)--OSI Systems, Inc. (NASDAQ: OSIS) today announced that its Board of Directors has approved an increase to the Company’s existing stock repurchase authorization.

The Board has authorized an additional 1,000,000 shares for repurchase under the Company’s stock repurchase program, increasing the total remaining authorization to 1,078,731. The expanded authorization reflects the Company’s continued confidence in its long-term strategy and strong free cash flow generation.

During the quarter ended June 30, 2026, the Company repurchased 564,880 shares of its common stock.

“We continue to execute on our capital allocation priorities by returning capital to shareholders through share repurchases,” said Alan Edrick, Executive Vice President and Chief Financial Officer. “The increase in our share repurchase authorization underscores our confidence in the strength of our business and our ability to generate robust cash flow, while maintaining flexibility to invest in growth opportunities.”

Purchases may be made from time to time in the open market or in privately negotiated transactions and block trades, in accordance with federal securities laws, including Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended. This program does not have an expiration date. The share repurchase program may be modified, terminated or expanded by the Company at any time without prior notice. There is no guarantee as to the exact number of shares, if any, that will be purchased by the Company. The amount and timing of any purchases will depend on a number of factors, including price, trading volume, general market conditions, legal requirements, and other factors.

About OSI Systems

OSI Systems designs and manufactures specialized electronic systems and components for critical applications. The Company operates through three business segments: Security, Optoelectronics and Manufacturing, and Healthcare. Its Security division delivers advanced inspection systems, turnkey screening solutions, and comprehensive support services to protect people and infrastructure. The Optoelectronics and Manufacturing segment serves as a global supplier of high-performance optoelectronic solutions and precision manufacturing services for leading OEMs. The Healthcare segment focuses on patient monitoring, diagnostic cardiology, and related services with the goal of enhancing clinical care and patient outcomes. Serving customers in over 170 countries, OSI Systems strategically positions its sales, service, R&D, and manufacturing capabilities worldwide to provide fast and efficient delivery and support. For more information on OSI Systems or any of its subsidiary companies, visit www.osi-systems.com. News Filter: OSIS-G

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to OSI Systems’ current expectations, beliefs, and projections concerning matters that are not historical facts. Forward-looking statements are not guarantees of future performance and involve uncertainties, risks, assumptions, and contingencies, many of which are outside OSI Systems’ control and which may cause actual results to differ materially from those described in or implied by any forward-looking statements. Undue reliance should not be placed on forward-looking statements, which are based on currently available information and speak only as of the date on which they are made. OSI Systems assumes no obligation to update any forward-looking statement made in this press release that becomes untrue because of subsequent events, new information, or otherwise, except to the extent it is required to do so in connection with its ongoing requirements under Federal securities laws. For a further discussion of factors that could cause OSI Systems’ future results to differ materially from any forward-looking statements, see the section entitled "Risk Factors" in OSI Systems’ most recently filed Annual Report on Form 10-K and other risks described therein and in documents subsequently filed by OSI Systems from time to time with the Securities and Exchange Commission.

More News From OSI Systems, Inc.

OSI Systems (OSIS - Free Report) is expected to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended June 2026. This widely-known consensus outlook gives a good sense of the company's earnings picture, but how the actual results compare to these estimates is a powerful factor that could impact its near-term stock price.

The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on August 20. On the other hand, if they miss, the stock may move lower.

While the sustainability of the immediate price change and future earnings expectations will mostly depend on management's discussion of business conditions on the earnings call, it's worth handicapping the probability of a positive EPS surprise.

Zacks Consensus EstimateThis airport security and full-body scanner manufacturer is expected to post quarterly earnings of $3.76 per share in its upcoming report, which represents a year-over-year change of +16.1%.

Revenues are expected to be $528.34 million, up 4.6% from the year-ago quarter.

Estimate Revisions TrendThe consensus EPS estimate for the quarter has remained unchanged over the last 30 days. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period.

Investors should keep in mind that an aggregate change may not always reflect the direction of estimate revisions by each of the covering analysts.

Price, Consensus and EPS Surprise

Earnings WhisperEstimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out. Our proprietary surprise prediction model -- the Zacks Earnings ESP (Expected Surprise Prediction) -- has this insight at its core.

The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier.

Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only.

A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP.

Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell).

How Have the Numbers Shaped Up for OSI?For OSI, the Most Accurate Estimate is higher than the Zacks Consensus Estimate, suggesting that analysts have recently become bullish on the company's earnings prospects. This has resulted in an Earnings ESP of +1.86%.

On the other hand, the stock currently carries a Zacks Rank of #2.

So, this combination indicates that OSI will most likely beat the consensus EPS estimate.

Does Earnings Surprise History Hold Any Clue?While calculating estimates for a company's future earnings, analysts often consider to what extent it has been able to match past consensus estimates. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number.

For the last reported quarter, it was expected that OSI would post earnings of $2.53 per share when it actually produced earnings of $2.60, delivering a surprise of +2.77%.

Over the last four quarters, the company has beaten consensus EPS estimates four times.

Bottom LineAn earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss.

That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it's worth checking a company's Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

OSI appears a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release.

Expected Results of an Industry PlayerAnother stock from the Zacks Electronics - Miscellaneous Components industry, Fabrinet (FN - Free Report) , is soon expected to post earnings of $3.85 per share for the quarter ended June 2026. This estimate indicates a year-over-year change of +45.3%. Revenues for the quarter are expected to be $1.28 billion, up 40.9% from the year-ago quarter.

Over the last 30 days, the consensus EPS estimate for Fabrinet has been revised 0.4% down to the current level. Nevertheless, the company now has an Earnings ESP of +1.39%, reflecting a higher Most Accurate Estimate.

When combined with a Zacks Rank of #4 (Sell), this Earnings ESP makes it difficult to conclusively predict that Fabrinet will beat the consensus EPS estimate. The company beat consensus EPS estimates in each of the trailing four quarters.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.