Q3 2026 ESCO Technologies Inc Earnings Call Transcript
Key Points
- Consolidated book-to-bill of 1.21 with record backlog of $1.54 billion, indicating strong demand across all segments.
- Aerospace & Defense segment delivered 9% organic sales growth and 30% adjusted EBIT margins, with strong commercial and defense aerospace performance.
- Doble orders surged 30% year-over-year, driven by broad-based strength including a 67% increase in condition monitoring orders.
- Test segment orders grew 42% year-over-year, fueled by industrial shielding projects and EMI filters for data centers.
- Raised full-year 2026 adjusted EPS guidance to $8.30-$8.40, reflecting a 38-39% increase year-over-year.
- Operating cash flow more than doubled to $193 million in the first nine months, driven by advance payments on Navy contracts.
- Megger acquisition on track to close in Q1 FY2027, with integration planning progressing and expected to enhance utility solutions scale.
- Order growth was negative in the quarter, primarily due to the $364 million acquired backlog from Maritime last year and non-repeat of $82 million Navy orders.
- Utility Solutions Group adjusted EBIT margins declined 130 basis points, impacted by weak NRG performance and unfavorable product mix at Doble.
- NRG continues to face soft renewables market conditions, with year-over-year orders down considerably and expected to remain negative in Q4.
- Test segment sales growth of 5% lagged order growth, with margins only up 50 basis points due to inflationary pressures.
- Surface ship revenue experienced pushouts in the prior quarter, though recovery is on track, but the company remains cautious on program execution.
- Megger acquisition debt cost is expected to be around 6%, which could pressure future earnings.
- Doble's high-voltage cable monitoring orders have long lead times (up to a year), potentially delaying revenue recognition.
Good day, and thank you for standing by. Welcome to the third-quarter 2026 ESCO Technologies earnings call. (Operator Instructions) Please be advised that today's conference is being recorded.
On the call today, we have Bryan Sayler, President and CEO; Chris Tucker, Senior Vice President and CFO.
And now I'd like to turn the conference over to our first speaker today, Kate Lowrey, Vice President of Investor Relations. Kate, you now have the floor.
Thank you. Statements made during this call, which are not strictly historical, are forward-looking statements within the meaning of the Safe Harbor provisions of the federal securities law. These statements are based on current expectations and assumptions, and actual results may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in the company's operations and business environment, including but not limited to the risk factors referenced in the company's press
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