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Aug 6, 2026, 4:17 PM ETTechnology

ESCO Technologies — Q3 2026 Earnings Summary

ESEESCO TECHNOLOGIES INC
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Financial Performance

  • Q3 2026 Net Sales increased 14% year-over-year to $339 million, compared to $296 million in Q3 2025; organic sales grew 8% ($20 million), with Maritime contributing $23 million of revenue growth.
  • Q3 2026 GAAP EPS from continuing operations rose 31% to $1.26 per share, up from $0.96 per share in Q3 2025.
  • Q3 2026 Adjusted EPS from continuing operations increased 38% to $2.20 per share, compared to $1.60 per share in Q3 2025.
  • Year-to-date (YTD) Q3 2026 Net Sales reached $938 million, up from $742.7 million in the prior year period.
  • YTD Q3 2026 GAAP EPS from continuing operations was $3.66 per share, compared to $2.76 per share in the prior year.
  • YTD Q3 2026 Adjusted EPS from continuing operations was $5.75 per share, compared to $3.71 per share in the prior year.
  • Net cash provided by operating activities from continuing operations was $193 million YTD, an increase of $105 million compared to the prior year period.
  • Q3 2026 Adjusted EBIT margin expanded by 90 basis points; Adjusted EBIT increased 28% to $50.5 million (30.0% margin) in the Aerospace & Defense segment.
  • Q3 2026 Entered Orders were $410 million with a book-to-bill ratio of 1.21, resulting in a record backlog of $1.54 billion as of June 30.

Guidance and Future Outlook

  • FY 2026 Sales guidance raised to a range of $1.30 to $1.33 billion, representing 19% to 21% growth over the prior year.
  • FY 2026 Adjusted EPS guidance raised to a range of $8.30 to $8.40 per share, representing 38% to 39% growth; this reflects a midpoint increase of $0.70 per share from initial November guidance and $0.22 per share from the May update.
  • Q4 2026 Adjusted EPS is expected to be in the range of $2.55 to $2.65 per share, indicating 10% to 14% growth compared to Q4 2025.
  • Management expressed confidence in delivering above-market growth driven by durable growth drivers, leading market positions, and record backlog.

Business Segments and Product Lines

  • Aerospace & Defense (A&D): Q3 2026 sales increased 23% to $168.2 million; organic sales grew 9%. Adjusted EBIT increased 28% to $50.5 million (30.0% margin). Entered orders decreased 66% to $195.7 million due to a high base of acquired backlog from the prior year, but backlog reached a record $1.1 billion.
  • Utility Solutions Group (USG): Q3 2026 sales increased 8% to $100.0 million. Doble sales rose 17% to $113.3 million driven by protection testing and offline test equipment, while NRG sales fell 29% to $13.5 million due to lower renewables revenue. Entered orders increased 20% to $126.9 million, with backlog at $189.4 million.
  • RF Test & Measurement (Test): Q3 2026 sales increased 5% to $70.9 million, driven by U.S. Test & Measurement (EMC) and medical/industrial shielding. Entered orders increased 42% to $87.0 million, resulting in a record backlog of $248.6 million.
  • Megger Acquisition: ESCO agreed to acquire Megger Group Limited, which will join the Utility Solutions Group; regulatory filings are underway with an anticipated closing in Q1 of fiscal 2027.

Market and Competitive Landscape

  • A&D sales growth was led by strong performance in commercial aerospace and Navy sectors.
  • Test segment order strength was driven by industrial shielding projects and electromagnetic interference (EMI) filters for U.S. data centers.
  • USG Doble business continues to experience broad-based demand increases from utility customers.
  • NRG business faced headwinds related to the expiration of U.S. renewables tax credits.

Risks and Challenges

  • Q3 2026 entered orders were lower than the prior year due to $364 million of acquired backlog related to the Maritime acquisition in Q3 2025.
  • Inflationary pressures and unfavorable mix partially offset volume leverage and price increases in the A&D segment.
  • NRG EBIT reductions were driven by lower sales volumes.
  • Forward-looking statements note risks including climate change regulations, labor disputes, geopolitical conflicts, supply chain disruptions, material shortages, and integration of acquired businesses.

Management Commentary and Tone

  • CEO Bryan Sayler described Q3 as "another strong quarter," highlighting 14% revenue growth, 90 basis points of Adjusted EBIT margin expansion, and a 38% increase in Adjusted EPS.
  • Management noted double-digit organic sales growth across aerospace, Navy, Test, and Doble businesses year-to-date.
  • Management cited momentum across business platforms driving a backlog increase of over $400 million year-to-date.

Other Key Points

  • A quarterly cash dividend of $0.08 per share will be paid on October 15, 2026, to stockholders of record on October 1, 2026.
  • Q3 2026 Adjusted EPS excludes $0.94 per share of after-tax charges, including $0.52 of acquisition-related amortization, $0.20 of debt financing, $0.19 of acquisition costs related to the Megger deal, and $0.03 of restructuring charges.
  • YTD Q3 2026 Adjusted EPS excludes $2.09 per share of after-tax charges, primarily $1.57 of acquisition-related amortization and $0.23 of acquisition costs related to the Megger deal.
  • The Company reported a book-to-bill ratio of 1.16 in the A&D segment and 1.27 in the USG segment for the quarter.
  • Total backlog as of June 30, 2026, was $1.54 billion, with A&D at $1.1 billion, USG at $189.4 million, and Test at $248.6 million.