- ESE Q2 Deep Dive: Revenue Miss Offsets Strong Backlog and EPS Beat
May 15, 2026
Engineered products manufacturer ESCO (NYSE:ESE) fell short of the market’s revenue expectations in Q1 CY2026, but sales rose 16.5% year on year to $309.3 million. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $1.31 billion at the midpoint. Its non-GAAP profit of $1.91 per share was 3.8% above analysts’ consensus estimates.
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ESCO (ESE) Q1 CY2026 Highlights:
Revenue: $309.3 million vs analyst estimates of $320.4 million (16.5% year-on-year growth, 3.4% miss) Adjusted EPS: $1.91 vs analyst estimates of $1.84 (3.8% beat) Adjusted EBITDA: $57.81 million vs analyst estimates of $73.41 million (18.7% margin, 21.3% miss) The company reconfirmed its revenue guidance for the full year of $1.31 billion at the midpoint Management raised its full-year Adjusted EPS guidance to $8.13 at the midpoint, a 1.2% increase Operating Margin: 15.5%, in line with the same quarter last year Backlog: $1.47 billion at quarter end, up 57.7% year on year Market Capitalization: $7.71 billion
StockStory’s Take
ESCO’s second quarter results drew a negative market reaction after the company missed revenue expectations, despite strong underlying growth. Management pointed to broad-based order strength, particularly in aerospace and defense, and a record backlog as evidence of resilient demand. CFO Christopher Tucker emphasized the “powerful combination” of core organic growth and recent acquisitions, but also acknowledged that the Utility Solutions segment faced softer renewables demand. CEO Bryan Sayler noted, “the removal or the imminent removal of the tax credits is changing behavior amongst developers,” contributing to near-term weakness in renewables.
Looking ahead, ESCO’s outlook is shaped by continued robust demand across its core segments and early integration work on its pending Megger acquisition. Management expects utility capital spending and grid modernization to remain elevated, while commercial aerospace and naval programs provide long-term visibility. Sayler stated, “Adding Megger to the ESCO portfolio creates a scaled utility solutions platform and strengthens our position as a trusted partner to utilities worldwide.” The company also highlighted its ability to drive pricing above inflation as a key lever for maintaining margins in an uncertain cost environment.
Key Insights from Management’s Remarks
Management attributed the quarter’s performance to a rebound in aerospace and defense activity, strong demand for utility solutions tied to grid modernization, and broad-based growth in its Test business. Renewables demand was a notable weak spot, impacted by shifting tax incentives.
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Aerospace and defense rebound: The segment saw robust order growth, with significant wins in both U.S. and U.K. Navy programs and improving commercial aerospace orders as original equipment manufacturers (OEMs) began to recover from prior production challenges. Utility solutions grid investment: ESCO’s utility solutions benefited from elevated utility capital spending as electric utilities responded to growing electricity demand and an aging grid. Condition monitoring offerings, which help utilities monitor equipment remotely, grew in importance as regulatory approvals allowed these tools to be included in rate bases. Test business momentum: Orders and sales in the Test segment surged, driven by strong U.S. and European demand for electromagnetic compatibility (EMC) and industrial shielding equipment. Management cited favorable regulatory trends and increased requirements for testing across mission-critical applications. Renewables softness amid policy changes: Demand in the renewables segment dropped as developers prioritized project completions before the expiration of certain tax credits. Management acknowledged that “removal or the imminent removal of the tax credits is changing behavior amongst developers,” resulting in short-term weakness. Early Megger integration work: ESCO began regulatory filings and internal integration planning for its pending acquisition of Megger Group, aiming to create a more comprehensive utility solutions platform. Management expects the deal to close in early 2027 and highlighted anticipated earnings accretion and synergy opportunities.
Drivers of Future Performance
ESCO’s forward outlook is underpinned by sustained end-market demand, ongoing grid modernization, and integration of strategic acquisitions, but faces risk from renewables volatility and inflationary pressures.
Grid modernization and utility spending: Management expects elevated utility capital expenditure to continue, supported by rising electricity demand and regulatory focus on grid reliability. This should benefit ESCO’s diagnostic and monitoring solutions, which help utilities extend the life of aging infrastructure while controlling costs. Commercial aerospace recovery: The company anticipates further growth as OEMs increase aircraft production rates over the next few years. Management noted improving order momentum and a positive long-term outlook for both defense and commercial aviation segments, citing “significant growth, both on the aftermarket and on the OEM side.” Risks from renewables and inflation: Renewables demand remains uncertain due to shifting tax policies, and management was cautious about calling a bottom in that business. Additionally, inflationary pressures on input costs are being offset by ESCO’s demonstrated ability to implement price increases, though this remains an area to monitor.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be watching (1) progress on the Megger acquisition integration and regulatory approvals, (2) momentum in utility solutions as grid modernization and capital spending trends evolve, and (3) stabilization in renewables demand as policy uncertainty subsides. Execution on price increases and further evidence of aerospace and defense recovery will also be important markers for tracking ESCO’s ability to deliver on its growth outlook.
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- ESCO Technologies Megger Deal Reshapes Utility Solutions And Growth Outlook
May 15, 2026
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ESCO Technologies (NYSE:ESE) announced the acquisition of Megger Group Limited. The deal is described by the company as transformative for its Utility Solutions platform. Megger is expected to be combined with ESCO's existing utility focused businesses to create a larger solutions platform. The company highlighted record order intake and a growing backlog alongside the acquisition announcement.
For you as an investor, this move puts a spotlight on ESCO Technologies' role in utility infrastructure and testing solutions. The addition of Megger is intended to expand ESCO's reach with utility customers worldwide and deepen its exposure to grid reliability, power quality, and related services that are central to many long-term energy and infrastructure themes.
The company is tying this acquisition to its current momentum, pointing to record order intake and a growing backlog as it outlines its future plans. That combination of a larger utility platform and a fuller order book may allow ESCO to pursue a broader range of projects, partnerships, and product offerings with utility customers over time.
Stay updated on the most important news stories for ESCO Technologies by adding it to your watchlist or portfolio. Alternatively, explore our Community to discover new perspectives on ESCO Technologies.NYSE:ESE Earnings & Revenue Growth as at May 2026
3 things going right for ESCO Technologies that this headline doesn't cover.
The Megger deal sits on top of an already busy year for ESCO Technologies, with Q2 sales of US$309.3m and net income of US$34.7m, and full year 2026 revenue guidance kept at US$1.29b to US$1.33b. That backdrop suggests the company is using an established earnings base and record backlog to support a sizeable move into utility testing and diagnostics, while still funding a quarterly dividend of US$0.08 per share. For investors, a key angle is that ESCO is leaning further into grid-focused hardware and services where it will face large competitors such as ABB, Schneider Electric and Siemens, but with a more specialized portfolio tied to power quality and reliability.
How This Fits Into The ESCO Technologies Narrative
The planned Megger acquisition fits with the narrative that rising power reliability and grid modernization needs can support recurring revenue in ESCO's utility focused products and solutions. Adding another large acquisition on top of Maritime could test the integration capacity mentioned in the narrative. If execution is slower than planned it could pressure earnings and margins. The utility testing and monitoring focus of Megger may increase ESCO's exposure to data driven, predictive maintenance tools, which is not fully captured in the earlier emphasis on traditional hardware centric offerings.
Story Continues
Knowing what a company is worth starts with understanding its story. Check out one of the top narratives in the Simply Wall St Community for ESCO Technologies to help decide what it is worth to you.
The Risks and Rewards Investors Should Consider
⚠️ Integration risk from running multiple large acquisitions at once, including Megger and Maritime. This could add costs or distract management if timelines slip. ⚠️ Higher exposure to regulated utility spending cycles, which can slow if project approvals or budgets are delayed, affecting how quickly the backlog turns into revenue. 🎁 The Megger deal is intended to create a larger utility focused platform, which could give ESCO more scale with grid customers and a broader product set than smaller rivals. 🎁 Strong Q2 performance, raised earnings guidance and a record backlog provide financial flexibility as ESCO reshapes its portfolio around long term power reliability and infrastructure themes.
What To Watch Going Forward
From here, it is worth tracking how quickly ESCO secures regulatory and closing approvals for the Megger acquisition, and whether management keeps reaffirming or updating its earnings and revenue guidance as the deal moves toward the expected fiscal 2027 close. Order intake and backlog in the Utility Solutions platform will be important signals of how utilities are responding to the combined offering, especially versus larger industrial peers. Investors can also watch dividend decisions and cash flow to see how the company balances deal funding with shareholder returns and ongoing investment in aerospace, defense and test segments.
To stay up to date on how the latest news affects the investment narrative for ESCO Technologies, head to the community page for ESCO Technologies to follow the top community narratives.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include ESE.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
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- FormFactor Inc Sees Significant Reduction in Chuck Royce's Portfolio
May 12, 2026
This article first appeared on GuruFocus.
Exploring the Strategic Moves of a Small-Cap Investment Pioneer
Chuck Royce (Trades, Portfolio) recently submitted the 13F filing for the first quarter of 2026, providing insights into his investment moves during this period. Charles M. Royce is known as one of the pioneers of small-cap investing. He has been the portfolio manager for Royce Pennsylvania Mutual Fund since 1972. Royce holds a bachelor's degree from Brown University and a Master of Business Administration from Columbia University. The firm invests in smaller companies, primarily those with market capitalizations up to $5 billion, although some of its Funds may invest in companies with market capitalizations up to $10 billion. The value approaches that portfolio managers use share one significant trait: They are looking for terrific stocks trading for less than the estimate of the company's worth as a business - its enterprise value. "Essentially, we are interested in three thingsa strong balance sheet, a record of success as a business, and the potential for a profitable future." - Charles M. Royce
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Summary of New Buy
Chuck Royce (Trades, Portfolio) added a total of 56 stocks, among them:
The most significant addition was DigitalOcean Holdings Inc (NYSE:DOCN), with 224,412 shares, accounting for 0.19% of the portfolio and a total value of $19.25 million. The second largest addition to the portfolio was FactSet Research Systems Inc (NYSE:FDS), consisting of 65,139 shares, representing approximately 0.14% of the portfolio, with a total value of $14.13 million. The third largest addition was Azenta Inc (NASDAQ:AZTA), with 523,308 shares, accounting for 0.11% of the portfolio and a total value of $11.06 million.
Key Position Increases
Chuck Royce (Trades, Portfolio) also increased stakes in a total of 354 stocks, among them:
The most notable increase was Exponent Inc (NASDAQ:EXPO), with an additional 492,764 shares, bringing the total to 1,144,873 shares. This adjustment represents a significant 75.56% increase in share count, a 0.32% impact on the current portfolio, with a total value of $74.70 million. The second largest increase was Andersen Group Inc (NYSE:ANDG), with an additional 639,396 shares, bringing the total to 1,408,715. This adjustment represents a significant 83.11% increase in share count, with a total value of $38.32 million.
Summary of Sold Out
Chuck Royce (Trades, Portfolio) completely exited 43 of the holdings in the first quarter of 2026, as detailed below:
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Tegna Inc (TGNA): Chuck Royce (Trades, Portfolio) sold all 1,432,316 shares, resulting in a -0.28% impact on the portfolio. Graphic Packaging Holding Co (NYSE:GPK): Chuck Royce (Trades, Portfolio) liquidated all 1,275,693 shares, causing a -0.19% impact on the portfolio.
Key Position Reduces
Chuck Royce (Trades, Portfolio) also reduced positions in 285 stocks. The most significant changes include:
Reduced FormFactor Inc (NASDAQ:FORM) by 706,028 shares, resulting in a -60.98% decrease in shares and a -0.4% impact on the portfolio. The stock traded at an average price of $86.06 during the quarter and has returned 40.06% over the past 3 months and 135.23% year-to-date. Reduced Kyndryl Holdings Inc (NYSE:KD) by 1,479,508 shares, resulting in a -77.18% reduction in shares and a -0.4% impact on the portfolio. The stock traded at an average price of $17.6 during the quarter and has returned 1.68% over the past 3 months and -56.59% year-to-date.
Portfolio Overview
At the first quarter of 2026, Chuck Royce (Trades, Portfolio)'s portfolio included 774 stocks, with top holdings including 1.31% in Arcosa Inc (NYSE:ACA), 1.01% in Quaker Houghton (NYSE:KWR), 1% in JBT Marel Corp (NYSE:JBTM), 0.95% in ESCO Technologies Inc (NYSE:ESE), and 0.92% in MKS Inc (NASDAQ:MKSI).
The holdings are mainly concentrated in all 11 industries: Industrials, Technology, Financial Services, Consumer Cyclical, Healthcare, Basic Materials, Energy, Consumer Defensive, Communication Services, Real Estate, and Utilities.
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- Why ESCO (ESE) Stock Is Nosediving
May 12, 2026
What Happened?
Shares of engineered products manufacturer ESCO (NYSE:ESE) fell 8% in the afternoon session after the company reported mixed first-quarter 2026 results, where it missed revenue expectations but beat profit forecasts.
While sales grew 16.5% year-over-year to $309.3 million, this figure fell short of analysts' estimates. On a brighter note, the company's adjusted earnings per share of $1.91 beat the consensus estimate of $1.84. ESCO also highlighted strong future demand with its backlog increasing by 57.7% year-over-year to $1.47 billion. In a sign of confidence, management raised its full-year adjusted earnings guidance.
Despite the profit beat and positive outlook on its backlog and guidance, the revenue miss appeared to weigh more heavily on investor sentiment, leading to the stock's decline.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy ESCO? Access our full analysis report here, it’s free.
What Is The Market Telling Us
ESCO’s shares are not very volatile and have only had 4 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 22 days ago when the stock dropped 1.4% on the news that it announced an agreement to acquire Megger Group Limited for a total of $2.35 billion.
The deal was structured with $0.9 billion in cash and approximately $1.4 billion in ESCO equity. The cash portion was to be funded through existing cash and new debt. Investors reacted negatively, primarily due to the significant stock portion of the payment, which raised concerns about the dilution of existing shareholders' value. Additionally, the new debt increased the company's financial leverage.
ESCO is up 55% since the beginning of the year, but at $306.31 per share, it is still trading 9.7% below its 52-week high of $339.35 from May 2026. Investors who bought $1,000 worth of ESCO’s shares 5 years ago would now be looking at an investment worth $2,933.
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- ESCO (ESE) Q2 2026 Earnings Call Transcript
May 12, 2026
Image source: The Motley Fool.
DATE
Thursday, May 7, 2026 at 5 p.m. ET
CALL PARTICIPANTS
Chief Executive Officer — Bryan Sayler Chief Financial Officer — Christopher Tucker
Full Conference Call Transcript
Bryan Sayler: Thanks, Kate, and thanks, everyone, for joining today's call. We are pleased to be with you this afternoon to discuss our second quarter results. I'd like to start the call by sincerely thanking all of our employees around the world. Your dedication, collaboration and commitment continue to make the difference, and they were central to delivering another outstanding quarter. In Q2, we continue to see positive momentum across our business platforms as the pace of progress across our end markets continues to build. We had another strong quarter for orders across all 3 segments, and that sustained demand drove backlog to a record level, clear evidence of healthy end markets and the strength of our competitive position.
From an operational perspective, Q2 delivered another strong performance, translating into exceptional results on both the top and bottom line. Revenue strength was broad-based across most of our served markets. We see this quarter as further proof of the power of our strategy and our ability to execute with consistency, delivering sustainable value over time. As we announced in mid-April, we have reached an agreement to acquire Megger Group Limited. This acquisition represents a significant step in our portfolio transition, and I wanted to give you a quick update on what's been transpiring since the announcement. We have begun the regulatory filings process in the required countries.
And while the timing of this process can be uncertain, our current expectation is that it should be completed in a time frame that results in closing the deal in the first quarter of fiscal 2027. In addition, I want to let you know that we have already established internal teams with Megger, Doble and ESCO staff working together to better understand key aspects of the integration process. We expect that this early preparation and planning will be beneficial in setting out steps for a smooth and orderly integration of Doble and Megger with a focus on realizing identified synergies once the transaction is complete.
Adding Megger to the ESCO portfolio creates a scaled utility solutions platform and strengthens our position as a trusted partner to utilities worldwide. This acquisition marks another meaningful step in enhancing our portfolio, and we remain confident in the long-term outlook for our target markets. With durable demand drivers firmly in place, we are excited about the opportunities ahead. Chris will run you through all of the financial details for the second quarter. But before that, I want to give you a few comments on each segment. We recently completed our annual strategic planning process with our subsidiary businesses. As part of these meetings, we assess each of our end markets and our strategies to deliver above-market growth.
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My comments will focus on the current order strength that we are seeing as well as some of the longer-term dynamics across our served markets. Starting with Aerospace and Defense. In Q2, we continue to see order strength on U.S. and U.K. Navy programs, both from the maritime business and organically at Globe, where we entered $24 million of Virginia Class orders in the quarter for Block V.2 and Block VI content. In addition, we are seeing broad order strength on commercial aerospace programs. As we have mentioned previously, commercial aerospace orders were a little soft last year as the OEMs work through some internal issues. So it is nice to see the rebound in order strength here.
We continue to see a positive long-term outlook across our A&D end markets, supported by strong demand visibility and multiyear program backlogs. In commercial aerospace, demand continues to outpace production, sustaining historically high OEM backlogs. Annual deliveries are expected to increase from approximately 1,400 aircraft in 2025 to more than 2,000 per year by 2028 and beyond. While we view industry forecasts with an appropriate conservatism, we believe that the OEMs are on a recovery path, and we are already seeing order momentum tied to early progress in raising building rates. In defense aero, elevated geopolitical uncertainty is supporting higher budgets and new program starts.
The F-47 NGAD program represents a meaningful long-cycle growth opportunity, and we have achieved strong early wins to secure attractive shipset content. In naval markets, both the U.S. and U.K. remain committed to submarine modernization and fleet expansion with increasing build rates and new platform development continuing to be key priorities. Turning to the Utility Solutions Group. We delivered another strong quarter of orders led by services, off-line test equipment and condition monitoring that supported double-digit revenue growth. These results were partially offset by lower renewables demand as developers continue to prioritize project completions ahead of tax credit sunsets later this summer. Looking ahead, we are encouraged by the outlook for utility solutions.
Approximately 85% of segment activity is tied to utility capital spending, which we expect to remain elevated as electric utilities invest to meet rising electricity demand. This demand is placing increasing strain on an aging infrastructure, accelerating the need to maintain, expand and modernize the electric grid. Our diagnostic measurement, testing and monitoring solutions help utilities improve reliability and performance across both new and legacy assets. Our condition monitoring equipment and high-voltage test solutions are becoming increasingly important for utilities and OEMs that manufacture transformers and switchgear as they navigate the challenges of maintaining and expanding the grid. Overall, we remain bullish on the longer-term opportunity in the utility end market.
Finally, I'll touch on the Test business, which carried its great start to the year into the second quarter. Orders were strong in the quarter, driven by EMC test and measurement in the U.S. and Europe. Filter orders for government-funded data centers and multiple industrial shielding projects. Over the longer term, we are seeing broad-based strength across most of test end markets and expect mid-single-digit organic revenue growth over our planning horizon. Demand is being supported by a favorable regulatory and standards environment, rising requirements for electromagnetic compatibility and shielding performance across mission-critical applications. Compliance testing and evolving standards continue to drive increased test frequency and expanded certification requirements.
We see sustained demand across EMC and microwave applications, health care, industrial shielding and EMP filters serving utilities and secure data centers. We are optimistic about Test's continued opportunities to drive growth and margin expansion over time. With that, I'll turn it over to Chris, who will run you through the financial details for the quarter.
Christopher Tucker: Thanks, Bryan. Everyone can follow along on the chart presentation. We will start on Page 3, which shows the financial highlights for the second quarter. The bar charts across the top of this page clearly show that the second quarter was another great set of results for ESCO. The key theme with ESCO's financial results right now is that the core company performance on an organic basis is quite strong, and the ESCO Maritime acquisition is adding significantly to that strong base company performance. It's been a powerful combination driving our results since the closing of the Maritime deal in April of 2025.
Getting to the numbers, we start with orders, which increased 42% Organic order growth was double digit for all 3 business platforms with overall organic order growth of 22%. Maritime added $53 million of orders or 20 points of additional growth. On the sales side, reported growth was 33.5%, which was comprised of 13% organic growth and $48 million of sales from Maritime. On the profitability side, we saw adjusted EBIT margins improved by 370 basis points to 21.7% and adjusted earnings per share increased by 63% to $1.91 per share. Next, we will go through the segment highlights, starting with Aerospace and Defense on Page 4.
A great quarter across all metrics, starting with orders, which came in at nearly $184 million compared to $96.5 million in the prior year quarter. Organic orders increased by 35% with strong growth from the commercial aerospace and Navy businesses. As stated previously, Maritime added $53 million of orders in the quarter, which brought reported order growth to just over 90%. Sales in the quarter were $150 million with organic growth of 14%. The strong organic growth was driven by strength from commercial and defense aerospace as well as the Navy business. So really nice performance from all parts of the core Aerospace and Defense platform.
On the profitability side, we had good improvement to 28.6% adjusted EBIT margins, an increase of 160 basis points. Adjusted EBIT and adjusted EBITDA dollars increased by 78% and 72%, respectively. Margin increases were due to positive impacts from leveraging sales growth and increased prices. Next, we go to Chart 5 and the Utility Solutions Group. Orders here were up 10% in the second quarter, and that was driven by strong performance at Doble, where orders grew by 20%. We did see weak orders performance at NRG, where the renewables markets continue to be very soft. Sales in the quarter were up a modest 3%. Doble sales growth of 11% was somewhat offset by declines in NRG.
Doble continues to see good end market activity across a number of product lines serving the regulated utility customer base. Adjusted EBIT dollars in the quarter were up nearly 11% with volume, price and mix benefits at Doble more than offsetting margin drops at NRG. Next, we have the Test business on Page 6. This business had another terrific quarter with orders up 21% and sales up more than 27%. This business is seeing robust market activity centered around U.S. test and measurement and power filter demand. Adjusted EBIT margins improved nicely, increasing to 15.4%, which represents an increase of 300 basis points from last year's second quarter as the business continues to nicely leverage sales growth.
Next is Chart 7, where we have year-to-date highlights. The first 6 months have been very strong for ESCO as we make progress towards another record year. Order strength has been significant with 30% organic growth year-to-date. All 3 businesses have delivered double-digit organic growth with aerospace and defense leading the way. Sales have also been strong with 12% year-to-date organic growth, led by Test at 27% and Aerospace and Defense at 14%. Adjusted EBIT margins were up 370 basis points year-to-date as all 3 businesses have delivered improved margins. Going to Chart 8, we have cash flow highlights for the first 6 months.
Operating cash flow is up significantly at nearly $135 million compared to $46 million in the prior year. A key driver has been increased advanced payments on large Navy contracts. Capital spending is down slightly compared to last year, and there's a $10 million use of cash on the acquisition line related to working capital and tax settlements for the Maritime deal. EBITDA leverage is low at 0.4x, and we are positioned well for the debt requirements that will come with the Megger deal, which is currently expected to close in the first quarter of fiscal 2027. Our last chart is # 9, where we have updated 2026 guidance. With another strong quarter, we are increasing full year 2026 guidance.
We now expect full year adjusted earnings per share of $8 to $8.25 per share. This represents an increase of 33% to 37% compared to fiscal 2025. This is a substantial increase from our original November guide, and you can see from the bar graphs at the bottom of the page, we expect 2026 to be another record year and a nice continuation of the growth trend ESCO has delivered since fiscal 2021. That completes the financial summary, and now I'll turn it back over to Bryan.
Bryan Sayler: Thanks, Chris. So as you've heard from our commentary, Q2 was another solid quarter, and we're looking at another year of strong revenue and earnings growth. And with record backlog, we continue to feel great about the long-term prospects for ESCO. That concludes our opening remarks, and we'll now turn it over for the Q&A.
Operator:[Operator Instructions] Our first question comes from the line of Tommy Moll of Stephens.
Thomas Moll: Bryan, on Test, you talked about mid-single-digit sales growth over the planning horizon. I don't think that's different from what you've said previously, but you gave a lot of detail on some of the drivers for that today. And so I'm curious, just given some of the recovery there, is it fair to say you've got increasing conviction and visibility in that outlook? And then just moving to the bottom line there, any change post your planning conference on what the margin aspiration would be for that segment?
Bryan Sayler: Well, thanks, Tommy. Yes, listen, I do think it's a little bit of a change. As you know, we're having a very strong year this year at the business. And we have adjusted -- I think historically, we would have said 3% to 5%. We're probably saying more like 4% to 6% now. And this year, we're going to be well ahead of that. But yes, I would say our outlook for the Test business broadly is improving. And I think what I've said to you all before is that we're driving towards 20% EBITDA margins in that business.
And I think after what we've seen this year and what we saw in the 5-year kind of review that we just went through, we think we're going to get there a little quicker than we might have thought before.
Thomas Moll: And as a follow-up, I wanted to ask on Megger. At the time of the announcement, you framed the accretion as -- I forget the exact word you used, Bryan, but accretive in the first year and significantly accretive in the other years. Two-part question for you today. Are the fair bogeys to assume there something like low single digits on -- just on a percentage basis in the first year going to potentially even low double digits by the third year? And then second part of the question, how would you frame whatever return parameters you use to underwrite the deal, potentially on the ROIC side or some other framework that you used here?
Bryan Sayler: Yes. Thanks for the question. Yes, I think what we said and what we still believe is that on an earnings basis and EPS basis, it's going to be accretive in the first full year, and then it's going to be significantly accretive in the year beyond that. I'm kind of doing math in my head, but it's approximately double-digit accretive in that second year. I'm sorry, the second question was?
Thomas Moll: Whatever return related underwriting you used on the deal?
Bryan Sayler: Yes. So we -- so our kind of our guiding star there is really making sure that our internal rate of return on the deal is going to be better than our weighted average cost of capital. And so we are going to -- we do see a better than double-digit return on an IRR basis, and we do have a pretty good spread over our weighted average cost of capital.
Operator: Our next question comes from the line of Scott Deuschle of Durchell of Deutsche Bank.
Scott Deuschle: Bryan, can you characterize the demand that Doble is just seeing in its condition monitoring business and also characterize the pricing power you have in condition monitoring?
Bryan Sayler: Yes. I would say that overall condition monitoring continues to accelerate. I think I've said to you before that one of the characteristics we're seeing is that increasingly public utilities commissions around North America are allowing the condition monitoring tools to be built into the rate base. And that has served to really accelerate the overall demand there. We are seeing really good demand characteristics. And it would be at the high end of what we are seeing in terms of our product lines in terms of growth. So it's in the double-digit growth category.
Scott Deuschle: Okay. Are orders for condition monitoring systems growing faster than the 20% headline number you put up for Doble's orders this quarter?
Bryan Sayler: No, I don't think so. I would say that's a year-over-year comparison number. I think we're seeing broad-based growth over our entire product line. And Scott, I think one of the things that we -- one of our thesis here was that the amount of spending was going to be the same, whether it went to renewables or went to regulated utility piece. And so I think a little bit of what you're seeing is the softness that we're seeing over on the renewable side is really coming through as increased spending on the grid sustainment and grid modernization side.
Scott Deuschle: Okay. And last question just on this topic. Like do condition monitoring systems help operators reduce their long-term hiring needs for electricians? And if so, has that become a key part of the value proposition given the shortage of electricians that are out there today?
Bryan Sayler: Well, the answer to the first piece is yes, that the way that condition monitoring operates is it allows you to only send a truck roll when you know there's an issue or something that needs to be responded to. So yes, it does reduce the number of truck rolls. But in the grand scheme of things, I do not believe that, that is the most important financial reason why a utility would want to do this.
What the condition monitoring allows them to do is get better real-time data from the grid edge so that as they're operating their system, they're able to -- those peak load conditions, they're able to operate the system more efficiently and they're able to push things a little bit harder than they might if they don't have those grid edge feedback. So I think the bigger value in condition monitoring is they get more life out of existing assets, meaning that they can defer capital investments and expensive replacements, and that allows them to put their investments more into needed areas and into grid expansion.
Scott Deuschle: That's clear and really helpful. Last question, the declines in energy accelerated this quarter by a pretty meaningful amount in both sales and I think orders actually declined by even more. Is there any hard evidence you can point to that this business is actually at a bottom? And is a business that can see a 30% sales decline a business that you want to be in long term?
Bryan Sayler: Yes. Listen, I think that the challenge with renewables is they are pretty volatile, and they're very responsive to a lot of the policy changes that we see in Washington. And I think that's what we're experiencing right now is that the removal or the imminent removal of the tax credits is changing behavior amongst developers. And so I'd like to be -- I'd like to believe that this is a bottom, but I've been around long enough to never call bottoms until I start seeing the trajectory in the other direction. So it's possible it could be a little deeper. And I also think it's possible that this could last a little bit longer.
But listen, long term, renewables are absolutely a piece of the overall grid solution. And we do believe that this is a business that can be profitable and even at a lower level. And so the answer is yes, I think this is a business that we want to be in. It's a business we continue to believe in. And it's a business that we do think is going to return to growth in the second half of '26 or beginning of '27.
Scott Deuschle: Okay. Is the business profitable at this level of sales?
Bryan Sayler: It is. It is profitable. I think the challenge is that on a year-over-year comparison basis, it was very profitable a year ago, and it's not as profitable now, but it's still profitable.
Operator:[Operator Instructions] Our next question comes from the line of Jonathan Tanwanteng.
Jonathan Tanwanteng: Nice job on the quarter and the increased outlook. I was wondering if you could first talk about the commercial airline demand, particularly in consumables. I know you've seen a pretty strong trailing demand. But as we look forward, you see flights getting canceled, even entire airlines getting canceled in the case of Spirit. I'm just wondering if you see any pressure from that on the consumable bit of your business as you look into the future?
Bryan Sayler: Well, it's pretty early to see any impact from something like an airline going out of business. We -- there has been a fair amount of impact to widebodies coming in and out of the Middle East in terms of overall air traffic. But we have not seen that manifest in a meaningful way in our order patterns. In fact, our orders this quarter were outstanding and really implied significant growth, both on the aftermarket and on the OEM side. We pointed in our prepared remarks to some of the increases we're seeing on the OEM side. We're pretty excited about what we're seeing from Boeing and others.
We do think that they're back on track, and we're prepared to support them at even higher build rates. And I would say we seem to regularly have this discussion about how conservative I am about taking their forecast to heart. I would say that our belief in what's happening there is improving, and we're optimistic about what that means for our business.
Jonathan Tanwanteng: Got it. That's helpful. And then just on the revenue guidance, it looks like you didn't change it. And I was wondering what are the moving parts in there, just given the Test has outperformed your expectations by so much? Are you just tracking towards the higher end of the range? Or are there some puts and takes that we should be thinking about in the other segments?
Christopher Tucker: I would say there's a few puts and takes. I mean I think that you noticed the Maritime is slightly under $100 million year-to-date. And kind of the full year guide we had given there before was like $230 million to $245 million. So they're going to be probably at the lower end of that range based on kind of how the first half has gone. Mean, overall, the business is still doing great. Profits are good. Cash is good. Orders are good. They're just seeing a little bit of some delays and slowdowns on some of the U.S. surface ship type programs. So again, I think that kind of brings it back to the lower end.
We're probably a little bit better in Doble than what we had thought a quarter ago. NRG is offsetting that. So we're a little bit worse there. And then we've got a few places in aerospace and defense, mostly on the commercial aircraft side and defense aircraft side where we're a little better. So all these are kind of plus and minus. And yes, we kind of end up in the same place.
Jonathan Tanwanteng: Got it. And then last one, if I could sneak one in. Any thoughts on where inflation is going and your ability to push pricing through to your customers? What's built into your forecast today? And what could be the risk there as we go forward?
Bryan Sayler: Yes. We certainly believe that we're able -- I think we've got a demonstrated history of being able to drive price faster than inflation. We certainly keep an eye on that. It's a little bit early right now to call anything on oil prices or anything like that, but we are starting to see some signals there that may require us to kind of go back to customers with some price changes. But you can count on us to be pretty aggressive about the price side.
Operator: I'm showing no further questions at this time. I would now like to turn it back to Bryan Sayler for closing remarks.
Bryan Sayler: Well, listen, thanks, everyone, for taking our call. I mean I think as you saw, we feel really good about our quarter. We feel really good about our year. And we're looking forward to talking to you again about another great quarter 3 months from now. Take care.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
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ESCO (ESE) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool
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- ESCO Technologies Q2 Earnings Call Highlights
May 10, 2026
ESCO Technologies logo
Key Points
Interested in ESCO Technologies Inc.? Here are five stocks we like better. ESCO Technologies beat expectations in fiscal Q2, with orders up 42%, sales up 33.5%, adjusted EPS up 63% to $1.91, and adjusted EBIT margin expanding to 21.7%. The company also raised its full-year fiscal 2026 adjusted EPS outlook to $8.00 to $8.25. Backlog and demand momentum were strong across all three segments, led by Aerospace and Defense and Test, while the newly acquired ESCO Maritime contributed materially to growth. Management said the company ended the quarter with a record backlog and sees continued strength in commercial aerospace, Navy programs and condition monitoring. Utility Solutions remained mixed, as Doble benefited from stronger utility spending but NRG continued to face weakness in renewables markets. ESCO said the planned Megger acquisition is still expected to close in fiscal 2027 and should be accretive to earnings once completed.
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ESCO Technologies (NYSE:ESE) reported strong fiscal second-quarter results and raised its full-year earnings outlook, citing broad-based order momentum, record backlog and gains from its ESCO Maritime acquisition.
President and CEO Bryan Sayler said the company saw “positive momentum across our business platforms” during the quarter, with order strength across all three segments. He said sustained demand pushed backlog to a record level, reflecting “healthy end markets and the strength of our competitive position.”
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Senior Vice President and CFO Chris Tucker said second-quarter orders rose 42%, including 22% organic order growth. ESCO Maritime, acquired in April 2025, added $53 million of orders, representing 20 percentage points of additional growth. Sales increased 33.5%, including 13% organic growth and $48 million of sales from Maritime.
Adjusted EBIT margin improved 370 basis points to 21.7%, while adjusted earnings per share rose 63% to $1.91, Tucker said.
Company Raises 2026 Earnings Outlook
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ESCO raised its fiscal 2026 adjusted earnings per share guidance to a range of $8.00 to $8.25. Tucker said that would represent an increase of 33% to 37% compared with fiscal 2025 and would mark another record year for the company.
For the first six months of fiscal 2026, Tucker said organic orders rose 30%, with double-digit organic growth across all three business platforms. Year-to-date sales increased 12% organically, led by 27% growth in Test and 14% growth in Aerospace and Defense. Adjusted EBIT margins improved 370 basis points year to date.
Story Continues
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Operating cash flow for the first half was nearly $135 million, compared with $46 million in the prior-year period. Tucker attributed the improvement in part to increased advance payments on large Navy contracts. He said EBITDA leverage remained low at 0.4 times, positioning the company for debt needs tied to the pending Megger transaction.
Aerospace and Defense Posts Strong Order Growth
In Aerospace and Defense, orders totaled nearly $184 million, up from $96.5 million in the prior-year quarter. Organic orders rose 35%, led by commercial aerospace and Navy programs. Maritime contributed $53 million of orders, bringing reported order growth to just over 90%.
Segment sales were $150 million, including 14% organic growth. Tucker said commercial aerospace, defense aerospace and Navy programs all contributed to the performance. Adjusted EBIT margin rose 160 basis points to 28.6%, reflecting sales leverage and increased prices.
Sayler said the company continued to see order strength in U.S. and U.K. Navy programs, including $24 million of Virginia-class submarine orders at Globe for Block V.2 and Block VI content. He also said commercial aerospace orders have rebounded after being “a little soft” last year as OEMs worked through internal issues.
Looking ahead, Sayler said commercial aerospace demand continues to exceed production, supporting high OEM backlogs. He cited expectations for annual aircraft deliveries to rise from about 1,400 in 2025 to more than 2,000 per year by 2028 and beyond, while noting the company views industry forecasts conservatively.
Utility Solutions Lifted by Doble, Offset by Renewables Weakness
Utility Solutions Group orders rose 10% in the quarter, driven by a 20% increase at Doble. Sales increased 3%, as 11% sales growth at Doble was partly offset by declines at NRG, where renewables markets remained soft. Adjusted EBIT dollars rose nearly 11%, with volume, price and mix benefits at Doble more than offsetting lower margins at NRG.
Sayler said roughly 85% of the segment’s activity is tied to utility capital spending, which he expects to remain elevated as electric utilities invest to meet rising electricity demand and modernize an aging grid. He said diagnostic measurement, testing and monitoring products are helping utilities improve reliability and performance across both new and legacy assets.
During the question-and-answer session, Sayler said condition monitoring demand continues to accelerate, aided by public utility commissions in North America increasingly allowing those tools to be built into the rate base. He described condition monitoring as a double-digit growth category for ESCO.
Sayler said condition monitoring can reduce truck rolls by helping utilities identify when an issue requires a response. However, he said the bigger value is providing real-time data from the grid edge, helping operators run systems more efficiently during peak load conditions and extend the life of existing assets.
NRG continued to face pressure from weak renewables demand. Sayler said developers are changing behavior ahead of the expected removal of certain tax credits. He declined to call a bottom in the market, saying the downturn could go “a little deeper” or last longer, but added that ESCO still believes renewables are part of the long-term grid solution. He said the NRG business remains profitable and could return to growth in the second half of 2026 or early 2027.
Test Segment Outperforms as Demand Broadens
The Test segment delivered what Tucker called “another terrific quarter,” with orders up 21% and sales up more than 27%. Demand was centered on U.S. test and measurement and power filters, including filter orders for government-funded data centers and industrial shielding projects. Adjusted EBIT margin improved 300 basis points to 15.4% as the business leveraged higher sales.
Sayler said Test continues to benefit from demand tied to electromagnetic compatibility testing, shielding performance, healthcare, industrial shielding and EMP filters for utilities and secure data centers. He said the company now views the segment’s longer-term organic revenue growth outlook as closer to 4% to 6%, compared with a prior 3% to 5% range.
Sayler also said ESCO is still targeting 20% EBITDA margins in Test, adding that after the company’s recent five-year strategic review, management believes the segment can reach that level faster than previously expected.
Megger Deal Expected to Close in Fiscal 2027
Sayler provided an update on ESCO’s planned acquisition of Megger Group Limited, which was announced in April. He said the company has begun regulatory filings in required countries and currently expects the transaction to close in the first quarter of fiscal 2027, though the timing remains uncertain.
Internal teams from Megger, Doble and ESCO have started planning for integration, Sayler said. He said the acquisition would create a scaled utility solutions platform and strengthen ESCO’s position as a partner to utilities globally.
In response to an analyst question, Sayler said the transaction is expected to be accretive to EPS in the first full year and “approximately double digit accretive” in the second year. He said ESCO underwrote the deal with an expected internal rate of return above its weighted average cost of capital.
Management said full-year revenue guidance was unchanged, reflecting puts and takes across the portfolio. Tucker said Maritime is likely to come in near the lower end of its previously discussed $230 million to $245 million annual sales range due to delays and slowdowns on some U.S. surface ship programs. He said Doble is performing better than expected, NRG is weaker, and parts of Aerospace and Defense are modestly stronger.
Sayler also addressed inflation and pricing, saying ESCO has a demonstrated history of driving price faster than inflation. He said the company is monitoring signals, including oil prices, that could require additional pricing discussions with customers.
About ESCO Technologies (NYSE:ESE)
ESCO Technologies Inc is a diversified manufacturer of engineered products and systems designed to meet customers' critical performance requirements in the test, measurement, control, and filtration of data, fluids, and gases. The company serves a wide range of end markets, including commercial aerospace, defense, industrial, medical, and communication network sectors. ESCO's solutions are tailored to environments where reliability, precision and regulatory compliance are paramount.
Operating through multiple business segments, ESCO Technologies delivers test and measurement instruments such as RF and microwave components, signal distribution systems, and integrated test enclosures that support defense and aerospace programs.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
The article "ESCO Technologies Q2 Earnings Call Highlights" was originally published by MarketBeat.
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- ESCO Technologies Q2 Earnings Call Highlights
May 10, 2026 · marketbeat.com
ESCO Technologies NYSE: ESE reported strong fiscal second-quarter results and raised its full-year earnings outlook, citing broad-based order momentum, record backlog and gains from its ESCO Maritime acquisition.
- ESCO Technologies Inc. (ESE) Q2 2026 Earnings Call Transcript
May 8, 2026 · seekingalpha.com
ESCO Technologies Inc. (ESE) Q2 2026 Earnings Call Transcript
- Esco Technologies (ESE) Surpasses Q2 Earnings and Revenue Estimates
May 8, 2026
Esco Technologies (ESE) came out with quarterly earnings of $1.91 per share, beating the Zacks Consensus Estimate of $1.9 per share. This compares to earnings of $1.35 per share a year ago. These figures are adjusted for non-recurring items.
This quarterly report represents an earnings surprise of +0.53%. A quarter ago, it was expected that this maker of smart meters and filtration products would post earnings of $1.32 per share when it actually produced earnings of $1.64, delivering a surprise of +24.24%.
Over the last four quarters, the company has surpassed consensus EPS estimates two times.
Esco Technologies, which belongs to the Zacks Technology Services industry, posted revenues of $309.34 million for the quarter ended March 2026, surpassing the Zacks Consensus Estimate by 0.04%. This compares to year-ago revenues of $265.52 million. The company has topped consensus revenue estimates just once over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.
Esco Technologies shares have added about 71.8% since the beginning of the year versus the S&P 500's gain of 7.6%.
What's Next for Esco Technologies?
While Esco Technologies has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?
There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.
Ahead of this earnings release, the estimate revisions trend for Esco Technologies was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $2.07 on $335.12 million in revenues for the coming quarter and $8.10 on $1.31 billion in revenues for the current fiscal year.
Story Continues
Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Technology Services is currently in the bottom 27% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Safe Pro Group Inc. (SPAI), another stock in the same industry, has yet to report results for the quarter ended March 2026.
This company is expected to post quarterly loss of $0.15 per share in its upcoming report, which represents a year-over-year change of +44.4%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.
Safe Pro Group Inc.'s revenues are expected to be $0.81 million, up 327.9% from the year-ago quarter.
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This article originally published on Zacks Investment Research (zacks.com).
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- Esco Technologies (ESE) Surpasses Q2 Earnings and Revenue Estimates
May 7, 2026 · zacks.com
Esco Technologies (ESE) came out with quarterly earnings of $1.91 per share, beating the Zacks Consensus Estimate of $1.9 per share. This compares to earnings of $1.35 per share a year ago.
