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Alamo Group (ALG) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Industrials· Aug 4, 2026

Source: earnings call transcript

Executive summary

Alamo Group Q2 FY26 — Strong Sales and Improved Adjusted Earnings Driven by Industrial Equipment

Alamo Group delivered a solid second quarter, marked by strong sales growth in its Industrial Equipment division, driven by recent acquisitions and organic demand. While gross margins faced pressure from mix and investments, adjusted earnings and EBITDA showed healthy improvement. The company maintains a disciplined capital allocation strategy, prioritizing tuck-in M&A and shareholder returns, with a strong balance sheet providing ample flexibility despite cautious near-term outlooks for some end markets.

Highlights

5

  • Net sales increased 7.6% to $415.7 million in Q2 FY26.

  • Adjusted EPS grew 7.2% to $2.82 in Q2 FY26.

  • Adjusted EBITDA rose to $63.9 million (14.2% of net sales) in Q2 FY26 from $58.8 million (14% of net sales) in Q2 FY25.

  • Industrial Equipment division sales increased 12.8% to $271.6 million, with organic growth of 2.6%.

  • Free cash flow for the LTM ended June 30, 2026, was $135.3 million, representing 134% of net income.

Concerns

5

  • Gross margin declined 120 basis points to 24.6% in Q2 FY26 due to sales mix and growth investments.

  • Net interest expense increased to $3.6 million in Q2 FY26 from $2.5 million in Q2 FY25, primarily due to the Petersen acquisition.

  • Industrial Equipment book-to-bill ratio was 0.85x in Q2 FY26, with net orders down 2% YoY.

  • Vegetation Management book-to-bill ratio was 0.9x in Q2 FY26, with net orders down 1% YoY.

  • Vegetation Management end markets are expected to be flattish to down mid-single digits for the remainder of 2026.

Guidance & targets

CategoryTargetConfidence
Adjusted Operating Income Margin
15%
high materiality
High
Adjusted EBITDA Margin
18%
high materiality
High
Business Exit
Complete exit
low materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Industrial Equipment
Sales growth driven by organic demand and contributions from Petersen and Ring-O-Matic acquisitions. Strong performance in excavators, vacuum trucks, and rental business, which is on pace for a record year. Snow sales lower due to deliberate focus on attractive commercial opportunities, improving profitability. Adjusted EBITDA margins were roughly unchanged YoY, benefiting from higher volume, ramping procurement savings, and Petersen's contribution, partially offset by higher input costs (freight and steel) and streamlining costs. Orders strongest in snow and sweepers/safety (organic and inorganic growth), while excavator/vacuum truck orders were lower against a record Q2 FY25.
Organic net sales growth: 2.6% YoYQ2 FY25 Net Sales: $240.7 millionQ2 FY25 Adjusted EBITDA: $40.3 millionQ2 FY25 Adjusted EBITDA Margin: 16.8%Book-to-bill ratio: 0.85xNet orders change: -2% YoYContribution to total sales: 59%
$271.6 million12.8%—$45.3 million Adjusted EBITDA (16.7% of net sales)
Vegetation Management
Sales were relatively stable YoY, marking the second consecutive quarter of growth after eight quarters of declines. Growth in North American agriculture, Tree Care, Recycling, and European businesses offset declines in municipal mowing and South America. Adjusted EBITDA margins were flat YoY, reflecting improved operational execution and favorable pricing offset by inflation, tariffs, and unfavorable sales mix. Municipal mowing orders showed strong momentum, and Tree Care/Recycling orders grew. North American agriculture orders were flat YoY but built on a strong year-to-date pattern.
Q2 FY25 Net Sales: $178.4 millionQ2 FY25 Adjusted EBITDA: $18.5 millionQ2 FY25 Adjusted EBITDA Margin: 10.4%Book-to-bill ratio: 0.9xNet orders change: -1% YoYContribution to total sales: 41%
$179.1 million0.4%—$18.6 million Adjusted EBITDA (10.4% of net sales)

Orderbook & backlog

Total backlog 4 to 5 months of revenue Q2 FY26

Represents aggregate lead times, consistent with historical levels outside of boom years.

Industrial Equipment book-to-bill ratio 0.85x Q2 FY26

net orders down 2% YoY

Vegetation Management book-to-bill ratio 0.9x Q2 FY26

net orders down 1% YoY

Deals & partnerships

Petersen Acquisition of a business contributing to Industrial Equipment division.

Acquired earlier in 2026. Integration efforts and advancement of commercial and operational synergies are progressing well.

Ring-O-Matic Acquisition of a business contributing to Industrial Equipment division.

Acquired during 2025.

Undisclosed Exit of a small business in the Netherlands serving the waterway vegetation management market.

Part of portfolio review to align with long-term strategic direction. Expected to be completed either through sale or closure.

Risks & headwinds

Gross margin decline Q2 FY26

120 bps

Mitigation:Favorable pricing, procurement savings, and operating disciplines partially offset the decline.

Higher input costs Q2 FY26

freight and steel

Mitigation:Partially offset by higher volume, ramping procurement savings, and cost efficiency initiatives in Industrial Equipment.

Cost to streamline manufacturing activities Q2 FY26

costs incurred

Mitigation:Partially offset by higher volume, ramping procurement savings, and cost efficiency initiatives in Industrial Equipment.

Inflation, tariffs, and unfavorable sales mix Q2 FY26

offsetting factors

Mitigation:Offset favorable pricing and improved operational execution in Vegetation Management.

Vegetation Management end market pressure H2 FY26

flattish to down mid-single digits

Mitigation:Company is focused on alternate sources of growth and strengthening dealer network. Expects long-term relevance of brands and products.

Lumpiness and timing of orders in excavator and vacuum truck businesses Q2 FY26

orders lower in Q2 FY26

Mitigation:Acknowledged as inherent to the business; Q2 FY25 was a record quarter for orders, making comparison tough.

Pockets of softness in construction markets Q2 FY26

some pockets

Mitigation:Company notes market is stable but selective, with near-term growth moderating after several years of double-digit growth.

What to watch in Q3 FY26

Vegetation Management End Market Trajectory

H2 FY26
Current Flattish to down mid-single digits
Target Stabilization or improvement

Why it matters

This segment has seen 8 quarters of decline and is now stabilizing; its recovery is key to overall growth.

I would call that end market to be flattish to down mid-single digits, somewhere in that ZIP code. Nonetheless, a remarkable swing in trajectory versus the prior 2 years to 3 years.

Find out whether ALG delivers this. Inve re-checks your case every morning.

Q&A highlights

Seeking clarity on backlog dynamics, lead times, and market share given normalized order patterns, specifically how much revenue is backlog-dependent and turn rates for Industrial vs. Vegetation.

Robert Hureau explained that aggregate lead times represent 4-5 months of revenue in backlog, consistent with historical levels outside of boom years. He highlighted positive order trends in municipal mowing and snow business, while excavator/vacuum truck orders were down against a record Q2 FY25. He emphasized market share gains in both divisions.

“Today, in the aggregate, those lead times, if you look at our backlog and our quarterly revenue, we've got 4 to 5 months of revenue sitting in backlog in the aggregate and similarly within the Industrial division.”

asked by Chris Moore · answered by Robert Hureau

2 min read 5 chapters

Detailed narrative

Q2 Performance Overview

Alamo Group reported strong Q2 FY26 results with net sales up 7.6% to $415.7 million and adjusted EPS increasing 7.2% to $2.82. Adjusted EBITDA reached $63.9 million, representing 14.2% of net sales. The company highlighted continued strong customer activity and progress on operational improvements and strategic priorities, despite a 120 basis point decline in gross margin to 24.6% due to sales mix and growth investments.

Industrial Equipment Division Strength

The Industrial Equipment division saw net sales grow 12.8% to $271.6 million, with organic sales up 2.6%. This growth was driven by excavators, vacuum trucks, and the rental business, which is on pace for a record year. Recent acquisitions, Petersen and Ring-O-Matic, also contributed significantly, with Petersen's integration progressing well and its EBITDA margins performing as expected.

Vegetation Management Stabilization

The Vegetation Management division's net sales were relatively stable, up 0.4% to $179.1 million, marking the second consecutive quarter of year-over-year growth after eight quarters of declines. Growth in North American agriculture, Tree Care, and Recycling, along with European businesses, offset declines in municipal mowing and South America. Adjusted EBITDA margins for the division were 10.4%, flat year-over-year, reflecting improved operational execution despite inflation and tariffs.

Strategic Priorities and Portfolio Review

Management reiterated its four strategic pillars: people and culture, commercial excellence, operational excellence, and capital deployment. As part of a portfolio review, the company announced its decision to exit a small waterway vegetation management business in the Netherlands by the end of 2026 and expects further decisions in H2 FY26. These actions align with the long-term strategy of owning market-leading, strategically relevant businesses.

Capital Allocation and M&A Focus

Alamo Group maintains a disciplined and balanced capital allocation strategy, targeting net leverage up to 2.5x. M&A remains a top near-term priority, focusing on tuck-in acquisitions in the industrial space with attractive EBITDA margins and strong strategic fit, aiming for 1-2 transactions annually. The company also returned capital to shareholders through $4.1 million in dividends and $9.4 million in share repurchases under its $50 million authorization.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.