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    FELE
    Earnings call· Mar 2026(Q1 FY26)

    FRANKLIN ELECTRIC CO Q1 FY26 earnings call FELE

    Apr 28, 2026 Source

    Executive summary

    Franklin Electric Q1 FY26 — Strong Organic Growth and Margin Expansion

    Franklin Electric delivered a strong first quarter with robust organic growth across all segments, driven by balanced volume and pricing. The company achieved record adjusted EPS and expanded adjusted operating income margins, reflecting successful strategic initiatives and productivity efforts. While navigating global market uncertainties and tariff-related cost pressures, management remains confident in its full-year outlook and continued investment in strategic growth areas like new products and channel expansion.

    Highlights

    5

    • Consolidated sales increased 10% year-over-year to $500.4 million, driven by balanced volume and pricing.

    • Adjusted diluted EPS grew 24% year-over-year to a new Q1 record of $0.83.

    • Adjusted operating income margin expanded 70 basis points year-over-year to 10.4%.

    • Distribution segment operating income margin improved 50 basis points to 2% of sales.

    • Energy Systems operating income margin improved 90 basis points to 33.7%.

    Concerns

    4

    • Gross profit margin declined 100 basis points year-over-year to 35% due to higher material costs from tariffs.

    • Global Water Systems operating income margin decreased 110 basis points year-over-year to 14%.

    • EMEA sales in Global Water Systems were negatively impacted by the ongoing conflict in the Middle East.

    • Restructuring costs of $3.9 million were incurred in Q1 FY26, primarily in global water operations.

    Guidance & targets

    5
    CategoryTargetConfidence
    Full-year sales
    $2.17 billion to $2.24 billion
    high materiality
    Medium
    Full-year adjusted diluted EPS
    $4.40 to $4.60
    high materiality
    Medium
    Value Acceleration Office productivity
    Over $15 million
    medium materiality
    High
    Value Acceleration Office productivity
    Over 100 basis points
    medium materiality
    Medium
    New product vitality revenue
    $160 million
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Consolidated
    Consolidated sales increase primarily due to price and volume growth across all three segments, positive impact of foreign currency translation, and incremental sales from recent acquisitions.
    Gross Profit Margin: 35%, down 100 bps YoY from 36%Adjusted Operating Income Margin: 10.4%, up 70 bps YoY from 9.7%
    		$500.4 million10%——
    Global Water Systems
    Driven by strong price, favorable currency exchange, and additional volumes from recent acquisitions. EMEA sales volumes negatively impacted by Middle East conflict.
    U.S. and Canada Sales Growth: 7% YoYAll other surface pumping equipment sales: Up 17%Water treatment products sales: Up 8%Groundwater pumping equipment sales: Up 3%Dewatering equipment sales (U.S. and Canada): Down 9%Sales outside U.S. and Canada: Up 17% overallForeign currency translation impact on sales outside U.S. and Canada: +8%Acquisitions impact on sales outside U.S. and Canada: +7%Operating Income: $44.4 million, up $1 million YoYOperating Income Margin: 14%, down 110 bps YoYAdjusted Operating Income: $48.3 million, up $4.9 million or 11% YoYAdjusted Operating Income Margin: 15.2%, up 10 bps YoY
    		—11%—14%
    Distribution
    Sales increase primarily due to higher volumes and price realization. Operating income margin improved due to higher sales volume, strong price realization, and solid leverage on SG&A costs.
    Sales (Q1 FY25): $141.9 millionOperating Income: $3 million, up $0.9 million YoYOperating Income Margin: 2%, up 50 bps YoY
    		$150.9 million6%—2%
    Energy Systems
    Operating income margin increased primarily due to higher sales volume, solid price realization, and strong leverage on SG&A costs from higher sales.
    Sales (U.S. and Canada): Up 3% YoYSales (Outside U.S. and Canada): Up 29% YoY, primarily Asia PacificOperating Income: $24.2 million, up $2.3 million YoY from $21.9 millionOperating Income Margin: 33.7%, up 90 bps YoY from 32.8%
    		$71.8 million7%—33.7%

    Operational metrics

    23
    Adjusted Diluted EPS
    $0.83Up 24% YoY from $0.67
    Q1 FY26

    New first quarter record, primarily driven by expansion of adjusted operating income.

    GAAP Diluted EPS
    $0.77Up 15% YoY from $0.67
    Q1 FY26

    Reported fully diluted earnings per share.

    Restructuring Costs
    $3.9 millionVs $0.2 million in Q1 FY25
    Q1 FY26

    Primarily related to structural improvement initiatives across global water operations, expected to deliver savings in 2026 and be accretive in 2027.

    Effective Tax Rate
    24.2%Vs 25% in Q1 FY25
    Q1 FY26

    Change driven by favorable discrete stock compensation in Q1 FY26.

    SG&A as % of Net Sales
    24.6%Vs 26.3% in Q1 FY25
    Q1 FY26

    Increase in SG&A expenses primarily due to incremental impact of acquisitions.

    SG&A as % of Net Sales (ex-acquisitions)
    24%Improved 230 bps YoY
    Q1 FY26

    Improvement year-over-year without the impact of acquisitions.

    Adjusted Operating Income
    $52 millionUp $7.7 million or 17% YoY from $44.3 million
    Q1 FY26

    Consolidated operating income before restructuring costs.

    Cash Balance
    $80.4 million
    End of Q1 FY26

    Company's cash position at quarter-end.

    Revolving Credit Agreement Outstanding
    $88 million
    End of Q1 FY26

    Amount outstanding under the company's revolving credit facility.

    Shares Repurchased
    120,000 shares
    Q1 FY26

    Shares purchased in the open market.

    Remaining Share Repurchase Authorization
    0.7 million shares
    End of Q1 FY26

    Total authorized shares that may be repurchased.

    Quarterly Cash Dividend
    $0.28
    Q1 FY26

    Company announced its 34th consecutive year of dividend expansion.

    Sales Growth Contribution (Volume)
    Just under 30%
    Q1 FY26

    Contribution to consolidated sales growth.

    Sales Growth Contribution (Price)
    Just over 30%
    Q1 FY26

    Contribution to consolidated sales growth.

    New Product Vitality Revenue Target
    $160 million
    FY26-FY28

    Targeted new product revenue over a three-year period, with a focus on accretive innovations.

    Value Acceleration Office Productivity Target (Annual)
    Over 100 basis points
    Annual

    Expected annual productivity improvement from the Value Acceleration Office.

    Value Acceleration Office Productivity (FY26)
    Over $15 million
    FY26

    Expected productivity delivery from the Value Acceleration Office for the current fiscal year.

    Water Treatment Margin Improvement
    Up 410 basis pointsYoY
    Full year 2025

    Focused margin improvement efforts.

    Distribution Margin Improvement
    Up 210 basis pointsYoY
    Full year 2025

    Focused margin improvement efforts.

    Energy Systems Revenue as % of Total
    13%
    Q1 FY26

    Contribution of Energy Systems to total consolidated revenue.

    Energy Systems Operating Income as % of Total
    More than 1/3
    Q1 FY26

    Contribution of Energy Systems to total consolidated operating income.

    Global Dewatering Business Growth
    Up 30%+YoY
    Q1 FY26

    Healthy growth in the global dewatering space, from a smaller base.

    Data Center Business Size
    Sub-$50 million
    Current

    Total products for data centers, identified as the fastest-growing space for pumps, motors, and drives.

    Industry KPIs

    6
    MetricValueDetails
    Capacity expansionNew water factory
    Tariff cost impact100 basis pointsbps
    Parts aftermarket businessUp 30%+%
    Data center prime power demandSub-$50 millionUSD
    Incremental margin operating leverageOver 100 basis pointsbps
    Order backlog order intake by segmentUp 10%%

    Orderbook & backlog

    1
    Total backlogUp 10%Entering Q2 FY26

    Up 10% YoY

    Positive book-to-bill as entered the quarter.

    Product announcements

    1
    ProductTypeDetails
    VersaBoost Prolaunch

    Capital programs

    2
    New water factoryinaugurated

    Inaugurated in Izmir, Turkey, as part of expanding capital deployment for new projects.

    Regional expansionsunderway

    More focused expansions and regional efforts in India, South America, and Mexico.

    Risks & headwinds

    4
    Higher material costs from tariffsQ1 FY26

    Unfavorably impacted gross profit margin by 100 bps

    Mitigation: Company will continue to be disciplined in price strategy to pass through commodity inflation.

    Macroeconomic and geopolitical outlook uncertaintyFull year 2026

    Reflected in full-year sales and adjusted diluted EPS guidance range

    Mitigation: Holding guidance, but monitoring global markets.

    Middle East conflictQ1 FY26, ongoing

    Negatively impacted EMEA sales volumes in Global Water Systems

    Mitigation: Monitoring impact on ag prices, freight, and new customers.

    Timing of orders in North America dewateringQ1 FY26

    Flattish to slightly down YoY for fleet dewatering

    Mitigation: Full-year dewatering outlook still expects growth across the globe.

    What to watch in Q2 FY26

    5

    Tariff-related expenditures clawback

    Q2 earnings call
    CurrentRequest submitted, awaiting response
    TargetResponse received, potential clawback

    Why it matters

    Could impact full-year financial results not currently included in guidance.

    Our outlook does not include a clawback of tariff-related expenditures. We have formally submitted our request and are awaiting a response and we'll know more in our Q2 earnings call.

    Q&A highlights

    6

    Is the full-year revenue guidance conservative, and what are the expected sequential trends and market nuances for the rest of the year?

    The guidance is prudent due to global unknowns like ag prices and the Middle East conflict. Q2 and Q3 are expected to show robust top and bottom-line performance, following normal seasonal patterns. The underlying business is healthy, with steady market demand, positive backlogs, and book-to-bill trends.

    “I think the -- what we don't know is obviously what we don't know. We see the quarters on a stand-alone basis to be positive top and bottom line here through the next 3. So you're going to see from a sequential standpoint, that normal performance, which is obviously a bit more muted given the growing seasons and the weather in Q1 and 4, but we -- our outlook for 2 and 3 looks robust and looks on track.”

    asked by Michael Halloran · answered by Joseph Ruzynski

    3 min read6 chapters

    Detailed Narrative

    01

    Strong Q1 Performance Across Segments

    Franklin Electric reported a strong first quarter for all segments, with consolidated sales up 10% year-over-year to $500.4 million. This growth was driven by healthy organic volume increases and disciplined pricing across all business units. The company achieved a 24% year-over-year expansion in adjusted diluted EPS to $0.83, a new first-quarter record, primarily due to a 17% increase in adjusted operating income. Management noted healthy backlogs and positive order trends as the company entered the second quarter.

    02

    Strategic Initiatives and Productivity Focus

    The company's Value Acceleration Office, launched in 2025, is off to a strong start, with expectations to deliver over $15 million in productivity during 2026 and a long-term goal of over 100 basis points of annual productivity once fully ramped. Restructuring efforts, primarily related to structural improvement initiatives across global water operations, resulted in $3.9 million in costs during Q1 2026. These actions are anticipated to generate savings in 2026 and be accretive in 2027, demonstrating a commitment to margin expansion and efficiency.

    03

    New Product Innovation and Growth Drivers

    Franklin Electric is focused on innovation to drive growth, exemplified by the Q1 launch of VersaBoost Pro, a new pressure boosting product for residential markets. This launch is part of a broader strategy to achieve $160 million in new product vitality revenue by 2028. The company is targeting faster-growing markets, such as the data center space, which is currently a sub-$50 million business but represents a significant growth opportunity for pumps, motors, and drives globally, with a dedicated production line being established in the U.S.

    04

    Distribution Segment Deep Dive

    The Distribution segment, now exceeding $700 million in revenue, was highlighted for its strategic importance and growth opportunities. With 84 branches and 650 On-Site Inventory (OSI) locations, it provides critical inventory and value-added services to customers, including 24/7 portal access and on-site support. The segment's operating income margin improved by 50 basis points in Q1, building on a 210 basis point expansion in the full year 2025, demonstrating successful streamlining and leveraging of processes.

    05

    Capital Deployment and Financial Health

    The company maintains a healthy balance sheet, ending Q1 2026 with $80.4 million in cash and $88 million outstanding under its revolving credit agreement. Capital deployment includes investments in new projects, such as the inauguration of a new water factory in Izmir, Turkey, and regional expansions in India, South America, and Mexico. Franklin Electric also returned capital to shareholders through the repurchase of 120,000 shares for $11.3 million and the announcement of its 34th consecutive year of dividend expansion, with a quarterly cash dividend of $0.28.

    06

    Global Market Dynamics and Outlook

    While the underlying business remains solid, the company's full-year guidance reflects a prudent approach given macroeconomic and geopolitical uncertainties. The Middle East conflict negatively impacted EMEA sales volumes in the Global Water Systems segment. The company is also awaiting a response on a submitted request for a clawback of tariff-related expenditures, which is not currently included in its outlook. Despite these challenges, management expressed confidence in its strategy to add customers, serve new markets, and increase productivity.

    AI-generated summary of the company’s earnings call. Not investment advice.