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    FELE
    Earnings call· Jun 2026(Q2 FY26)

    FRANKLIN ELECTRIC CO Q2 FY26 earnings call FELE

    Jul 28, 2026 Source

    Executive summary

    Franklin Electric Q2 FY26 — Strong Growth and Raised Full-Year Outlook

    Franklin Electric delivered a solid second quarter, driven by strong organic growth, new product contributions, and effective cost management, leading to record adjusted EPS and an expanded operating margin. The company raised its full-year sales and adjusted EPS guidance, reflecting confidence in its strategic execution despite ongoing macroeconomic and geopolitical uncertainties in certain global markets.

    Highlights

    5

    • Consolidated revenue grew over 6% year-over-year, with 3.5% organic growth.

    • Adjusted diluted EPS increased 18% year-over-year to a record $1.55.

    • Adjusted operating income was up 12% year-over-year, with margin expanding 80 basis points to 15.8%.

    • New product sales contributed over $10 million in Q2, and new water treatment dealers added over $2 million in revenue.

    • Full-year sales guidance raised to $2.21 billion-$2.29 billion and adjusted diluted EPS guidance raised to $4.50-$4.70.

    Concerns

    4

    • A $4.5 million provision was booked for a legal settlement in the Energy Systems segment.

    • Restructuring costs of $400,000 were incurred in Q2 2026, primarily in the Water segment.

    • Acceleration of inflation and softer regions in Europe and South America were noted as headwinds.

    • EMEA sales volumes in North Africa, Middle East, and Eastern Europe were negatively impacted by ongoing conflict.

    Guidance & targets

    2
    CategoryTargetConfidence
    Full-year sales
    $2.21 billion to $2.29 billion
    high materiality
    High
    Full-year adjusted diluted EPS
    $4.50 to $4.70
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Global Water Systems
    Operating income was $65.2 million, up $3.4 million. Adjusted operating income was $65.6 million, up $3.7 million or 6%, with an adjusted operating income margin of 18.3%, an improvement of 10 basis points from prior year. Operating margin was positively impacted by favorable price realization and somewhat offset by higher material costs. Restructuring costs of $400,000 were incurred.
    U.S. and Canada sales: up 8%Agricultural market sales: up 12%Residential products sales: up 11%Mineral extraction sales: up 6%Large dewatering equipment sales: decreased 12%Outside U.S. and Canada sales: increased 1%Foreign currency translation impact on sales: 5% increaseRecent acquisitions impact on sales: roughly 1% increaseVolume price impact on sales (outside U.S./Canada): newly impacted by 5%
    		up 5%——18.2%
    Distribution
    Sales increase was primarily due to higher volumes, acquisition-related sales and price realization. Operating income was $19.7 million, a year-over-year increase of $3.6 million. Operating income margin improved by 80 basis points versus the prior year.
    		$221.1 million11% increase—8.9%
    Energy Systems
    Operating income was down $1.2 million. Adjusted operating income was $32.4 million, up $3.3 million or 11%, with an adjusted operating income margin of 40.4%, up 290 basis points from prior year. Adjusted operating income increased primarily due to favorable price, organic volume growth and refunds associated with IPA tariffs. A $4.5 million legal settlement provision was booked.
    U.S. and Canada sales: increased 1%Outside U.S. and Canada sales: increased 12% (primarily Europe and Africa)
    		$80.2 million3% increase—27.9 million

    Operational metrics

    28
    Consolidated Revenue Growth
    over 6%YoY
    Q2
    Adjusted Operating Income Growth
    12%YoY
    Q2
    GAAP EPS Growth
    11%YoY
    Q2
    Adjusted EPS Growth
    18%YoY
    Q2
    New Product Sales
    $10 million
    Q2
    New Water Treatment Dealer Revenue
    $2 million
    Q2
    Legal Settlement Provision
    $4.5 million
    Q2 2026

    Booked as a provision for a concluded legal matter.

    Restructuring Costs
    $400,000vs $200,000 in Q2 2025
    Q2 2026

    Primarily related to structural improvement initiatives across global water operations.

    Effective Tax Rate
    25.7%vs 24.9% in Q2 2025
    Q2

    Increase primarily due to increased unfavorable discrete events.

    Consolidated Gross Profit
    $230.6 millionup from $211.8 million
    Q2 2026
    Consolidated Gross Profit Margin
    37%up 90 basis points from 36.1% in Q2 2025
    Q2 2026

    Favorably impacted by price volume and tariff refunds, largely offset by material inflation and timing of tariff expense.

    SG&A Expense
    $132.1 millionvs $123.5 million in Q2 2025
    Q2 2026

    Increase primarily due to incremental impact of acquisitions.

    SG&A as % of Net Sales
    21.2%vs 21% in Q2 2025
    Q2 2026
    SG&A as % of Net Sales (ex-acquisitions)
    20.8%20 basis points improvement YoY
    Q2 2026
    Consolidated Adjusted Operating Income
    $98.5 millionup $10.3 million or 12% from $88.2 million in Q2 2025
    Q2 2026
    Consolidated Adjusted Operating Income Margin
    15.8%up 80 basis points from 15% in Q2 2025
    Q2 2026
    Cash Balance
    $97.3 million
    Q2 end
    Revolving Credit Outstanding
    $107 million
    Q2 end
    Net Cash Flows from Operating Activities
    $58.7 millionvs $32 million in H1 2025
    H1

    Main driver for change was improved inventory usage.

    Quarterly Cash Dividend
    $0.28
    Q2

    Payable August 20 to shareholders of record on August 6.

    Critical Minerals Sales Growth
    10%up from high teens in Q1
    Q2
    Water Treatment Organic Volume Growth
    north of 5%
    Q2

    Despite a pretty muted residential market.

    New Dealer Metrics Exceeded
    4%
    H1

    Team exceeded new dealer revenue metrics.

    Ag Sales Growth
    12%
    Q2

    Led by sales of groundwater pumping equipment.

    Ag Business Replacement Rate
    75%+
    ongoing
    Critical Minerals Market TAM
    multibillion dollar
    future
    Critical Minerals Market CAGR
    high single-digit
    future
    Critical Minerals Needed Increase
    6 to 7x
    next 10 years

    Industry KPIs

    5
    MetricValueDetails
    Capacity expansion—
    Tariff cost impactfew million dollarsUSD
    Data center prime power demand—
    Dealer inventory months of supplybalanced
    Order backlog order intake by segmenthealthy

    Orderbook & backlog

    1
    Total BackloghealthyQ2 end

    strong order growth

    Deals & partnerships

    3
    Geoquit (UK)Water Systems business focused on groundwater and residential space in Europe (UK).

    Closed just before Q1 exit. Focus on government investment and integrating solutions for builders and drillers.

    Wood Brothers (US)Water treatment business, extending reach in the center of the U.S.mid-20s, low 30s revenue

    Closed just before Q1 exit. Helps extend reach in a part of the U.S. historically underserved, serving as a platform for smaller dealers.

    Benson (US)Distribution business, exposing to Gulf Coast, ag space, utility/municipal infrastructure.mid-20s type revenue business

    Closed as entered Q2. Known for a while, brings new market exposure and pull-through for Franklin products.

    Capital programs

    2
    New factory in Turkeyunderway

    Benefit: efficient operating structure

    Ramping up a new factory in Turkey to build an efficient operating structure to better serve customers long term.

    Facility consolidations in North Americaunderway

    Benefit: efficient operating structure; nice productivity boost

    Working through facility consolidations in North America to build an efficient operating structure and expect a nice productivity boost from these efforts as we move into 2027.

    Risks & headwinds

    4
    InflationQ2 and back half

    acceleration of inflation throughout the quarter; some softer regions in Europe and South America

    Mitigation: continue to watch for pricing and productivity measures to offset as we move to the back half

    Geopolitical Conflictongoing

    EMEA sales volumes, specifically in North Africa, Middle East and Eastern Europe were negatively impacted

    Mitigation: replacement business, we're still able to sell

    Tariff Announcementsback half

    last week another tariff announcement

    Mitigation: modeled some balance in pricing and the offset to these same tariffs included in our inventory

    South American Market Slowdownback half

    slower year than we expected in South America; political change and pause on support to farmers

    Mitigation: modeled in

    What to watch in Q3 FY26

    5

    Productivity boost from facility consolidations

    2027
    CurrentCosts included in Q2, ramping up a new factory in Turkey and working through some facility consolidations in North America
    Targetnice productivity boost

    Why it matters

    Operational efficiency and margin expansion are key strategic priorities.

    We are ramping up a new factory in Turkey and working through some facility consolidations in North America to build an efficient operating structure to better serve customers long term. Some of these costs are included in our overs, both in restructuring and operating expense, and we expect a nice productivity boost from these efforts as we move into 2027.

    Q&A highlights

    6

    How large are these exposures, what specific products are involved, and any specific data center wins?

    Critical minerals is a multi-billion dollar TAM, with sales up high teens in Q1 and 10% in Q2, focused on dewatering and maintenance in mines. Data centers involve municipal hookups, flushing applications, and supporting CDU manufacturers, with no specific wins to call out yet but strong positioning.

    “For critical minerals, obviously, energy infrastructure, the need for more electricity, data centers, et cetera, that critical mineral space for us, we think, is a multibillion dollar TAM that we're trying to make sure that we can both position ourselves to serve but also have the products to meet that need.”

    asked by Matt Summerville · answered by Joseph Ruzynski

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Growth Initiatives

    Franklin Electric's Q2 FY26 results were bolstered by a focused strategy on growth, with new products contributing over $10 million in sales and new water treatment dealers adding over $2 million in revenue. The company emphasizes expanding into faster-growing markets and channels, supported by investments in R&D and strategic M&A. This approach aims to increase velocity and scale, delivering solutions that anticipate customer needs and accelerate overall growth.

    02

    Margin Expansion and Productivity

    Adjusted operating income increased 12% and adjusted operating margin expanded 80 basis points to 15.8%, driven by volume growth, price discipline, and cost management. The company is ramping up a new factory in Turkey and consolidating facilities in North America, expecting productivity boosts in 2027. A new Chief Supply Chain and Transformation Officer has been appointed to lead these efforts, focusing on building efficient supply chain networks and transformation execution.

    03

    Balance Sheet and Capital Deployment

    The company maintains a strong balance sheet with $97.3 million in cash and generated $58.7 million in net cash flows from operating activities in H1 FY26, up from $32 million in H1 FY25. Capital deployment remains disciplined, with a record capital budget for the year balanced between growth, productivity, and sustaining projects, alongside continued dividend growth. The commitment to shareholders remains a key tenet of the company's strategy.

    04

    Water Systems Segment Spotlight

    The Water Systems segment, a $1.3 billion business, was highlighted as central to Franklin's identity, focusing on products that supply, move, treat, and dewater. The strategy aligns with powerful megatrends like a rising middle class, increased residential construction, accelerating urbanization, and the expanding need for critical minerals. Innovation, world-class water labs, and deep engineering expertise are central to designing solutions that anticipate customer needs.

    05

    Critical Minerals and Data Center Exposure

    The company is actively positioning itself in the critical minerals market, which saw high-teens growth in Q1 and 10% growth in Q2, focusing on dewatering and maintenance for mine operations. This market is viewed as a multi-billion dollar TAM with a high single-digit CAGR. In data centers, Franklin Electric serves various elements of the cooling loop, from municipal hookups to flushing applications and supporting CDU manufacturers, with plans for increased specificity in the back half of the year.

    06

    Acquisition Strategy and Channel Health

    Franklin Electric closed three deals in H1 FY26: Geoquit (UK water systems), Wood Brothers (US water treatment), and Benson (US distribution), all tracking ahead of plan. These acquisitions extend market reach, integrate solutions, and facilitate the pull-through of Franklin products. The company also noted a healthy and balanced inventory position in its channel, with sell-in and sell-out aligned, indicating strong underlying demand.

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