IDEX (IEX) Q2 FY26 earnings call: guidance and Q&A

IDEX reported strong Q2 FY26 results with 5% organic sales growth, 28.1% adjusted EBITDA margin (+70 bps YoY), and $2.32 adjusted EPS (+12%). This performance was significantly driven by higher volumes from growth platforms and operational execution, exceeding expectations. Orders grew 28% organically overall, with a record over $1 billion, providing increased confidence and visibility for the remainder of 2026 and into 2027.

HST led growth with 47% organic order growth and 12% organic revenue growth. This was primarily fueled by strong demand in data center, semiconductor, and space & defense markets, which collectively represent over one-third of HST revenue year-to-date. The segment achieved approximately 40% year-over-year margin flow-through (excluding tariff refunds) and has seen a significant increase in recurring revenues within its semiconductor portfolio to approximately 50% due to Mott's filtration business.

FMT saw 11% organic order growth and 1% organic sales growth, supported by the water platform and mining exposures, partially offset by softness in ag, chemical, and energy. FSDP experienced 19% organic order growth, boosted by strong aerospace demand at BAND-IT and North American fire and integrated system orders, though organic sales declined 1% due to dispensing and European rescue market softness^🌐. Both segments showed signs of improving industrial order rates towards the end of Q2.

IEEPA tariff refunds in Q2 FY26 provided a net benefit of $0.08 to adjusted EPS and 130 basis points to adjusted EBITDA margin. However, customer rebates related to these refunds reduced consolidated organic growth by 2% in the quarter. Management clarified that the majority of the tariff refund and associated rebate activity is contained within Q2.

IDEX generated $177 million in free cash flow and maintained over $1.1 billion in liquidity. The company reduced gross leverage to 1.9x from 2.1x a year ago. Capital expenditures guidance for FY26 was raised from $90 million to $110 million to support capacity expansions in high-growth, high-return businesses, primarily within HST, for future growth in 2027 and 2028. Share repurchases totaled $77 million in Q2, with plans to maintain a quarterly pace of around $75 million through 2026, with flexibility for M&A.

The company is observing a shift in demand patterns, with longer lead-time orders from advantaged markets (data center, semiconductor, space & defense) providing significant forward visibility, particularly in HST, with some volume already booked into 2027. Simultaneously, more traditional rapid replenishment, short-cycle businesses, especially in FMT, showed encouraging signs of broader lift towards the end of Q2 and into July, suggesting a more typical launch of industrial recovery.

IDEX attributes its success in high-growth markets to intentional investments in acquiring and integrating technologies, particularly through the 80/20 framework. This approach allows the company to develop unique solutions, often at the component level, that address emerging technical needs and leverage existing technologies across different advantaged markets, driving both growth and margin expansion.