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    NPO
    Earnings call· Jun 2026(Q2 FY26)

    Enpro Q2 FY26 earnings call NPO

    Aug 4, 2026 Source

    Executive summary

    Enpro Q2 FY26 — Strong Performance and Raised Full-Year Outlook

    Enpro delivered robust Q2 FY26 results, driven by strong demand in Advanced Surface Technologies and solid organic growth in Sealing Technologies, leading to a raised full-year outlook. The company is strategically investing in capacity expansion and integrating recent acquisitions to capitalize on long-term growth tailwinds, while managing softness in certain end markets and addressing legacy environmental liabilities.

    Highlights

    5

    • Total company sales increased 17.6% year-over-year to $338.8 million.

    • Adjusted EBITDA grew over 22% to $86.9 million, with a margin of 25.6%.

    • Adjusted diluted EPS increased 23.2% to $2.50.

    • Advanced Surface Technologies (AST) sales grew 21.8% with strong demand and improved orders.

    • Sealing Technologies achieved 5% organic growth, driven by aerospace and domestic general industrial markets.

    Concerns

    4

    • Commercial vehicle markets remained soft in Q2, though showing early signs of stabilization.

    • Weakness observed in smaller European general industrial and food/biopharmaceutical markets within Sealing Technologies.

    • Increased corporate expenses to $15.7 million, up from $12.1 million, primarily due to higher incentive compensation accruals and $1.3 million in restructuring costs.

    • Environmental reserve increased by $60 million related to legacy uranium mine liabilities.

    Guidance & targets

    15
    CategoryTargetConfidence
    Total Enpro sales growth
    14% to 16% range
    high materiality
    High
    Adjusted EBITDA
    $330 million to $340 million
    high materiality
    High
    Adjusted diluted earnings per share
    $9.30 to $9.80
    high materiality
    High
    Normalized tax rate for adjusted diluted EPS
    25%
    medium materiality
    High
    Fully diluted shares outstanding
    21.4 million
    medium materiality
    High
    Sealing Technologies organic growth
    high single digits
    medium materiality
    High
    AlpHa and Overlook acquisition contributions
    $60 million to $65 million
    medium materiality
    High
    Sealing Technologies segment margins
    high end of our long-term target range of 30%, plus or minus 250 basis points
    medium materiality
    High
    Advanced Surface Technologies (AST) year-over-year growth
    20%
    high materiality
    High
    Advanced Surface Technologies (AST) adjusted segment EBITDA margin
    approaching 25%
    high materiality
    High
    Capital expenditures
    $60 million to $65 million
    medium materiality
    High
    Sealing Technologies organic top line growth
    mid-single-digit
    medium materiality
    High
    AST organic top line growth
    high single-digit to low double-digit
    high materiality
    High
    Sealing Technologies adjusted EBITDA margins
    30%, plus or minus 250 basis points
    medium materiality
    High
    AST adjusted EBITDA margins
    30%, plus or minus 250 basis points
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Sealing Technologies
    Growth driven by AlpHa and Overlook acquisitions, strong aerospace performance, and double-digit organic growth in domestic general industrial markets. Nuclear and power generation applications were steady. Weakness in smaller European general industrial and food/biopharmaceutical markets. Margin remained above 30% for the 10th consecutive quarter, driven by operational performance, strategic pricing, acquisitions, and FX tailwinds, partially offset by commercial vehicle softness and growth investments.
    Organic growth: 5%Aftermarket sales: 60% of segment revenueAdjusted segment EBITDA growth: 13.3%
    		$216.2 million15.3%—33.2%
    Advanced Surface Technologies (AST)
    Sales increased with improving sequential orders. Strong demand for precision cleaning solutions tied to advanced node chip production. Book-to-bills for capital equipment and coatings solutions materially increased. Margin expanded 430 basis points, driven by operating leverage on higher sales growth and production volumes, and normalization of foreign exchange headwinds.
    Adjusted segment EBITDA growth: 48.5%
    		—21.8%—23.9%

    Operational metrics

    15
    Total company sales
    $338.8 millionup 17.6% year-over-year
    Q2 FY26

    Strong second quarter sales.

    Total company adjusted EBITDA
    $86.9 millionincreased more than 22%
    Q2 FY26

    Expanded 90 basis points year-over-year.

    Corporate expenses
    $15.7 millionincreased from $12.1 million a year ago
    Q2 FY26

    Primarily driven by higher incentive compensation accruals and $1.3 million in restructuring costs.

    Adjusted diluted earnings per share
    $2.50increased 23.2%
    Q2 FY26

    Largely driven by factors behind adjusted EBITDA growth.

    Capital expenditures and capitalized software
    approached $30 million
    Year-to-date

    In support of growth and efficiency projects.

    Revolving debt repaid
    $80 million
    First half

    Bringing leverage ratio to 1.6x.

    Net leverage ratio
    1.6xafter taking into account the fourth quarter 2025 acquisitions of AlpHa and Overlook and an $80 million reduction in revolving debt so far this year
    Q2 FY26

    Trailing 12-month adjusted EBITDA.

    Net debt
    approximately $500 million
    as of June 30, 2026

    Includes $450 million in senior notes due 2033 and $130 million outstanding on $800 million revolving credit facility, net of $77 million in cash and cash equivalents.

    Revolving credit facility outstanding
    $130 million
    Q2 FY26

    Part of net debt calculation.

    Cash and cash equivalents
    $77 million
    Q2 FY26

    Used in net debt calculation.

    Quarterly dividend per share
    $0.32
    Q2 FY26

    Paid in the second quarter.

    Share repurchase authorization
    $50 million
    Current

    Outstanding authorization.

    Environmental reserve increase
    $60 million
    Q2 FY26

    Related to legacy uranium mine liabilities.

    Book-to-bills
    materially increased
    Q2 FY26

    In the AST segment.

    FX impact on AST margin
    a little over $2 millionunfavorable FX related to transactional Taiwanese working capital last year
    Q2 FY25

    Normalization of this headwind contributed to Q2 FY26 margin expansion.

    Industry KPIs

    7
    MetricValueDetails
    Capacity expansionincremental investment
    Tariff cost impactminimal and manageable
    Parts aftermarket business60%%
    Data center prime power demandstrong demand
    Incremental margin operating leverage430 basis pointsbps
    Order backlog order intake by segmentsignificant order and backlog growth
    Industry production market size forecastsdouble-digit growth%

    Deals & partnerships

    2
    AlpHa Measurement SolutionsAcquisition of process analytics and compositional analysis capabilities.

    Integration going very well, investing in new product development, technology, and applications expansion.

    Overlook IndustriesAcquisition of fluid path technology for liquid dose biologics.

    Integration going very well, complements Enpro's single-use biopharmaceutical capabilities, supported with additional capital and access to Enpro's resources.

    Capital programs

    4
    AST capacity expansion (Arizona)underway

    Benefit: accelerate growth in the cleaning space

    Pulling forward the second phase of investment.

    AST capacity expansion (Milpitas, California)underway

    Benefit: adding capacity to keep up with customer demand

    Part of incremental investments to support growth.

    AST capacity expansion (Taiwan)underway

    Benefit: adding capacity to keep up with customer demand

    Part of incremental investments to support growth.

    Commercial vehicle production line expansioncompleted
    Start: during this downturn

    Benefit: support aftermarket

    Added a second line to address past challenges with keeping up with both OEM and aftermarket demand during fast market growth.

    Risks & headwinds

    4
    Softness in commercial vehicle marketsQ2 FY26, with early signs of stabilization

    remained soft in the second quarter

    Mitigation: Positioned business ahead of eventual recovery, maintained strong margins, added a production line to support aftermarket.

    Weakness in European general industrial and food/biopharmaceutical marketsQ2 FY26

    softness in Europe in our smaller general industrial and food and biopharmaceutical positions during the quarter

    Increased corporate expensesQ2 FY26

    $15.7 million in Q2 FY26, up from $12.1 million a year ago

    Legacy environmental liabilitiesQ2 FY26 (reserve increase), cash outflow not for 3 years, project potentially 10 years

    $60 million increase in environmental reserves

    Mitigation: Reached a probable solution with government and local communities for remediation, cash outflow will not be meaningful in any given year.

    What to watch in Q3 FY26

    5

    Commercial vehicle market recovery

    next year
    Currentsoft in Q2 FY26, early signs of stabilization
    Targetimproving momentum, FTR posting double-digit growth next year

    Why it matters

    This segment is a significant portion of Sealing Technologies, and its recovery will drive organic growth.

    Commercial vehicle markets remained soft in the second quarter, although we are seeing early signs of stabilization and improvement... I'm excited about next year for that business.

    Q&A highlights

    7

    Is the guidance raise primarily from AST, and what's driving the acceleration in Sealing's second-half growth?

    The majority of the raise is AST, but Sealing is also improving with mid-to-high single-digit organic growth expected in H2, driven by improved orders in general industrial, aerospace, and compositional analysis.

    “the majority of the guidance raise is AST, although Sealing is improving through the year. I mean we talked about it last quarter that we would see mid-single digits to high single-digit organic growth in Sealing for the second half of the year, and that's coming to fruition.”

    asked by Jeff Hammond · answered by Joe Bruderek

    2 min read6 chapters

    Detailed Narrative

    01

    Enpro 3.0 Strategy and Colleague Growth

    Enpro's "Enpro 3.0" strategy emphasizes individual growth, with colleagues setting bold goals for professional and personal development. This empowerment and focus on purpose are driving both financial results and personal performance, fostering a motivating environment across the organization. The company believes this internal growth aspect is half of its overall strategy.

    02

    Strategic Positioning and End Markets

    Enpro focuses on highly engineered products for mission-critical platforms in key end markets with long-term tailwinds, including advanced semiconductor production, biopharmaceutical processes, space exploration, and commercial transportation. The company leverages strong technical capabilities, engineering, and specialized manufacturing to partner with customers and develop innovative solutions, continuously investing in new products and capacity expansions.

    03

    Acquisition Integrations and Growth Drivers

    The integrations of AlpHa Measurement Solutions and Overlook Industries are progressing well. AlpHa and AMI enhance process analytics and compositional analysis capabilities, while Overlook's fluid path technology complements biopharmaceutical offerings. Enpro is investing in new product development and technology expansion for these acquisitions, aiming to drive above-average top-line growth and leveraging its supply chain and financial management expertise.

    04

    Semiconductor Market Demand and AST Investments

    The Advanced Surface Technologies (AST) segment is experiencing strong demand driven by accelerating capital spending in semiconductor markets, particularly for AI, advanced computing, and communications infrastructure. Customer build plans and lead times provide healthy visibility through 2027, prompting incremental investments in capacity in Arizona, Milpitas, and Taiwan to support precision cleaning solutions and highly engineered tools.

    05

    Commercial Vehicle Market Dynamics

    The commercial vehicle market, particularly trailers (over 70% of Enpro's exposure), remained soft in Q2 FY26 but is showing early signs of stabilization and improvement. While not a significant factor in the current guidance raise, management is optimistic about a recovery in 2027, with FTR forecasting double-digit growth. Enpro has strategically positioned its business, including adding a production line, to capitalize on the eventual upturn and maintain strong margins.

    06

    Environmental Liabilities

    Enpro increased its environmental reserve by $60 million in Q2 FY26 related to legacy uranium mine liabilities from decades before the company's founding. This increase reflects a probable solution reached with government agencies and local communities for soil management and other remediation efforts, with cash outflows not expected for at least three years and spread over a potential 10-year project.

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