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    TKR
    Earnings call· Jun 2026(Q2 FY26)

    TIMKEN Q2 FY26 earnings call TKR

    Aug 4, 2026 Source

    Executive summary

    The Timken Company Q2 FY26 — Strong Performance and Raised Full-Year Guidance

    The Timken Company delivered strong Q2 FY26 results, driven by robust organic growth and margin expansion across both segments, leading to a second raise in full-year guidance. The company is actively executing its 'Elevate to Outperform' strategy, optimizing its portfolio through divestitures and acquisitions, and investing in strategic verticals like automation and aerospace. While geopolitical uncertainties and cost inflation present headwinds, management remains confident in its ability to drive structural margin improvements and accelerate growth.

    Highlights

    5

    • Total sales increased 7.5% year-over-year to $1.26 billion, with organic revenue up more than 4%.

    • Adjusted EBITDA margins expanded to 19.6% from 17.7% last year, with organic incremental margins over 40%.

    • Adjusted EPS grew nearly 30% year-over-year to $1.83, leading to a raised full-year outlook for 16% growth at the midpoint.

    • Industrial Motion segment achieved an all-time quarterly record sales of $454 million, with adjusted EBITDA margins up 500 basis points to 23.3%.

    • Generated over $80 million in free cash flow and maintained net leverage at 2x, while returning $45 million to shareholders.

    Concerns

    4

    • A $0.10 per share headwind is factored into guidance for incremental cost inflation, including higher logistics costs and strategic investments in aerospace and defense.

    • Power and electrification segment revenue was lower, driven by a sizable decline in solar sales.

    • Automotive OE was a negative contributor to Engineered Bearings revenue.

    • The second half organic growth is implied to be more modest (2.5%) compared to the first half, partly due to geopolitical uncertainty and normal seasonality.

    Guidance & targets

    14
    CategoryTargetConfidence
    Full-year 2026 Net Sales Growth
    5% to 6% total increase
    high materiality
    High
    Full-year 2026 Organic Revenue Growth
    3.5% at the midpoint
    high materiality
    High
    Full-year 2026 Adjusted EPS
    $6.05 to $6.35
    high materiality
    High
    Full-year 2026 Adjusted EPS Growth
    16% at the midpoint
    high materiality
    High
    Full-year 2026 Consolidated Adjusted EBITDA Margin
    Low 18% range at the midpoint
    medium materiality
    High
    Full-year 2026 Free Cash Flow
    $375 million to $400 million
    high materiality
    High
    Belts Divestiture Impact on Industrial Motion EBITDA Margin
    Structurally improve by more than 200 basis points
    medium materiality
    High
    Automotive OE Exit Impact on Engineered Bearings Margins
    Start benefiting margins
    low materiality
    Medium
    Full-year 2026 Adjusted EPS Outlook Bridge - Organic Sales & Q2 Outperformance
    $0.20 to $0.25 positive impact
    medium materiality
    High
    Full-year 2026 Adjusted EPS Outlook Bridge - Tariff Refunds
    $0.08 per share tailwind
    medium materiality
    High
    Full-year 2026 Adjusted EPS Outlook Bridge - Cost Inflation & Strategic Investments
    $0.10 headwind
    medium materiality
    High
    Full-year 2026 Organic Sales Growth - Engineered Bearings
    Slightly lower than Industrial Motion
    low materiality
    Medium
    Full-year 2026 Organic Sales Growth - Industrial Motion
    Slightly higher than Engineered Bearings
    low materiality
    Medium
    Full-year 2026 Pricing Impact
    Up more than 1%
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Engineered Bearings
    Sales were up nearly 4% from last year, driven by higher volumes and pricing. Aerospace and defense and infrastructure achieved the strongest gains. Margins benefited from favorable price mix, tariff refunds, and higher volumes, but were negatively impacted by higher operating costs, including labor for headcount additions.
    Organic sales growth: 2.5%Currency translation impact: >1%Adjusted EBITDA: $161 millionAdjusted EBITDA margin last year: 19.7%
    		$807 million3.9%—20% of sales
    Industrial Motion
    Achieved an all-time quarterly record for the segment, with sales up 14.6%. Organic sales increased 8% due to higher demand and pricing. Automation and industrial solutions, infrastructure, and industrial transportation and mobility were all up double digits. Margins increased 500 basis points, reflecting strong operational execution, higher volumes, favorable price mix, and net tariff refunds.
    Organic sales growth: 8%Bijur Delimon acquisition impact: ~5%Currency translation impact: >1%Adjusted EBITDA margin last year: 18.3%
    		$454 million14.6%—23.3% of sales

    Operational metrics

    26
    Adjusted EBITDA
    $247 million
    Q2 FY26

    Includes a net benefit for IEEPA tariff refunds of $8 million.

    Adjusted EPS
    $1.83Up nearly 30% year-over-year
    Q2 FY26

    Includes a net benefit for IEEPA tariff refunds of $0.08 per share.

    Organic Sales Growth
    4.4%Up from last year
    Q2 FY26

    Driven by higher volumes and pricing across both segments.

    Acquisition Contribution to Sales
    1.8%
    Q2 FY26

    Bijur Delimon acquisition added to sales.

    Foreign Currency Translation Impact on Sales
    1.3%
    Q2 FY26

    Contributed to top-line growth.

    Organic Sales Growth - Americas
    3%
    Q2 FY26

    Regional organic growth.

    Organic Sales Growth - EMEA
    5%
    Q2 FY26

    Regional organic growth.

    Organic Sales Growth - Asia Pacific
    6%
    Q2 FY26

    Regional organic growth.

    Organic Incremental Margins
    >40%
    Q2 FY26

    Even without the benefit of tariff refunds.

    Pricing Impact on EBITDA
    $14 million
    Q2 FY26

    Benefited from pricing actions over the last year.

    Tariff Net Favorable Impact on EBITDA
    $6 millionVersus last year
    Q2 FY26

    Benefit of refunds more than offset higher tariff costs compared to the prior year.

    Bijur Delimon Acquisition Contribution to Adjusted EBITDA
    $4 million
    Q2 FY26

    Contributed to adjusted EBITDA with a high teens margin.

    Cash Returned to Shareholders
    $45 million
    Q2 FY26

    Returned through share buybacks and dividends.

    Net Debt to Adjusted EBITDA
    2x
    Q2 FY26

    Ended the quarter in the middle of the targeted range.

    Full-year 2026 Bijur Delimon Acquisition Contribution to Revenue
    1%Unchanged from prior outlook
    FY26

    Expected to add 1% to revenue for the year.

    Full-year 2026 Currency Contribution to Revenue
    ~1%Unchanged from prior outlook
    FY26

    Estimated to contribute around 1% to the top line.

    Full-year 2026 Consolidated Adjusted EBITDA Margin Incremental Margin
    >30%
    FY26

    Implied by the midpoint of the full-year earnings outlook.

    80/20 Enterprise Engagement
    60%
    Q2 FY26

    Percentage of enterprise engaged in 80/20 by total company revenue.

    IEEPA Tariff Refunds
    $8 million
    Q2 FY26

    Net benefit included in adjusted results. No additional benefits assumed for H2 due to unpredictable timing and amounts.

    Cost Inflation Headwind
    $0.10 per share
    H2 FY26

    Factored into full-year guidance, expected to impact margins in the second half.

    Share Repurchases
    155,000 shares
    Q2 FY26

    Approximately 155,000 shares repurchased.

    Quarterly Dividend Increase
    3%
    Q2 FY26

    Quarterly dividend raised by 3%.

    Strategic Verticals Organic Growth
    High single-digit
    Q2 FY26

    Impact of increased organizational focus and investment.

    Automation and Robotics Organic Growth
    Mid-teensVersus last year
    Q2 FY26

    Increased mid-teens versus last year.

    Linear Motion Platform Organic Growth
    Double-digitSecond consecutive quarter
    Q2 FY26

    Driven by Rollon's expansion into the U.S. and outperformance in factory automation.

    Industrial Motion EBITDA Margin (H1 FY26)
    22.4%
    H1 FY26

    Analyst-cited figure for first half margin.

    Industry KPIs

    5
    MetricValueDetails
    Tariff cost impact$6 millionUSD
    Data center prime power demandBenefiting
    Dealer inventory months of supplyReasonable point
    Incremental margin operating leverage>40%%
    Order backlog order intake by segmentRobust

    Orderbook & backlog

    1
    Aerospace Book-to-Bill RatioSolidly well north of 1Q2 FY26

    Still building

    Strong growth, up significantly year-over-year from an order book standpoint. Requires investment in additional resources and labor to meet demand.

    Deals & partnerships

    3
    Bijur DelimonIntegration into lubrication systems platform

    Integration is going very well and ahead of schedule. Bijur Delimon is a natural fit and scales the lubrication systems platform.

    Belts businessDivestiture of belts business

    Remains on track to complete the divestiture in the third quarter. Guidance still includes the belts business.

    Automotive OE businessExit of Automotive OE business

    Progressing as planned.

    Risks & headwinds

    5
    Geopolitical Volatility and UncertaintySecond half of 2026

    Implied H2 organic growth of ~2.5% vs H1, partly due to geopolitical uncertainty.

    Mitigation: Maintaining credibility and giving a forecast based on current visibility, while acknowledging external factors.

    Incremental Cost InflationSecond half of 2026

    $0.10 per share headwind to FY26 adjusted EPS outlook.

    Mitigation: Includes higher logistics costs and strategic investments in aerospace and defense operations.

    Decline in Solar SalesQ2 FY26

    Sizable decline in solar sales, impacting power and electrification segment.

    Mitigation: Growth in power generation was offset by solar decline; wind was modestly up.

    Belts Business Ramp-downQ3 FY26

    Lower belt sales in Q3, contributing to a slight headwind in the guide.

    Mitigation: Related to the impending divestiture of the belts business.

    Automotive OE Negative ImpactQ2 FY26

    Negative contributor to Engineered Bearings revenue.

    Mitigation: The company is progressing with its exit from this business, expected to benefit margins in 2027.

    What to watch in Q3 FY26

    5

    H2 Organic Growth Rate

    Next quarter
    CurrentImplied ~2.5%
    TargetPotential upside beyond conservative guide

    Why it matters

    Verifying if demand remains robust or if geopolitical/seasonal factors lead to actual moderation, impacting full-year performance.

    But there's a combination of things when you look at the back half. One you already referred to, which is the uncertainty from the geopolitical situation that's in the Middle East. And the second one is just the normal seasonality that we've seen historically when you compare front half to back half of the year. So I think between those 2, we -- and then obviously, with July now behind us, we feel like that's an appropriate guide for the back half of the year. But we -- it remains to be seen💬 whether there is upside to that or not.

    Q&A highlights

    6

    Why is the implied H2 organic growth (2.5%) lower than H1, despite healthy demand? Is it due to 80/20 rationalization, conservatism, or other factors?

    Management stated it's a combination of factors: no signs of slowdown in the robust order pattern, but geopolitical uncertainty and normal seasonality contribute to a more conservative H2 outlook. The order book in Q2 performed well, with aerospace & defense, automation, and infrastructure leading. The lower H2 growth is also partly due to tougher year-over-year pricing comps.

    “But there's a combination of things when you look at the back half. One you already referred to, which is the uncertainty from the geopolitical situation that's in the Middle East. And the second one is just the normal seasonality that we've seen historically when you compare front half to back half of the year.”

    asked by Bryan Blair · answered by Lucian Boldea

    2 min read6 chapters

    Detailed Narrative

    01

    Elevate to Outperform Strategy Progress

    The company is making good progress on its 'Elevate to Outperform' strategy, launched at a recent Investor Day, which focuses on optimizing the portfolio, investing decisively in strategic verticals, and leveraging its multinational footprint. This strategy contributed positively to Q2 results and underpins the raised full-year guidance. Key initiatives include the belts divestiture, automotive OE exit, and the Bijur Delimon acquisition.

    02

    Portfolio Optimization and M&A

    Within portfolio optimization, the belts divestiture is on track for Q3 completion, expected to improve Industrial Motion EBITDA margin by over 200 basis points pro forma. The automotive OE exit is also progressing, anticipated to benefit Engineered Bearings margins in 2027. The integration of Bijur Delimon is ahead of schedule, scaling the lubrication systems platform to approximately $400 million in revenue and demonstrating successful M&A execution.

    03

    Strategic Vertical Investments and 80/20 Implementation

    Timken is allocating more resources to strategic verticals, achieving high single-digit organic growth in these areas in Q2, with automation and robotics up mid-teens. The 80/20 initiative is being deployed across the enterprise, with 60% of total company revenue engaged in Q2 and a target of 75% by Q3. This is expected to benefit the bottom line in 2027 by redeploying resources to strategic customers and creating pricing opportunities.

    04

    One Timken Operating Model and Leadership Appointments

    The company is enhancing its multinational footprint leverage through the 'One Timken' model, exemplified by the successful expansion of the Rollon linear motion platform into the U.S., driving double-digit organic growth. Two new leadership appointments, Chief Commercial Officer Tim Graham and Chief Operating Officer Steve Ribaudo, are designed to enhance execution, speed, and accountability by centralizing commercial strategy and overseeing enterprise-wide operations and P&Ls.

    05

    Demand Backdrop and Channel Inventory

    Management observes a gradual improvement in demand rather than a sharp snapback, attributing this to geopolitical uncertainty🌐 and cautious inventory management across the channel. While some end markets like construction and heavy industries show stronger momentum, overall, the channel is at a reasonable inventory level, suggesting stability rather than significant restocking or destocking. The order book remains robust, particularly in aerospace and defense.

    06

    Aerospace and Defense Investment Rationale

    The decision to invest in strengthening aerospace and defense operations, including increasing operative headcount and improving retention, is driven by significant existing backlog and growing demand. This sector, along with its supply chain, is still catching up from pandemic-era disruptions, and defense requirements are increasing. The investment is seen as a long-term opportunity to capitalize on sustained market demand, despite short-term costs associated with training specialized labor.

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