PHINIA NYSE: PHIN reported first-quarter 2026 results that management said were largely in line with expectations, as the company posted growth in both its Fuel Systems and Aftermarket segments and reiterated its full-year outlook amid ongoing geopolitical and trade uncertainty.
First-quarter results show year-over-year growth in both segments
CEO Brady Ericson said the quarter “developed largely as we expected,” citing “solid revenue growth from both Fuel Systems and Aftermarket” and continued progress toward full-year guidance. PHINIA reported first-quarter net sales of $878 million, up 10.3% from the prior-year period. Excluding foreign exchange impacts and the contribution from SEM, Ericson said revenue increased 3.6%.
Adjusted EBITDA was $115 million, up $12 million year over year, with a 13.1% margin, according to Ericson. Total segment adjusted operating income was $107 million, representing a 12.2% margin. Adjusted earnings per diluted share, excluding non-operating items, were $1.29 compared with $0.94 a year earlier, a 37% increase, Ericson said.
By segment, Ericson said Fuel Systems sales rose 12% to $549 million, with an adjusted operating margin of 9.3%. Aftermarket sales increased 7.5% to $329 million, with an adjusted operating margin of 17%.
Drivers of revenue and EBITDA included FX, tariffs, and supplier savings
CFO Chris Gropp detailed key revenue drivers, noting net sales increased 10.3% year over year. Compared with the first quarter of 2025, Gropp said foreign exchange contributed $39 million, as the euro, Chinese renminbi, British pound, and Brazilian real strengthened against the U.S. dollar.
Gropp also cited a $17 million benefit from volume and mix, as higher sales in the Americas and Asia offset flat sales in Europe. He said revenue included $12 million of tariff recovery, while SEM contributed $14 million in the quarter. Excluding FX and SEM, Gropp said sales were up 3.6%.
On profitability, Gropp said adjusted EBITDA increased to $115 million, with a 20-basis-point year-over-year margin improvement. He attributed the change to several factors, including:
- $6 million of supplier savings and cost control measures
- $3 million benefit from net tariff pass-throughs
- $3 million from volume/mix, SEM, and other changes
Fuel Systems mix pressured near-term flow-through as programs ramp
During the Q&A, Joseph Spak of UBS asked about negative mix that weighed on adjusted EBITDA relative to volume growth. Gropp said the issue was “mainly” in Fuel Systems and tied to new programs that are launching but “have not gotten fully up to full ramp.” He said the impact was concentrated in Europe and Asia-Pacific and is expected to improve as programs reach full capacity.
Gropp said the company anticipated this ramp dynamic, adding, “This should go away. Not a concern for us.” He said it may persist “for another quarter or so,” and then improve as the year progresses and volumes build.
New business wins include alternative fuels and aerospace and defense
Ericson highlighted first-quarter new business activity across both segments, saying the company is growing with existing customers while adding new ones and gaining traction in newer areas. He pointed to aerospace and defense as an adjacent market where PHINIA is “incrementally winning business and building a presence.”
Ericson said PHINIA was awarded a program with a new customer for an unmanned aerial drone that uses the company’s GDI injector technology. In response to a question from Bobby Brooks of Northland Capital Markets, Ericson said the program is “going into commercial production” and is for an engine manufacturer “that’s also making the drone as well,” for defense applications. Ericson characterized it as a “larger internal combustion engine” for a “larger drone,” and said it is PHINIA’s “second customer, fourth program” in the aerospace and defense market.
Ericson also cited Fuel Systems wins including a compressed natural gas fuel rail assembly with a global OEM in India—PHINIA’s third consecutive quarter of a major alternative fuel program win in the country—and a direct injection fuel rail assembly with a major Chinese OEM for a luxury SUV platform with a dual-fuel-injection V8 engine.
In Aftermarket, Ericson said demand remained supported by an aging fleet and a growing vehicle park. He highlighted wins including an expanded product portfolio with a major warehouse distributor in the Americas (adding steering and suspension and vehicle electronics), adding two new customers in Europe, and renewing a starter program with a global commercial vehicle on- and off-highway OEM.
Cash flow, capital returns, and reiterated 2026 guidance
PHINIA ended the quarter with $328 million of cash and total liquidity of roughly $808 million to $818 million, with Ericson citing a net leverage ratio of 1.4x, near the company’s 1.5x target. Ericson said PHINIA returned $67 million to shareholders during the quarter through $56 million of share repurchases and $11 million in dividends, and had $258 million remaining under its current repurchase authorization. Since the July 2023 spin-off through the first quarter of 2026, Ericson said PHINIA has repurchased $492 million of shares—about 23% of the original share count—and paid $120 million in dividends.
Gropp said cash flow from operations was $53 million, up $13 million year over year, and adjusted free cash flow was $22 million, which he described as PHINIA’s best first quarter since becoming a standalone company. He said capital expenditures were 3.6% of sales, below the company’s 4% target, aided by “efficient uses of working capital.”
For 2026, Gropp reiterated full-year guidance: revenue of $3.5 billion to $3.7 billion, adjusted EBITDA of $485 million to $525 million (13.7% to 14.3% margin), and adjusted free cash flow of $200 million to $240 million. He said the outlook does not account for potential impacts from recent or future government policy changes, including additional tariffs or tax reforms, but added that PHINIA does not see “a material change” in its tariff position based on recently issued Section 232 tariff clarifications.
On IEEPA-related tariffs, Gropp said PHINIA paid about $40 million last year across three quarters. Ericson said the company expects most of those tariffs to flow back to original equipment customers if refunds are received, resulting in an effect on revenue but “no effect on EBITDA,” and “accretive to margin.” Ericson added that the refund process is slow and the company is “not booking anything until we receive the cash.”
Looking ahead, Ericson said the company is seeing “positive signs on order boards” for North American trucking and an uptick in commercial vehicle trends in China. Gropp added that in China, passenger-car demand was down slightly but commercial vehicle performance “more than made up for it,” and said a similar dynamic occurred in Europe, where overall results were flat but commercial vehicle was up.
About PHINIA NYSE: PHIN
PHINIA Inc engages in the development, design, and manufacture of integrated components and systems that optimize performance, increase efficiency, and reduce emissions in combustion and hybrid propulsion for commercial and light vehicles, and industrial applications. The company operates through Fuel Systems and Aftermarket segments. The Fuel Systems segment provides advanced fuel injection systems, including pumps, injectors, fuel rail assemblies, and engine control modules; fuel delivery modules; canisters; sensors; and electronic control modules.
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