Enerpac Tool Group Q4 Earnings Call Highlights

Key Points

• Record revenue and regional growth: Enerpac reported fiscal 2026 revenue of $652 million, with fourth-quarter organic growth led by a 10% increase in Americas Industrial Tools & Services. Data center construction, power generation, defense and reshoring supported demand, while EMEA and Asia-Pacific faced service-related pressures.
• SFE acquisition strengthens growth outlook: Enerpac completed its approximately $472 million acquisition of SFE Group, expecting $4 million to $6 million in synergies by year three and adjusted EPS accretion in fiscal 2027. Net leverage was about 2.3 times at closing, with management targeting roughly 2 times within a year.
• Fiscal 2027 guidance includes higher revenue but margin pressure: The company forecast revenue of $825 million to $845 million, adjusted EBITDA of $195 million to $205 million and adjusted EPS of $2.00 to $2.15. Fourth-quarter EBITDA margin fell to 22.6% as lower-margin heavy-lifting growth, incentive compensation and investments in its PROPEL strategy weighed on profitability.

Enerpac Tool Group NYSE: EPAC reported record annual revenue for fiscal 2026 as fourth-quarter growth accelerated, led by its Americas business and gains in both product and service operations.

President and Chief Executive Officer Paul Sternlieb said fourth-quarter revenue exceeded the company’s expectations, with 10% organic growth in its Industrial Tools & Services segment. The company cited exceptional performance in the Americas, where demand was supported by data center construction, power generation, defense and reshoring activity.

For the full fiscal year, Enerpac reported revenue of $652 million, its highest level since the company’s 2019 relaunch, and organic growth of 4%. Currency contributed roughly two percentage points to reported growth, according to Chief Financial Officer Darren Kozik.

Americas strength offsets pressure in other regions

Americas revenue growth in the fourth quarter was broad-based across standard products, Heavy Lifting Technology, or HLT, and service. Kozik said the company also continued to gain commercial traction from newer products, major contract wins and additions to approved vendor lists.

Enerpac received Cybersecurity Maturity Model Certification, or CMMC, during the quarter, a U.S. defense cybersecurity compliance certification that management said would further position the company to serve the defense sector.

In EMEA, standard-product sales rose in the quarter, while HLT declined against a difficult prior-year comparison that included several large deals. EMEA service revenue grew for the first time in fiscal 2026, aided by LNG maintenance and shutdown work despite continued uncertainty in the Middle East.

Asia-Pacific saw product momentum in India, Korea and Australia, along with HLT wins involving E-movers and gantries. However, the region’s service business was affected by macroeconomic and geopolitical conditions. All three operating regions delivered double-digit order-rate growth during the fourth quarter, management said.

For the year, Americas organic revenue in Industrial Tools & Services increased 10%. EMEA organic revenue declined 3%, as growth in standard products and HLT was offset by service pressure, including softer North Sea conditions and customer consolidation. Asia-Pacific organic revenue declined 1%, with HLT growth offset by lower service revenue.

Sternlieb said Enerpac’s data center exposure is generally to manufacturers of equipment used in data centers, such as power equipment, rather than to the hyperscalers or data centers directly. The company provides lifting and movement equipment for manufacturing, transportation and installation applications. He said Enerpac has seen repeat orders for smaller HLT gantries and E-movers, and is adding commercial resources focused on the data center market.

Margins decline as company invests for growth

Fourth-quarter adjusted EBITDA margin was 22.6%, compared with 26.5% in the prior-year quarter. Kozik said the year-earlier period represented the company’s highest-margin quarter of fiscal 2025.

Margin pressure reflected sales mix, including stronger HLT growth in the Americas. Kozik said HLT, as a capital-goods business, typically carries margins in the mid-40% range and is lower margin than the broader portfolio average. Higher incentive compensation and investments behind the company’s new growth strategy also weighed on profitability.

For the full year, gross margins were affected by a higher growth rate in HLT and dilution from service operations. EBITDA margins also reflected higher research and development spending, incentive compensation and operational-improvement investments.

Management said it intends to pursue better asset utilization and further manufacturing-footprint optimization in fiscal 2027. Sternlieb also said the company expects to use pricing and productivity measures to offset inflation, while evaluating price actions by geography, product line and individual stock-keeping unit.

Cash flow supports SFE acquisition

Fiscal 2026 free cash flow increased 30% year over year to $120 million, driven by collections activity, inventory management and lower cash taxes. Enerpac ended the fiscal year with net debt-to-adjusted EBITDA leverage of 0.1 times before completing its acquisition of SFE Group.

The company completed the SFE transaction effective Oct. 28. The approximately $472 million purchase price included about $452 million in cash and roughly $20 million in equity awards granted in lieu of transaction bonuses. The cash portion was funded with cash on hand, an expanded term loan and revolving-credit borrowings.

Enerpac said the transaction values SFE at 10.6 times trailing adjusted EBITDA, or 9.5 times including expected synergies. The company is targeting $4 million to $6 million in synergies by the third year and expects the deal to be accretive to adjusted earnings per share in fiscal 2027.

Net leverage at closing was about 2.3 times, below Enerpac’s earlier estimate of 2.8 times. Management expects leverage to decline to approximately 2 times by the end of the first year following the acquisition, within its target range of 1.5 to 2.5 times.

Enerpac also renewed and expanded its credit facility to $850 million from $600 million. The five-year facility includes a $300 million term loan and a $550 million revolver, plus an accordion option of up to $425 million for potential future acquisitions.

Fiscal 2027 outlook and PROPEL strategy

For fiscal 2027, Enerpac forecast revenue of $825 million to $845 million and organic growth of 4% to 6%. The outlook includes approximately 10 months of SFE Group results. The company forecast adjusted EBITDA of $195 million to $205 million and adjusted earnings per share of $2.00 to $2.15.

The guidance excludes M&A transaction charges and integration-related items from adjusted EBITDA and adjusted EPS. Adjusted EPS also excludes amortization of acquisition-related intangible assets. The company’s outlook assumes no substantial change in tariffs, regulation or economic conditions from those in place at the end of the fourth quarter.

Management said the acquisition will add a business with roughly 74% of revenue generated in the Americas, further increasing Enerpac’s exposure to the region. Sternlieb said SFE brings premium products, higher-growth end-market exposure and a management team that will remain with Enerpac.

At its upcoming Investor Day, the company plans to detail its next-generation growth strategy, known as PROPEL. The strategy is structured around commercial excellence in attractive markets, product-first and application-led innovation, and operational-excellence initiatives such as inventory management and expansion of higher-margin service applications.

Enerpac increased R&D spending at an 11% compound annual rate over the past three years and introduced 11 products in fiscal 2026, compared with five in the prior year. Sternlieb said the company expects a similar or greater pace of launches in fiscal 2027.

About Enerpac Tool Group (NYSE:EPAC)

Enerpac Tool Group Corp. is an industrial tools and services company that provides engineered solutions for lifting, moving, positioning, maintenance and assembly applications. Its products are used in industries such as energy, infrastructure, construction, manufacturing, mining and heavy equipment.

The company offers high-pressure hydraulic tools and systems, including hydraulic pumps, cylinders, jacks, tensioners, torque tools and specialized lifting and positioning equipment. It also provides bolting, machining, flange-management and other field services designed to support the installation, maintenance and repair of large-scale industrial assets.

Enerpac Tool Group markets products under brands that include Enerpac, Hydratight, Equalizer, Mirage, Simplex and Larzep.

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