Federal Signal NYSE: FSS reported record third-quarter results for 2026, with higher sales, earnings, orders and operating cash flow supported by growth in its Environmental Solutions Group, acquisitions and aftermarket demand.
Third-quarter net sales rose 18% year over year to $656 million, while operating income increased 19% to $111.4 million. Adjusted EBITDA climbed 21% to $140.4 million, producing an adjusted EBITDA margin of 21.4%, up 50 basis points from the prior-year quarter. GAAP diluted earnings per share increased 16% to $1.29, while adjusted EPS rose 18% to $1.34.
“Our third quarter results includes records across consolidated net sales, adjusted EPS, adjusted EBITDA, and adjusted EBITDA margin,” President and Chief Executive Officer Jennifer Sherman said, citing contributions from both operating groups.
Orders and backlog
Order intake totaled $620 million in the third quarter, an increase of 33% from a year earlier. Backlog stood at $967 million at quarter-end, down about $25 million from the prior-year period. The company said the decline included a planned reduction in third-party Labrie refuse-truck backlog, a business discontinued in the fourth quarter of 2025.
Federal Signal had approximately $33 million of third-party Labrie refuse-truck backlog remaining at the end of the quarter, about $5 million more than management had expected at the start of the period because of delivery timing delays. Chief Financial Officer Ian Hudson said the company initially expected to deliver roughly $80 million of these trucks in 2026, but had delivered about $50 million through the third quarter.
Sherman said that excluding the impact of third-party Labrie refuse orders received in the prior-year quarter, orders increased $158 million, or 34%, year over year. Environmental Solutions Group, or ESG, orders increased 43%, including high-teens organic growth.
Management cited particularly strong order activity for Safe Digging trucks, road-marking trucks, sewer cleaners and metal-extraction support equipment. Orders at the Safety and Security Systems Group, or SSG, declined 6% from the prior-year quarter, primarily because the prior period included a large public-safety fleet order in Spain. Still, SSG’s $90 million of quarterly orders represented its third-highest quarterly total on record, according to the company.
Environmental Solutions drives growth
ESG revenue increased 21% to $564 million, while operating income rose 19% to $101.4 million. Adjusted EBITDA increased 20% to $126.4 million, though its 22.4% margin was slightly below the prior-year quarter’s 22.5% margin.
Acquisitions, including New Way and Mega, contributed materially to ESG sales growth, particularly in refuse trucks and metal-extraction support equipment. Excluding third-party refuse trucks, organic ESG sales increased in the mid-single digits. Hudson said pricing contributed approximately 3% to 3.5% of organic sales growth during the quarter, with the balance coming from volume and mix.
Aftermarket revenue increased 21%, driven by parts demand, used-equipment sales and rental-income growth. Rental income rose 24%, led by rentals of Safe Digging trucks and combination sewer cleaners. Aftermarket represented about 26% of ESG revenue during the quarter.
Federal Signal also continued expanding its parts and service network, opening a Quebec City branch during the quarter. Sherman said the facility was the company’s 20th new service-center location since 2019 and would support vehicle-based brands including Vactor, Elgin, TRUVAC, Trackless, New Way and Switch-N-Go.
The company said it sees additional service-center expansion opportunities in Canada and certain U.S. regions. Sherman also said Federal Signal is pursuing “conquest” customers—customers with which it has not previously done business—through its direct equipment, used-equipment and rental offerings.
SSG margin expands; cash flow rises
SSG sales increased 2% to $92 million, while operating income rose 4% to $22.8 million. Adjusted EBITDA increased 4% to $23.9 million, and its adjusted EBITDA margin expanded 50 basis points to 26.1%.
Operating cash flow totaled $91 million in the third quarter, up 50% from a year earlier. Cash generated from operations during the first nine months reached $306 million, a 94% increase from the comparable 2025 period.
Hudson said the cash-flow gain reflected higher net income, working-capital management and a meaningful benefit from New Way, where Federal Signal reduced inventory levels and improved receivables collection. The company continues to target 100% cash conversion annually, though Hudson characterized some of the New Way working-capital benefit as more unusual for 2026.
During the quarter, Federal Signal acquired Western Technology for approximately $9 million and paid about $13 million in New Way purchase-price closing adjustments. It also repaid approximately $34 million in debt, ending the period with $347 million in net debt and $1.04 billion of availability under its credit facility.
The company paid $9.2 million in dividends during the quarter, or $0.15 per share, and repurchased about $5 million of stock, or roughly 44,000 shares, at an average price of approximately $114 per share.
Acquisitions, capacity and outlook
Federal Signal completed the acquisition of Global Vacuum Systems after the quarter ended, paying approximately $29 million initially. The Texas-based manufacturer produces custom liquid vacuum tank trucks designed to collect and transport regulated or hazardous materials. The transaction also included an approximately 87,000-square-foot manufacturing facility in Texas for about $15 million.
Sherman said Global fills a gap in Federal Signal’s vacuum-truck portfolio and provides cross-selling opportunities through the company’s Vactor, TRUVAC, Guzzler, Westech and New Way brands. Global was the company’s fifth acquisition completed in the last two years, following purchases of Hog, New Way, Mega and Western Technology.
Management said New Way and Mega have exceeded its internal expectations for margin and profit contribution in every quarter of 2026. Federal Signal continues to target $15 million to $20 million of annual New Way synergies by the end of 2028, split roughly between cost and revenue opportunities.
Federal Signal raised its full-year adjusted EPS outlook to a range of $5.20 to $5.32, from a prior range of $5.12 to $5.30. It narrowed its revenue outlook to $2.61 billion to $2.64 billion, from $2.58 billion to $2.67 billion, primarily due to expected delays in third-party refuse-truck deliveries. The company maintained its capital-expenditure forecast of $45 million to $55 million.
Looking ahead, Sherman said Federal Signal expects to report another record year in 2027, supported by strategic growth initiatives, integration progress from recent acquisitions and additional M&A opportunities.
About Federal Signal (NYSE:FSS)
Federal Signal Corporation NYSE: FSS designs and manufactures equipment and systems used by municipalities, government agencies, industrial organizations and commercial customers. Its products support public safety, infrastructure maintenance, environmental protection and emergency response activities.
The company operates through two principal business areas: Environmental Solutions and Safety and Security Systems. Environmental Solutions products include street sweepers, sewer cleaners, vacuum trucks, hydro-excavation equipment, dump bodies and snow and ice control equipment.
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