Enerpac Tool Group Corp.

Enerpac reported adjusted earnings per share of $0.60 in Q3 fiscal 2026, versus $0.51 a year ago; $0.08 of that came from the tariff recovery. The company said it recognized a $6 million net benefit from the expected refund of IEEPA tariffs. On the operating line, IT&S product sales increased 5% organically, IT&S services declined 8%, and service revenue improved sequentially by 17%; Cortland grew 25% organically. Cash flow from operations was $69 million year to date versus $56 million in the prior-year period, free cash flow was $60 million for the first 9 months of fiscal 2026, and the company repurchased approximately $15 million of stock in the quarter. For the SFE deal, management cited approximately $170 million of trailing 12-month sales, approximately $44 million of adjusted EBITDA, a purchase price of approximately $472 million, a 10.6x trailing adjusted EBITDA multiple, and expected net debt leverage of approximately 2.8x at closing, declining to approximately 2.2x within 12 months. Full-year fiscal 2026 guidance was lowered to organic growth of 1% to 2%, adjusted EBITDA of $151 million to $156 million, and adjusted EPS of $1.84 to $1.89; free cash flow guidance was unchanged.

Paul Sternlieb struck an upbeat tone on execution and strategy, saying the company delivered on its plan for mid-single-digit product growth and improving service trends despite a larger-than-expected Middle East headwind. He framed the SFE acquisition as a disciplined M&A move that fits Enerpac’s premium-brand, high-margin approach and expands exposure to attractive verticals like defense, power generation, semiconductors, and data centers. He also emphasized product innovation and cited early traction from new launches, including the dual machine skate set for data center module movement and the LU Series torque wrench pump.

Darren Kozik focused on the financial tradeoffs behind the quarter and the acquisition. He detailed that SFE has about $170 million of trailing sales, about $44 million of adjusted EBITDA, and will be funded with revolver borrowings plus about $225 million under the accordion feature; he expects leverage to be about 2.8x at closing and about 2.2x within 12 months, with $4 million to $6 million of EBITDA synergies by year 3. On the quarter, he highlighted the $6 million tariff recovery, noted gross margin pressure from mix and service dilution, said adjusted SG&A rose 90 basis points as a percent of revenue, and pointed to stronger cash generation with $69 million of operating cash flow year to date and $60 million of free cash flow for the first 9 months. He also said Q4 should look similar to Q3, but without the tariff recovery, which is part of why full-year guidance was reduced.

Analysts pressed on why the SFE deal was priced at 10.6x EBITDA and whether it was run through a competitive process; management said it was a proprietary transaction, not an auction, and argued the valuation was attractive for a high-quality business. Questions also focused on data center exposure, leverage, and M&A capacity: management said data center demand is still small but an outsized opportunity, mainly through manufacturers and modular equipment rather than hyperscalers, and that while leverage will rise, the company still expects room for tuck-in deals or share repurchases. On the Middle East, management said the business there is roughly 10% of total sales or about $60 million and warned that the conflict remains fluid, with more pushouts possible, though they still view recovery as a matter of timing rather than if. They also said SFE’s distribution network overlaps only partly with Enerpac’s and could create cross-selling opportunities, including in welding channels.