Kadant Inc.

Q2 2026 revenue was a record $312.9 million, up 23% year over year. Adjusted EPS was a record $3.42, up 26% from $2.71 in Q2 2025; GAAP EPS was $2.75, up 24%. Gross margin was 43.8%, down 210 basis points from 45.9% a year ago, as the mix shifted toward lower-margin capital revenue. Adjusted EBITDA was a record $68.1 million, up 30%, and operating cash flow was $53.5 million, up 32%, with free cash flow of $42.6 million, up 17%. For the full year 2026, Kadant raised revenue guidance to $1.190 billion-$1.210 billion from $1.178 billion-$1.203 billion and adjusted EPS guidance to $12.43-$12.68 from $12.33-$12.68. Q3 2026 guidance is revenue of $297 million-$307 million and adjusted EPS of $2.90-$3.00. Management’s 2026 assumptions include gross margin of 44.0%-44.5%, SG&A of 27.2%-27.7% of revenue, net interest expense of $19.5 million-$20.0 million, a tax rate of 27.8%-28.3%, depreciation expense of $28.0 million-$28.5 million, and intangible amortization of about $34 million.

Jeff Powell said Kadant delivered excellent results despite continued softness in global capital equipment markets, with strong commercial activity across all segments and especially in aftermarket. He emphasized that the company’s large installed base is generating recurring revenue and that current demand weakness is more about delayed timing than lost demand. Powell repeatedly pointed to improving project momentum, saying the pipeline is stronger, backlog is growing, and demand should strengthen in the second half of 2026 and into 2027.

Michael McKenney highlighted record Q2 revenue of $312.9 million, record aftermarket parts revenue of $214.2 million, record adjusted EBITDA of $68.1 million, and adjusted EPS of $3.42. He explained that gross margin fell to 43.8% from 45.9% because the revenue mix shifted toward capital and because of product mix within both aftermarket and capital, partly offset by tariff refunds and partly pressured by amortization-related effects from the Kadant Profil acquisition. He also noted operating cash flow of $53.5 million, free cash flow of $42.6 million, net debt of $373 million, leverage of 1.72, and $249 million of revolver capacity plus $200 million of uncommitted borrowing capacity.

Analysts focused on whether a broader capital-project recovery is finally emerging and what is driving the pipeline. Management said several large projects are advancing across packaging, aerospace, OSB, and baler markets, and reiterated that projects are usually delayed rather than canceled, with timing now looking more near term than a year ago. On acquisitions, McKenney said Clyde is performing very well, Profil has started well despite profit deferral from acquired inventory, and one smaller fiber-processing deal is softer near term because of weaker demand. They also said the $182 million backlog estimate was correct and that quarterly order levels around $300 million may be the new base more or less for the back half of the year, with some large capital orders likely becoming 2027 revenue.