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SPX Technologies reported strong Q3 results:Adjusted EPS rose 20% to $2.21, revenue increased 20.5% to year-over-year growth, and adjusted EBITDA climbed 21.7%, marking the fifth consecutive quarter of more than 20% adjusted EPS growth.
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HVAC demand was the primary growth driver,with segment revenue up 35.5% and organic backlog reaching a record $1.1 billion, supported by data-center cooling demand. However, HVAC margins declined due to hiring, outsourcing, and higher input costs.
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SPX lowered the upper end of its full-year adjusted EPS outlook to $8.50 while raising its HVAC revenue outlook after acquiring FIS Water. The company said its four acquisitions, funded with roughly $1.2 billion, are performing as planned and should contribute about 60 basis points of full-year margin accretion.
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SPX Technologies (NYSE:SPXC) reported third-quarter 2026 adjusted earnings per share of $2.21, up 20% from a year earlier, as strong HVAC demand and recent acquisitions lifted revenue and profit. The company said the result marked its fifth consecutive quarter of adjusted EPS growth exceeding 20%.
Third-quarter revenue increased 20.5% year over year, including 11.8% organic growth and 8.5% growth from acquisitions. Adjusted EBITDA rose 21.7% to $165.7 million, while adjusted EBITDA margin expanded 20 basis points to 23.2%.
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President and CEO Gene Lowe said the results were led by strong demand in the company's HVAC business, particularly for data center-related cooling products, as well as margin performance in its Detection & Measurement segment. He added that recent acquisitions were performing well and that the company had added FIS Water to its HVAC portfolio.
HVAC Growth Drives Revenue, Though Margins Face Pressure
HVAC segment revenue rose a record 35.5% year over year, including 22.3% organic growth. Growth was supported by both heating and cooling products, with strong data center volumes. Segment income increased $26.4 million, or 28%, on higher organic volume and acquisitions.
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However, HVAC segment margin declined approximately 140 basis points. Chief Financial Officer Mark Carano said the decline reflected growth-related inefficiencies, including added labor and outsourcing costs, along with elevated input costs.
Carano said SPX accelerated hiring and added suppliers after demand continued to increase through the year. The company took those actions to support customer demand through the remainder of 2026 and position the business for further growth in 2027.
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"We made a decision, it was an intentional decision, to accelerate our hiring and secure additional suppliers to ensure that we can meet the demand that is out there," Carano said.
The company said much of the outsourcing involves metal fabrication that it would normally perform internally. As production equipment becomes fully operational, particularly at the company's Madison facility, SPX expects to bring more of that work in-house. Lowe said Madison began assembly activities during the quarter, shipping both OlympusMAX and Ingénia products, and is expected to continue ramping production through the rest of the year.
HVAC organic backlog rose 69% from a year earlier and 15% sequentially to about $1.1 billion, exceeding $1 billion for the first time. Lowe said the company continues to expect approximately $1.1 billion of total data center capacity once its planned expansion reaches full production.
Management said cooling-platform organic growth is expected to be about 30% in the second half of the year. The company expects growth-related inefficiencies to continue in the fourth quarter, but said labor productivity should improve next year. Carano said HVAC margins should be toward the high end of the company's medium-term target range for the full year of 2027, though he did not provide formal 2027 guidance.
Detection & Measurement Revenue Declines, Margins Improve
Detection & Measurement revenue declined 7.7% from the prior-year period, largely because the year-earlier quarter benefited from project timing. Despite the lower revenue, segment income rose about $1 million, or 1.7%, and segment margin improved 260 basis points.
Carano attributed the margin improvement to favorable project mix, benefits from segment synergy initiatives, and a commercial resolution with a customer. Segment backlog ended the quarter at $322 million, up 3% sequentially.
Management said D&M's underlying demand remained healthy, while project-oriented businesses continued to have an active opportunity pipeline. Lowe cited healthy conditions in transportation and continued growth in the company's communications technology businesses, while characterizing demand in its location and inspection business as normal. He said the company's Aids to Navigation business was seeing more modest growth because of slower activity in Europe, the Middle East and Asia.
Guidance Updated as Costs Rise and FIS Water Is Added
SPX lowered the upper end of its full-year adjusted EPS outlook to $8.50, resulting in a midpoint of $8.35. The update reflected revised expectations for both operating segments, as well as modest accretion from FIS Water.
The company raised its HVAC revenue outlook to incorporate FIS Water and modestly higher organic volume expectations. At the same time, it lowered the segment-margin outlook to account for growth-related inefficiencies and higher input costs experienced in the third quarter and expected to continue in the fourth quarter.
Carano said the company estimates roughly $25 million of second-half cost headwinds versus its prior expectations. About $15 million of that amount relates to growth-related inefficiencies, with the balance tied to price-cost pressures. SPX said it has raised prices across its HVAC businesses and expects to be in a better price-cost position next year.
Management said the updated outlook implies approximately 25% full-year adjusted EBITDA growth at the midpoint.
Acquisitions Expand Cooling Platform
SPX recently acquired FIS Water, which supplies water management and control solutions commonly paired with cooling towers. Lowe said the business expands SPX's cooling offering and strengthens its position in end markets including data centers. Management expects FIS Water to benefit from SPX's global channels, OEM relationships and specification-driven sales capabilities.
The company also discussed four strategic transactions completed during the year: Crawford, including Air Enterprises and ROM; Thermolec; Neptronic; and FIS Water. Lowe said SPX deployed about $1.2 billion of capital across those deals, which represent approximately $310 million of revenue run rate. He said the acquisitions were tracking on plan or modestly ahead of plan, while Carano said they are expected to provide roughly 60 basis points of full-year margin accretion.
At the end of the third quarter, SPX had $121 million of cash and $1.3 billion of total debt. Its leverage ratio under its bank credit agreement was approximately 1.8 times, including the impact of the FIS Water acquisition. Year-to-date adjusted free cash flow totaled $111 million.
About SPX Technologies (NYSE:SPXC)
SPX Technologies, Inc (NYSE:SPXC) is a diversified industrial technology company that develops and manufactures engineered products and solutions for the heating, ventilation, air conditioning and infrastructure markets. The company serves commercial, industrial and residential customers through specialized technologies designed to support building climate control, utility infrastructure and related applications.
SPX Technologies operates through two primary business segments: HVAC and Detection & Measurement.
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The article " What SPX Technologies (SPXC) Said on Its Q3 Earnings Call " was originally published by MarketBeat.
