Aug 6, 2026 earnings call — Record backlog and broad order strength
ESCO increased full year adjusted earnings per share guidance to $8.30 to $8.40 per share.
Revenue $0.3B (est $0.3B) · EPS $2.20 (est $2.12)
Key quotes
"Aerospace, utility and test orders were all strong, driving a consolidated book-to-bill of 1.21."
"We continue to believe that this process should be completed in a time frame that results in closing the deal in the first quarter of our fiscal 2027."
"Orders here were up 20% in the third quarter, and that was driven by exceptional performance at Doble, where orders grew by 30%."
Analyst Q&A 6
Test data center customers and Doble orders
Q (Thomas Moll · Stephens): He asked what kinds of data center customers are buying Test products and whether the customer base has broadened. He also asked for more detail on Doble's strong sales and orders and whether Megger is seeing the same trend.
A: Management said the Test data center customer base has improved and includes customers in the data center space that serve government and critical infrastructure, which tend to require EMP protection. On Doble, orders were up 30% year-over-year and the increase was broad-based, with condition monitoring up 67%, services up 13%, protection up 23% and off-line testing up 13%. They said renewables lag but Megger appears to be up nicely year-over-year as well.
"I would say that the 30% year-over-year increase in orders was very broad-based" — Bryan Sayler (CEO)
Segment revenue and margin questions
Q (Scott Deuschle · Deutsche Bank): He asked for updated segment revenue guidance and how Doble fits inside utility. He also asked why USG margins fell sequentially, whether component cost inflation affected costs, and if the 30% incremental EBIT margin for A&D still applies.
A: They gave segment guidance: A&D excluding Maritime 8% to 10% for the year, Test 10% to 12%, and overall utility 4% to 6%. Doble is expected to be low double digit through the fourth quarter. On USG margins, they cited unfavorable mix (growth in some high-voltage product lines), timing of SG&A and cost of sales items, and weaker NRG margins; they said they have not seen material component inflation yet. Christopher noted they still expect to drive margins higher and that the 30% target was a company-level reference.
"I mean what I would tell you is for A&D on an underlying basis, excluding Maritime, we're looking at 8% to 10% for the year." — Christopher Tucker (CFO)
Defense strength and NRG recovery timing
Q (CJS): He asked whether the defense strength was from programs of record or aftermarket and how to think about that near term. He also asked when NRG might return to year-over-year growth.
A: Management said the defense strength is mostly from programs of record, especially submarine programs, while aftermarket continues to accelerate at about the same rate and they expect the program-driven strength to continue. For NRG, they said one more quarter of tough year-over-year comps is likely, another negative in Q4, but they see sequential growth and expect growth to return in FY '27 from a lower base, trending toward high single-digit growth thereafter.
"I mean, I think that our aftermarket business there continues to accelerate at about the same rate as the rest of the business." — Bryan Sayler (CEO)
NRG headwinds and Megger integration priorities
Q (Tomohiko Sano · JPMorgan): He asked what beyond U.S. tax credit dynamics is driving NRG weakness and what bottlenecks exist. He also asked top priorities in the first 100 days after Megger closes and whether improved cash flow is structural or timing.
A: They said NRG is mainly diagnostics for utility-scale solar and wind and this year was affected by developers focusing on safe-harboring projects to qualify for tax credits, which expired last week, and that they expect developers to broaden focus now. For Megger, they will soon communicate plans to review footprint, manufacturing sites, harmonize product lines, and set a go-to-market strategy and combined identity. On cash flow, they target free cash flow conversion around 100% of adjusted net earnings and said they will be a bit above that this year due to timing of large contract payments, while structurally they expect to hit that target over time.
"So NRG, it's principally diagnostics business that's around solar and wind generation, utility scale terrestrial." — Bryan Sayler (CEO)
Condition monitoring lead times and ship revenue
Q (Scott Deuschle · Deutsche Bank): He asked the lead times for the condition monitoring orders, what percent of the business that represents, and whether condition monitoring growth is lumpy. He also asked if surface ship revenue pushouts have normalized.
A: They said cable monitoring orders have the longest lead times because they must follow the rate of cable construction and can be as long as a year. Overall condition monitoring is about 20% of the business and condition monitoring orders were up strongly year-over-year. On surface ship revenue, they said there have been no more pushouts and the recovery plan is unfolding as expected, though they continue to watch the programs closely.
"We kind of have to go at the rate that the cables themselves are built." — Bryan Sayler (CEO)
Megger deal timing and cost of debt
Q (Thomas Moll · Stephens): He asked for an updated view on the cost of debt for the Megger deal and whether the company will include Megger in the fiscal '27 guidance if the deal closes on the anticipated timeline.
A: They said they anticipate the November announcement will include Megger in the guide if the schedule tracks as hoped and they can give their best look at interest cost as part of that guidance. They expect the cost of debt to be around 6%, have Term Loan A and B terms locked in as SOFR instruments, and executed a deal-contingent hedge that is slightly below 6%, but advised planning with 6%.
"Yes, Tommy, we would anticipate if the schedule tracks the way we're hoping it does that our November announcement would include Megger in the guide." — Christopher Tucker (CFO)