Nathan Jones

Nathan Jones asked for details on the organizational structure and integration approach for SPX FLOW post-acquisition, considering overlaps and different customer bases. He also inquired about the potential margin improvement for CCT resulting from the finalized Boeing contract negotiations, including the timing and contribution of these benefits.

Answer

CEO Luca Savi emphasized that SPX is a well-run company with a strong management team, and the integration strategy focuses on maintaining performance while layering synergies, primarily from G&A. CFO Emmanuel Caprais detailed the Boeing contract as a high double-digit price adjustment over 4-5 years, with most increases in the first two years and inflation offsets in later years. This is expected to lead to a 'large improvement' in aerospace profitability, compensating for past price adjustments and cost inflation.

Nathan Jones inquired about the post-acquisition organizational structure for SPX FLOW, specifically how ITT plans to integrate overlapping parts with its Industrial Process (IP) business while allowing distinct businesses to run separately. He also asked for details on the potential margin improvement for CCT resulting from the finalized Boeing contract negotiations, including the timing and contribution of these benefits over the next few years.

Answer

CEO Luca Savi emphasized that SPX FLOW is a well-run company with a strong management team, and the integration approach will focus on ensuring continued performance and delivering synergies, primarily from G&A to avoid corporate duplication. He stated that well-performing parts will be kept stable. CFO Emmanuel Caprais detailed the Boeing contract as a high double-digit price adjustment over a 4-5 year period, with most price increases in the first two years and additional adjustments for inflation in years 3-5. This compensates for past price stagnation and cost inflation, leading to a significant improvement in aerospace profitability, allowing focus on supporting Boeing's growth.

Andres, on behalf of Nathan Jones, asked for clarification on the margin impact from FX transactions within Motion Technologies, given its strong 20.2% margins. He also sought more color on prospects for improving growth within Connect and Control Technologies (CCT) beyond aerospace and defense.

Answer

CFO Emmanuel Caprais clarified that while the FX transaction impact on Motion Technologies was negative in absolute value, it provided a year-over-year benefit of approximately 100 basis points to margins. Mr. Caprais detailed strong Q3 performance in CCT's Aerospace (high teens growth) and Defense (mid-single digits), including Casoria's contribution, and projected continued acceleration in Q4 for both Aero and Defense, expecting around 20% growth, necessitating a production ramp-up.

Nathan Jones (via Andres) asked about the strong 20.2% margins for Motion Technologies, specifically the margin impact from FX transactions. He also requested more color on prospects for improving growth within Connect and Control Technologies (CCT) beyond Aero and Defense.

Answer

Emmanuel Caprais, CFO, confirmed Motion Technologies' strong margins above 20% for the second consecutive quarter, noting that the FX transaction was still negative in absolute value but provided a year-over-year benefit of approximately 100 basis points. For CCT, Mr. Caprais highlighted strong Aero and Defense performance, with Aero orders up high teens and Defense up mid-single digits in Q3, and Casoria also performing strongly. He expects Q4 growth to accelerate, with Aero and Defense around the 20% mark, necessitating a production ramp-up to meet customer demand.

Nathan Jones asked for an update on IDEX's platforming strategy for 2026, its objectives, and whether any further restructuring or cost savings are planned for the year. He also inquired about IDEX's share repurchase plan for 2026, given the consistent repurchases throughout 2025.

Answer

Eric Ashleman, President and CEO of IDEX, emphasized that the platforming strategy's primary focus is growth, achieved by fostering collaboration among business units in advantaged markets to leverage innovation. He noted that a disproportionate amount of IDEX's growth is originating from these platform environments. Sean Gillen, CFO of IDEX, clarified that $40 million of the $60 million in 2025 cost savings are structural and will continue, with some minor carryover into 2026, but no new incremental cost actions are planned beyond normal productivity. Regarding share repurchases, Sean Gillen indicated that a similar level of activity to the second half of 2025, approximately $75 million per quarter, should be expected for 2026, though this could vary based on M&A activity.

Nathan Jones asked about the goals of IDEX's platforming strategy for 2026 and whether more restructuring expenses or cost savings are contemplated. He also inquired about the company's share repurchase plans for 2026.

Answer

Eric Ashleman (President and CEO) emphasized that the platforming strategy's focus is growth, leveraging units to work together in advantaged markets, which is disproportionately driving IDEX's overall growth, especially in HST. Sean Gillen (CFO) clarified that $40 million of the $60 million in 2025 cost savings are structural and will continue, with some temporary savings potentially reinvested, but no new rounds of cost-takeout are planned for 2026 beyond normal productivity. Sean Gillen stated that share repurchases in 2026 should be expected at a similar level to the second half of 2025, around $75 million per quarter, subject to M&A activity.

Nathan Jones from Stifel asked about opportunities for cost reduction and margin expansion through IDEX's platforming strategy, including potential consolidation of rooftops and the impact of earlier headcount reductions. He also inquired about the company's capital allocation priorities, specifically the increased share repurchase authorization and whether IDEX plans to be a more serial repurchaser of stock going forward.

Answer

Eric Ashleman, President and CEO of IDEX Corporation, confirmed that operational excellence and 80/20 principles are key to driving value, citing examples like Airtech and Muon's improved profitability. Akhil Mahendra, Interim CFO, added that platform optimization and cost containment efforts yielded $17 million in Q3, on track for over $60 million in full-year savings, with structural components expected to carry over. Mahendra also detailed the capital allocation framework, emphasizing bolt-on acquisitions, consistent dividends (30-35% of adjusted net income), and increased share repurchases, with 80% of year-to-date free cash flow returned to shareholders.

Nathan Jones, MD and Industrials Equity Analyst at Stifel, asked about IDEX's potential for cost reduction and margin expansion through its platforming strategy and acquisitions, including restructuring savings and consolidating facilities. He also inquired about IDEX's capital allocation priorities, specifically regarding share repurchases as a long-term avenue for capital deployment.

Answer

Eric Ashleman, President and CEO, detailed how operational excellence and 80/20 drive value, citing examples like Airtech, Muon, and Mott. Akhil Mahendra, Interim CFO, added that platform optimization and cost containment efforts yielded $17 million in Q3 savings, on track for over $60 million for the full year, with structural savings expected to continue. Ashleman confirmed that consolidating rooftops is a future opportunity for 2026, to be layered carefully to avoid growth interruption. Mahendra outlined IDEX's capital allocation framework, emphasizing strong free cash flow, bolt-on M&A, dividends (30-35% of adjusted net income), and accelerated share repurchases ($75 million in Q3, $175 million year-to-date).

Nathan Jones inquired about the $7 million decline in Asia adjusted EBITDA, driven by increased engineering spending for new programs, and whether this trend is expected to continue.

Answer

Mark Oswald, Executive Vice President and Chief Financial Officer, stated that overall APAC business performance is expected to be positive for full fiscal year 2026. He acknowledged that certain quarters would see increased launch and engineering costs, but these would be offset by other efficiencies throughout the year.

Nathan Jones asked about the factors that would lead Veralto to the low versus high end of its low-to-mid single-digit core growth guidance, and if the 50 basis points core margin expansion would change based on the growth rate. He also inquired about the impact of supply chain moves and regionalization on incremental profitability and margin expansion.

Answer

CFO Sameer Ralhan stated that the core growth guidance is prudent given macro uncertainties, but underlying demand and Q1 order patterns are good. He acknowledged that higher growth would typically lead to better margin leverage, but Veralto also has flexibility to modulate costs. CEO Jennifer Honeycutt explained that regionalization of manufacturing lines was primarily initiated to address the tariff environment, describing them as 'no-regret moves' due to Veralto's light assembly nature. She noted that these moves, such as diversifying Videojet's footprint and de-risking Trojan, aim to set Veralto up for future trade environments, with ongoing work to ensure efficient operation and absorption in new locations.

Nathan Jones asked for clarification on Veralto's low to mid-single-digit core sales growth guidance range, including factors that would lead to the low or high end, and how this might impact the 50 basis points core margin expansion. He also sought more color on supply chain moves, regionalization of footprint, and their contribution to incremental profitability.

Answer

Sameer Ralhan, SVP and CFO, stated that underlying demand is good, but macro uncertainties warrant a prudent guide for the beginning of the year. He noted that higher growth would likely lead to better margin expansion, with flexibility to modulate costs. Jennifer Honeycutt, President and CEO, explained that regionalization was initiated for the tariff environment, involving light assembly line moves (e.g., Videojet, Trojan, Hach) to diversify footprints. She emphasized these are 'no-regret moves' that enhance agility in a changing geopolitical landscape, with ongoing work to ensure efficient operation of new lines.

Nathan Jones from Stifel asked Jennifer Honeycutt to elaborate on how Veralto has leveraged tariff-related disruptions over the past six months to gain market share, and how these opportunities have played out against initial expectations. Jones also questioned the heavy pricing in PQI North America (3.3% contribution), asking about non-price mitigation actions for tariff impacts and the potential for these actions to improve margins into 2026.

Answer

Jennifer Honeycutt, President and CEO, highlighted Veralto's proactive three-pronged strategy (strategic pricing, supply chain/procurement changes, product line shifts) as successful, particularly with "no-regret" product line shifts closer to customers. She noted strong volume performance, suggesting market penetration where localization offers a competitive advantage. Regarding PQI North America, Ms. Honeycutt attributed strong price-volume balance to successful new Videojet product launches (CIJ, laser, secondary packaging for Food Safety Act compliance) and effective commercial execution.

Nathan Jones asked about Veralto's ability to leverage tariff-related disruption to gain market share over the past six months and how this played out against expectations. He also inquired about non-price mitigation actions in PQI, given the 3.3% price contribution in North America, and if these could help tariff impacts drop through to 2026 margins.

Answer

Jennifer Honeycutt (President and CEO) highlighted Veralto's proactive three-pronged strategy (strategic pricing, supply chain changes, product line shifts) as successful, with product line shifts being 'no-regret moves.' She noted a strong balance between price and volume in PQI North America, driven by new Videojet products and commercial execution, and confirmed continued monitoring of the environment.

Nathan Jones inquired about the expected impact of Pentair's 80/20 strategy on organic growth in 2026, specifically whether it would be a headwind or a tailwind. He also asked about the company's pricing approach for 2026, particularly in the pool business, considering Q4 inflation and potential market acceptance issues.

Answer

CEO John Stauch clarified that the 80/20 strategy is no longer a headwind, with early efforts to walk away from Quad 4 revenue behind them, and it is now expected to be a tailwind driving higher revenue from top customers. Regarding pricing, he stated that the goal is to offset costs with price, especially inflationary pressures, and to work cooperatively with channel partners to incentivize products and add value through innovation rather than just price increases.

Nathan Jones asked about the expected impact of Pentair's 80/20 initiatives on organic growth in 2026, specifically whether it would be a headwind or a tailwind. He also questioned Pentair's pricing strategy for 2026, particularly in the Pool business given Q4 inflation and recent price increases, and any concerns about market acceptance of further price hikes.

Answer

CEO John Stauch clarified that 80/20 initiatives are no longer a headwind and are expected to be a tailwind, driving higher revenue by growing relationships with top customers. Regarding pricing, CEO John Stauch stated the goal is to offset costs with price, not to exceed inflationary pressures. He emphasized working cooperatively with channel partners and focusing on innovation to add content and capability rather than solely relying on price increases.

Nathan Jones asked for clarification on the projected 10% increase in steel prices for 2026 (average 2026 over average 2025, or increase from current levels) and whether this implies a need for more price increases to cover inflationary pressures. He also inquired about the long-term growth of Leonard Valve's business, specifically the volume generated, given that its recent double-digit CAGR was likely influenced by price and metal inflation.

Answer

CFO Chuck Lauber clarified that the 10% steel price increase is the year-over-year average for 2026 over 2025, with projections for steel to continue rising through the back half of 2026. He reiterated A. O. Smith's historical ability to protect its price-cost relationship and margin profile. CEO Steve Shafer explained that the biggest driver of Leonard Valve's double-digit growth has been the digital transition of mixing valves, a technology upgrade, rather than pure cost pass-through. He noted that about 30% of their revenue comes from digital and connected products, indicating continued growth momentum from this segment.

Nathan Jones from Stifel sought clarification on the projected 10% increase in steel prices for 2026, asking if it represents an average year-over-year increase or a rise from current levels, and whether this necessitates further price increases to cover inflationary pressures. He also inquired about the long-term growth drivers for Leonard Valve, specifically distinguishing between volume-driven growth and price-driven growth, given its double-digit revenue CAGR from 2022-2025.

Answer

CEO Steve Shafer confirmed the 10% steel price increase is a year-over-year average for 2026 over 2025, with expectations for continued gradual rises in the second half. He noted the company's historical ability to protect its price-cost relationship despite carryover tariffs and other rising costs, though some fade is expected. For Leonard Valve, Mr. Shafer clarified that the primary growth driver has been the digital transition of mixing valves, a technology upgrade, rather than solely price-driven inflation, with digital products accounting for approximately 30% of revenue.

Nathan Jones asked for an update on the accuracy of the U.S. market size (6 million meters/year) and Badger Meter's 30% share, and how this translates to Badger's annual meter shipments. He also questioned the outlook for gross margins, considering headwinds from turnkey projects and copper prices, and tailwinds from the absence of turnkey projects in H1.

Answer

Ken Bockhorst, Chairman, President, and CEO, confirmed the market size is roughly in that space, with Dan Weltzien, CFO, clarifying it's a bit higher than $6 million but Badger's share is still relevant. Ken highlighted the PRASA project's significant scale, equivalent to 8 Orlandos. Dan discussed gross margins, noting continued positive structural mix impacts, while monitoring commodity input costs like copper and tariffs, aiming for price-cost parity.

Nathan Jones asked for an update on the size of the U.S. meter market and Badger Meter's share, seeking to understand the scale of the 1.6 million connection PRASA project. He also questioned the outlook for gross margins, considering headwinds from turnkey projects and copper prices, and tailwinds from the absence of turnkey projects in H1.

Answer

Ken Bockhorst, Chairman, President and CEO, confirmed the U.S. market is roughly 6 million meters per year, with 85% being replacements, and Badger Meter's share remains relevant. He clarified that the PRASA award is equivalent in scope to eight Orlando-sized projects. Dan Weltzien, CFO, stated that structural mix continues to positively impact margins, while commodity input costs (like ingot recipe) and tariffs are being monitored, noting price-cost parity on tariffs was achieved in 2025.

Nathan Jones inquired about the most promising areas for generating revenue synergies from the recent acquisitions (Druck, Panametrics, Reuter-Stokes) and if any financial framework could be provided. He also asked whether integration costs are adjusted out of reported results or eaten, and the expected impact of synergy achievement costs on free cash flow in 2026.

Answer

Alex Alcala (SVP and COO, incoming CEO) highlighted growth synergies in Druck (military side leveraging A&E's position), traditional commercial excellence across all businesses, and Reuter-Stokes (adjacencies in homeland security and industrial applications). He stated these are not yet baked into the model or guidance, and he's not ready to provide financial numbers. Rich Maue (EVP and CFO) clarified that direct integration costs would be excluded and visible, but ongoing business investments (e.g., hiring in finance/HR/IT) would not. He estimated 2026 free cash flow, including acquisitions, to be in the 90%-100% range, slightly down from 2025's 102%.

Nathan Jones (Stifel) inquired about potential revenue synergies from the recent acquisitions, despite not being included in the initial deal model or ROIC target, asking for insights into the most promising areas for these synergies and any potential financial framework. He also sought clarification on whether integration costs would be adjusted out of reported results and the expected impact of synergy-related expenses on 2026 free cash flow.

Answer

Alex Alcala (EVP and COO, Crane Company) confirmed expectations for growth synergies across the acquired businesses, such as leveraging Druck's military opportunities and Reuter-Stokes' adjacencies in homeland security, though these are not yet factored into guidance or a specific financial target. Rich Maue (EVP and CFO, Crane Company) clarified that directly associated integration costs would be excluded, while ongoing investments in functions like finance and HR would not. He did not provide a specific free cash flow impact for synergy-related expenses but projected core business free cash flow conversion to remain around 100%, with overall conversion including acquisitions in the 90%-100% range for 2026.

Nathan Jones asked for a broader outlook on 2026 growth, specifically whether Crane anticipates remaining within its 4%-6% organic growth target range, given the current year's performance and potential slowdowns.

Answer

Max Mitchell, Chairman, President, and Chief Executive Officer, stated that while it is still early and there are factors to monitor in Q4, based on current knowledge and market expectations, Crane's investment thesis for 4%-6% organic growth still holds for next year.

Nathan Jones with Stifel asked if the historical dynamic of low OEM margins and high aftermarket margins in the gas turbine business still holds, and if a ramp-up in the OE side would create a drag. He also sought color on what drove the longer-cycle industrial international orders from Q3 last year and when they might contribute to international growth.

Answer

Executive Vice President and CFO Todd Leombruno clarified that Parker is a significantly different company than a decade ago with substantial margin expansion, and while the OEM/aftermarket mix persists, Powergen's OEM margins are not dramatically lower than other segments. Chairman and CEO Jennifer Parmentier explained that the longer-cycle orders from Q3 were in the engineered materials business, with a typical cycle of 6-12 months, and did not repeat in Q4.

Nathan Jones sought more clarity on Flowserve's expected market share within the $10 billion nuclear flow control opportunity over the next decade, specifically regarding win rates for large utility-scale reactors and SMRs. He also asked if pumps, given Flowserve's presence in over 50% of operating reactors, represent the biggest dollar opportunity.

Answer

Scott Rowe, Flowserve's President and CEO, referred to Flowserve's content in 75% of existing reactors, highlighting strong positions in North America, Europe, and Korea, while excluding China from estimates. He expects Flowserve to maintain the highest share of mainstream isolation valves and a large content (aiming for 50%+) in cooling pumps, with potential for overall market share growth by repositioning products for balance of plant. Mr. Rowe confirmed that pumps are likely the biggest ticket item and represent the largest dollar opportunity.

Nathan Jones sought more clarity on Flowserve's expected market share within the $10 billion nuclear flow control opportunity over the next decade, differentiating between large utility-scale reactors and SMRs. He also asked if pumps, given Flowserve's presence in over 50% of currently operating reactors, represent the biggest dollar opportunity.

Answer

Scott Rowe, President and CEO, referred to Flowserve's current content in 75% of existing reactors, highlighting strong positions in North America, Europe, and Korea, while excluding China from future estimates due to nationalistic policies. He expects Flowserve to maintain the highest share of main steam isolation valves and a significant share (around 50%) of cooling pumps, with potential for overall market share growth by repositioning products for the balance of plant. He confirmed that pumps are likely the biggest ticket item and represent the largest dollar opportunity.

Nathan Jones asked for more details on ESAB's 'good start' to the fourth quarter and current observations regarding the core growth rate.

Answer

Shyam Kambeyanda, President and CEO, clarified that the 'good start' refers to an expected improvement in the core growth rate from Q3's 2%, with October's performance aligning with this projection. He emphasized ESAB's dual focus on productivity and growth investments for long-term shareholder value.

Nathan Jones from Stifel asked for clarification on how Xylem's Measurement and Control Solutions (MCS) segment can achieve high single-digit growth in 2026, given its year-to-date book-to-bill ratio and the expectation of burning off backlog. He also questioned the MCS segment's Q3 margin expansion, seeking details on offsets to expected improvements and the long-term margin outlook.

Answer

CFO Bill Grogan explained that the current $1.5 billion backlog in MCS is still elevated, and as it normalizes with positive book-to-bill, it supports the high single-digit growth framework for 2026, driven by water meter project wins and a robust energy funnel. Bill Grogan attributed the Q3 margin offsets to the energy-water mix, noting that as mix normalizes and 80/20 simplification efforts continue, MCS margins are expected to expand into next year.

Nathan Jones (Stifel) questioned the feasibility of Xylem's Measurement & Control Solutions (MCS) segment achieving high single-digit growth in 2026, considering the 2025 book-to-bill ratio of 0.83-0.85 and ongoing backlog burn-off. He also sought clarification on why MCS's margin expansion was only 60 basis points in the quarter, asking about offsetting factors and the long-term margin outlook for the business.

Answer

CFO Bill Grogan clarified that the MCS backlog of $1.5 billion remains historically elevated, and burning this backlog while achieving a book-to-bill positive ratio will support the high single-digit growth framework for 2026, aided by normalizing water growth and new energy projects. Regarding margins, Mr. Grogan attributed the 60 basis point expansion to the energy-water mix, specifically the push-out of lower-margin energy projects. He expects sequential margin similarity, with mix normalization by late 2026, and anticipates continued margin expansion next year as 80/20 simplification efforts progress.