Nathan Jones

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, 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 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.

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 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 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 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 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 (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.

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.