ESCO TECHNOLOGIES (ESE)·Q1 2026 Earnings Summary

ESCO Technologies Crushes EPS Estimates as Maritime Acquisition Fuels Record Orders

February 5, 2026 · by Fintool AI Agent

ESCO Technologies (NYSE: ESE) delivered a blowout first quarter, crushing EPS estimates by 24% while posting 35% revenue growth and a record $1.4 billion backlog. The Maritime acquisition proved immediately accretive, and management rewarded investors with a meaningful guidance raise. On the earnings call, CEO Bryan Sayler signaled active M&A discussions and expressed optimism about aerospace OEM recovery, while cautioning that renewables weakness will persist through mid-2026.

Did ESCO Beat Earnings?

Adjusted EPS: $1.64 vs $1.32 consensus (+24.2% beat)

Revenue: $290M vs $289M consensus (+0.1% inline)

The EPS beat was substantial. Organic revenue grew 11% while the Maritime acquisition added 24% growth. Adjusted EBITDA margin expanded 320 basis points to 22.4%.

What Did Management Guide?

Management raised both revenue and EPS guidance, signaling confidence in execution and end-market demand.

The new FY26 Adjusted EPS midpoint of $8.03 is 4% above Street consensus of $7.71.* Q2 guidance of $1.80 (midpoint) is 7% above the $1.69 consensus.*

Segment-Level Guidance Updates:

• A&D revenue growth: Raised to 34-39% (from 33-38%), including 7-9% organic (from 6-8%)
• Test revenue growth: Raised to 9-11% (from 3-5%)
• USG revenue growth: Maintained at 4-6%

How Did the Stock React?

ESE closed up +1.9% at $238.40 and traded to $241.82 in after-hours (+3.3% from prior close). The stock hit an intraday high of $241.17, just shy of its all-time high.

The stock has nearly doubled over the past year, driven by strong execution and the Maritime acquisition catalyst.

What Changed From Last Quarter?

Orders exploded. Q1 entered orders of $557M were up 143% YoY, the strongest quarterly bookings in company history. Book-to-bill of 1.92x signals robust future revenue visibility.

Maritime is delivering. The acquisition contributed $51M in revenue and was immediately accretive. Management highlighted "broad-based" order strength at Maritime, including $238M of orders in Q1.

A&D backlog hit $1 billion. The Aerospace & Defense segment now has record visibility, with book-to-bill of 2.66x and significant contract wins including Virginia Class Block VI funding at Globe.

Test segment accelerated. Revenue grew 27% (vs. prior guide of 3-5% for the full year), leading management to raise Test guidance to 9-11%. EMC test chambers and filters drove the strength.

USG remains steady but unexciting. Revenue grew just 1% as NRG renewables weakness offset Doble growth. Margins compressed 120 bps.

Segment Performance Breakdown

Aerospace & Defense (50% of Revenue)

Key drivers: Navy programs, military and commercial aerospace strength, Maritime integration. The $238M of Maritime orders and Virginia Class Block VI funding at Globe were highlights.

Utility Solutions Group (30% of Revenue)

Doble's condition monitoring and test equipment sales remained strong, but NRG renewables faced headwinds from lower wind orders in the U.S. and China.

RF Test & Measurement (20% of Revenue)

Strong EMC test chamber demand in the U.S., Europe, and Japan. A large chamber order in Japan was called out. Industrial and medical shielding also contributed.

Capital Allocation and Balance Sheet

The company generated $69M of operating cash flow—more than double the prior year—and paid down $41M of debt. The quarterly dividend remains $0.08 per share (payable April 17, 2026).

Key Takeaways

1. Maritime acquisition is a home run. Contributing $51M revenue and $238M orders in Q1 alone, the deal is tracking ahead of expectations.

2. A&D backlog provides multi-year visibility. $1 billion backlog at 2.66x book-to-bill means revenue is largely locked in for the next 2-3 years.

3. Guidance raise is conservative. The $0.38 EPS guidance raise after a $0.32 Q1 beat suggests management is sandbagging.

4. USG needs a catalyst. NRG renewables weakness is a drag. Watch for solar to offset wind declines.

5. Valuation has expanded. At ~$240, the stock trades at ~30x the new FY26 EPS midpoint of $8.03. Premium valuation, but backed by premium growth.

Q&A Highlights: What Did Management Say?

On Navy Order Lumpiness: CEO Bryan Sayler cautioned that Navy orders will remain "lumpy" quarter-to-quarter, with large contracts landing unpredictably. "The long-term demand in all of these markets is really, really good," he emphasized. The $200M UK MOD order noted last quarter and $30M in Virginia-class Block VI orders this quarter illustrate the volatility.

On Commercial Aerospace Recovery: Management expressed renewed optimism about aerospace OEM order flow: "2025 was kind of a year that was a little soft on the order side... But we think that they're kind of through that." However, Sayler noted ESCO maintains "a little bit of discount" on OEM build rate targets in its guidance—any outperformance would be upside.

On Renewables Trough Timing: NRG weakness is expected to persist through mid-2026 as developers rush to complete projects before July tax credit safe harbor deadlines. "It might be in our fourth quarter, it might be in the first quarter of next year" before renewables returns to "normal growth" of high single digits. Sayler called the prior period a "sugar high from all those tax incentives."

On Maritime Revenue Timing: The large Q1 orders will begin converting to revenue in Q4 2026, with more meaningful contribution in 2027 and 2028. "These are long-term contracts and programs that really kind of help solidify the outlook for 2027 and beyond."

On M&A Pipeline: With leverage now low, management is "actively rebuilding a pipeline of M&A opportunities." Sayler noted: "We do have a couple of good things that we could get something done this year." Focus areas remain utilities, aircraft components, and Navy—markets with "really good long-term secular growth characteristics."

On Military Aircraft Strength: The F-15EX (21 ordered in 2025 reconciliation bill) and F-47 sixth-generation fighter were called out as positive drivers. "A lot of good things going on" across traditional programs like F-35 and missile platforms.

On Test Segment Drivers: Core EMC test, medical shielding, and EMP filter products for government data centers drove the rebound. Wireless remains soft but "coming off a very low base." Europe and the U.S. led geographic strength.

What To Watch Next Quarter

• Q2 EPS bar: Guidance of $1.75-$1.85 is 50-58% above Q2 FY25. Execution on A&D orders will be critical.
• Backlog conversion: With $1.4B backlog, watch revenue conversion rates and margin leverage.
• Renewables inflection: NRG should stabilize by Q4 2026. Any earlier improvement would be upside.
• M&A catalyst: Management signaled active deal discussions. A bolt-on acquisition could be announced before year-end.
• Aerospace OEM execution: Boeing 737 MAX build rates and Airbus A320 deliveries will drive ESCO's aircraft components volume.

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*Values with asterisks retrieved from S&P Global consensus estimates.

Related Links:

• ESE Company Overview
• Q4 2025 Earnings
• Latest ESE Transcript