Sign in

You're signed outSign in or to get full access.

FE

FRANKLIN ELECTRIC CO INC (FELE)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered broad-based growth and margin expansion: revenue $587.4M (+8% YoY), GAAP diluted EPS $1.31 (+4% YoY), and operating margin 15.0% (+40 bps YoY), with records in Water and Distribution sales and Energy segment operating income/margins .
  • Results beat Wall Street consensus on both revenue and EPS; revenue $587.4M vs $566.8M consensus and EPS $1.31 vs $1.29 consensus; EBITDA also ran above consensus, signaling stronger execution and pricing/productivity offsets across segments (Values retrieved from S&P Global)* .
  • Guidance held: FY25 sales $2.09–$2.15B and GAAP EPS $3.95–$4.25; management reiterated a Q3 plan to terminate the U.S. pension with an ~-$1.00 non-cash EPS impact excluded from guidance, preserving flexibility to accelerate supply chain optimization and select restructuring .
  • Capital returns and balance sheet actions: declared $0.265 dividend (payable Aug 21); repurchased 1.4M shares ($120M) including 1.2M from a trust ($104M); book-to-bill remained above 1 across all segments and backlog rose low double-digits YoY, reinforcing confidence into H2 .

What Went Well and What Went Wrong

What Went Well

  • Record performance: Water and Distribution achieved record sales; Energy posted record operating income and margin, with Energy margin up ~190–200 bps YoY on favorable geo mix, pricing and cost actions .
  • Broad-based growth: Consolidated sales +8% YoY with growth in all segments (Water +8%, Energy +6%, Distribution +5); strong U.S./Canada (+5%), Latin America (+26%), and APAC (+18%) momentum .
  • Positive demand/profitability signals: Book-to-bill >1 across all segments and backlog up low-double digits YoY; Distribution margin improved 300 bps on cost actions, operational execution, and stabilizing commodities .

Management quotes:

  • “We delivered strong results…record sales in…Water and Distribution…record operating income and margin performance in our Energy segment.” — CEO Joe Ruzynski .
  • “Operating income margin [Energy] increased primarily due to the favorable geographic mix…price realization and cost management actions.” — CFO Jennifer Wolfenbarger .

What Went Wrong

  • Water Systems margin mix headwind: Despite +8% sales, Water operating margin declined 160 bps YoY to 18.1% on product mix (large dewatering) and acquisition-related costs, plus FX .
  • FX pressure and hyperinflation exposures: Foreign currency translation negatively impacted sales (notably Brazil), with hyperinflation accounting in Argentina/Turkey highlighted in KPIs; FX-related expense also weighed on results .
  • Tariff/copper uncertainty persists: Management expects tariffs/inflation to be offset via pricing/productivity, but notes closer price/inflation dynamics in H2 and ongoing supply chain investments to mitigate risk .

Financial Results

Sequential comparison (oldest → newest) and vs consensus

MetricQ4 2024Q1 2025Q2 2025Q2 2025 Consensus
Revenue ($USD Millions)$485.7 $455.2 $587.4 $566.8*
Diluted EPS ($USD)$0.72 $0.67 $1.31 $1.29*
Gross Margin %33.8% 36.0% 36.1% —
Operating Margin %8.9% 9.7% 15.0% —

Values retrieved from S&P Global*.

Year-over-year: Q2 2025 vs Q2 2024 and vs consensus

MetricQ2 2024Q2 2025Q2 2025 Consensus
Revenue ($USD Millions)$543.3 $587.4 $566.8*
Diluted EPS ($USD)$1.26 $1.31 $1.29*
Operating Income ($USD Millions)$79.1 $88.1 —
Operating Margin %14.6% 15.0% —
Gross Profit ($USD Millions)$199.8 $211.8 —

Values retrieved from S&P Global*.

Segment breakdown (Net Sales, Operating Income, Operating Margin)

Net Sales ($USD Millions)

SegmentQ4 2024Q1 2025Q2 2025
Water Systems$279.6 $287.3 $340.8
Energy Systems$68.8 $66.8 $77.5
Distribution$157.2 $141.9 $200.0

Operating Income ($USD Millions)

SegmentQ4 2024Q1 2025Q2 2025
Water Systems$35.6 $43.4 $61.8
Energy Systems$24.7 $21.9 $29.1
Distribution$0.5 $2.1 $16.1

Operating Margin %

SegmentQ4 2024Q1 2025Q2 2025
Water Systems12.7% 15.1% 18.1%
Energy Systems35.9% 32.8% 37.5%
Distribution0.3% 1.5% 8.1%

KPIs

Geographic Net Sales ($USD Millions)

GeographyQ2 2024Q2 2025YoY Change
U.S. & Canada$193.6 $203.8 +5%
Latin America$41.8 $52.8 +26%
EMEA$56.0 $55.7 -1%
Asia Pacific$24.2 $28.5 +18%

Operational/Financial KPIs

KPIQ2 2025
Book-to-billAbove 1 across all segments
Backlog YoYUp low-double digits overall
Cash from Ops (quarter)~$52M vs ~$36M in Q2 2024
Share repurchases~1.4M shares for ~$120M; 1.2M from trust ($104M); remaining authorization ~1.1M shares

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
SalesFY 2025$2.09B–$2.15B $2.09B–$2.15B Maintained
GAAP EPSFY 2025$4.05–$4.25 $3.95–$4.25 (Q1 reset); maintained in Q2 Low end lowered in Q1; maintained in Q2
U.S. Pension Plan termination (non-cash EPS impact)Q3 2025Not guided ~-$1.00 per share; EXCLUDED from guidance New disclosure
Quarterly DividendQ3 2025$0.265 (prior quarterly level) $0.265 payable Aug 21, record Aug 7 Maintained

Earnings Call Themes & Trends

TopicQ4 2024 MentionsQ1 2025Q2 2025Trend
Tariffs/copper & macroPrepared for tariff scenarios; balanced FX headwinds; resilient portfolio Selective inventory build; price/productivity actions to offset; China COGS <10% Confident in offsetting tariffs/copper via supply chain levers and pricing; expect tighter price/inflation in H2 Stable mitigation; continued watchfulness
Supply chain/near-shoringProductivity actions; restructuring; diversified footprint Positioned inventory for tariff risk; capacity adds via M&A Accelerating tool near-shoring; expanding Turkey and India plants Accelerating footprint optimization
Product performance (Water/dewatering, Energy grid, Distribution)Water flat with dewatering normalization; Energy margin record; Distribution pressured by commodity pricing Water steady; dewatering mix softer; Energy +8% sales; Distribution impacted by weather, margins held Water +8% but mix pressured margins; Energy margin +~200 bps; Distribution margin +300 bps, record sales Improvement across segments
Innovation/technologyCritical asset monitoring and grid solutions ~25% of Energy mix OVERSITE and optimizer launches EVO ONE fuel monitoring solution highlighted Continued product innovation
M&A pipelineActive funnel; capacity/product-focused deals; leverage capacity up to ~3x thoughtfully Closed PumpEng; definitive for Barnes de Colombia; ~$125M combined purchase price; ~+$50M revenue; ~+$0.03 EPS Integrations running ahead; foundry expansion; cross-selling; pipeline healthy Active; integration ahead of plan
Demand indicatorsOrder trends improved; healthy balance sheet Book-to-bill >1; backlog mid-high single-digit growth in Water Book-to-bill >1 all segments; backlog up low-double digits Strengthening indicators

Management Commentary

  • “Our teams performed exceptionally well, driving record sales in both our Water and Distribution segments, along with record operating income and margin performance in our Energy segment.” — CEO Joe Ruzynski .
  • “Gross margin was 36.1% in the second quarter…a decrease of 70 basis points YoY; SG&A as a percent of sales improved by 120 bps YoY from cost actions.” — CFO Jennifer Wolfenbarger .
  • “We are maintaining FY sales of $2.09–$2.15B and GAAP EPS of $3.95–$4.25; we expect to terminate our U.S. Pension in Q3 with a non-cash EPS impact of approximately $1.00 per share, not included in guidance.” — CFO Jennifer Wolfenbarger .

Q&A Highlights

  • Distribution margin expansion: ~300 bps improvement driven ~one-third by cost actions; management expects Q3 margins to hold near Q2 levels, with seasonal step-down in Q4 and YoY improvement through H2 .
  • Integration updates: PumpEng and Barnes tracking well; foundry capacity leveraged to near-shore tools and support volume growth; footprint expansion underway in Colombia .
  • Demand cadence: Sequential trends “normal” with Q3 similar to Q2 and Q4 seasonal step-down; backlog/order trends positive; book-to-bill >1 across segments .
  • Price/cost and tariffs: Price/productivity more than offset inflation in Q2; H2 will be tighter but management prepared to offset via multiple levers; copper/tariff risks actively mitigated .
  • Residential/Water treatment: Resi stable with >70% replacement mix; water treatment grew mid-single digits on dealer adds and share gains despite weak housing starts .

Estimates Context

How actuals compared to Wall Street consensus (S&P Global):

MetricQ2 2025 ActualQ2 2025 Consensus
Revenue ($USD Millions)$587.4 $566.8*
Diluted EPS ($USD)$1.31 $1.29*
EBITDA ($USD Millions)$105.6*$94.6*
Revenue – # of Estimates—5*
EPS – # of Estimates—4*

Values retrieved from S&P Global*.

Implications: Clear top-line and EPS beat, supported by stronger Energy margins and Distribution cost execution; consensus FY25 revenue ~$2.14B and EPS ~$4.16 suggest potential for modest upward adjustments if H2 tariff headwinds remain manageable and backlog conversion stays strong (Values retrieved from S&P Global)*.

Key Takeaways for Investors

  • Broad-based beat and margin expansion: Strong segment execution with notable Energy margin gains and Distribution margin recovery; Water growth tempered by mix/acquisition costs .
  • Guidance discipline with flexibility: Maintaining FY25 ranges while flagging a Q3 pension-related non-cash EPS drag; room to invest in supply chain and restructuring to de-risk H2 .
  • Demand indicators positive: Book-to-bill >1 across segments; backlog up low-double digits YoY, supporting Q3 visibility and a “normal” cadence into year-end .
  • Tariff/copper risks managed: Pricing/productivity and near-shoring actions underpin margin resilience; expect tighter price/inflation dynamics in H2 but net positive for the year .
  • Capital deployment: Ongoing dividend ($0.265) and sizable buyback program reinforce shareholder returns while M&A pipeline/integration progress supports medium-term growth .
  • Medium-term thesis: Innovation (EVO ONE, asset monitoring), international Energy projects (India, Saudi), and foundry/footprint expansions should sustain margin quality and diversify growth vectors .
  • Near-term trading lens: The beat-plus-maintained guide, backlog strength, and visible cost actions are positive catalysts; monitor tariff headlines, FX, and Water mix as key swing factors .
All document-based facts and numbers are cited above. Consensus/estimate figures marked with an asterisk are Values retrieved from S&P Global*.