Executive Summary

Q3 2024 delivered margin-led earnings strength on flat sales: revenue $168.2M (+0.4% y/y), GAAP EPS $0.49 (+44% y/y), gross margin +260 bps to 31.3%; operating margin +110 bps to 14.2% .
Interest expense fell 25.9% y/y to $7.8M after the May 31 refinancing, providing a clear structural tailwind to net income and leverage improvement .
Demand mix was positive in municipal, repair, OEM (computer cooling), and petroleum; headwinds persisted in fire suppression (backlog normalization), industrial, construction, and agriculture (farm income) .
The Board raised the quarterly dividend to $0.185 (+2.8%) payable Dec 10, 2024; 52nd consecutive annual increase, reinforcing capital return consistency .
Against third-party consensus, Q3 revenue/EPS modestly missed (EPS $0.49 vs $0.55; revenue $168.18M vs $170.81M), likely driven by volume softness and higher SG&A despite pricing tailwinds; S&P Global (Capital IQ) consensus was unavailable due to API limits .

What Went Well and What Went Wrong

What Went Well

Material cost and pricing actions drove a 260 bps gross margin improvement; operating margin expanded 110 bps despite higher SG&A .
Refinancing reduced interest expense to $7.8M (-$2.7M y/y), contributing to a 44% increase in earnings and $20M quarter-over-quarter improvement in debt, net of cash; “we saw a 44% increase in earnings over last year” (Scott A. King) .
Backlog remained healthy ($207.8M) and YTD incoming orders rose 4.1%, supporting near-term visibility into Q4 and early 2025 .

What Went Wrong

Volume declines offset pricing benefits, keeping net sales effectively flat (+$0.7M y/y), with SG&A up to 15.3% of sales (from 13.9%) due to payroll/healthcare and selling activity .
Market-specific softness: fire suppression -$4.4M y/y (backlog normalization), industrial -$3.8M, construction -$1.1M (slower activity), agriculture -$0.7M (decline in farm income) .
Quarter-on-quarter operating margin compressed vs Q2 (14.2% in Q3 vs 15.4% in Q2) as mix and SG&A offset favorable materials/pricing, and gross margin dipped vs Q2 (31.3% vs 31.9%) .

Financial Results

Metric	Q1 2024	Q2 2024	Q3 2024
Revenue ($USD Millions)	$159.268	$169.513	$168.182
GAAP EPS ($)	$0.30	$0.32	$0.49
Adjusted EPS ($)	$0.30	$0.54	$0.49
Gross Margin %	30.4%	31.9%	31.3%
Operating Income ($USD Millions)	$20.429	$26.049	$23.885
Operating Margin %	12.8%	15.4%	14.2%
Interest Expense ($USD Millions)	$10.073	$9.048	$7.766
Adjusted EBITDA ($USD Millions)	$28.215	$35.369	$32.028

Segment/Market contribution (Q3 2024 y/y change):

Market	Q3 2024 y/y Δ ($USD Millions)
Municipal	+$5.4
Repair	+$2.3
OEM (incl. computer cooling)	+$1.8
Petroleum (intl. refueling)	+$1.2
Fire Suppression	-$4.4
Industrial	-$3.8
Construction	-$1.1
Agriculture	-$0.7

KPIs and Balance Sheet

KPI	Q1 2024	Q2 2024	Q3 2024
Backlog ($USD Millions, end of period)	$234.2	$224.4	$207.8
Incoming Orders ($USD Millions, quarter)	$178.9	$162.5	— (not disclosed)
Total Debt, net of cash (YTD change)	Decreased $1.6M (Q1)	Decreased $17.5M (H1)	Decreased $37.6M (9M)
Cash & Equivalents (end of period)	$27.772	$34.245	$39.701

Consensus vs Actual (Q3 2024)

Metric	Consensus	Actual	Surprise
EPS ($)	$0.55	$0.49	-$0.06
Revenue ($USD Millions)	$170.81	$168.182	-$2.63

Note: S&P Global (Capital IQ) consensus was unavailable due to API limits; third-party estimates are referenced above .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Capital Expenditure	FY 2024	~$20.0M (as of Q2)	$18–$20M (as of Q3)	Maintained range (clarified lower bound)
Backlog trajectory	FY 2024	Expect backlog to return to more normal levels by YE 2024 (Q1)	Backlog reduced to $207.8M; remains “healthy” heading into Q4 (Q3)	Maintained narrative; execution in progress
Dividend	Q4 2024 payout	$0.180 (prior quarter)	$0.185 payable Dec 10, 2024	Raised (+2.8%)

No explicit revenue, margin, OpEx, OI&E, or tax rate guidance was issued in Q3 materials .

Earnings Call Themes & Trends

Transcript was not available via tools; themes below reflect prepared remarks across quarters.

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
Pricing/materials and margins	Pricing contributed +130–210 bps margin benefit; material cost improvements (LIFO reduction) drove gross margin +200 bps (Q1) and +170 bps (Q2)	Gross margin +260 bps y/y; materials cost down; LIFO impact -40 bps; pricing realization +200 bps	Improving margin trajectory
Interest expense/refinancing	Refinancing completed May 31; expected >$7M annual interest savings (Q2)	Interest expense down to $7.8M (-25.9% y/y)	Structural tailwind realized
Backlog/incoming orders	Record Q1 orders ($178.9M); backlog +$16M q/q to $234.2M; normalization by YE (Q1)	Backlog $207.8M (down from $218.1M YE); YTD orders +4.1%	Healthy but normalizing
Market mix	Municipal strength, fire suppression normalization; agriculture weakness (Q1/Q2)	Municipal/repair/OEM/petroleum up; fire suppression/industrial/construction/agriculture down	Mixed; infrastructure-driven demand offsets cyclical softness
Operating leverage/SG&A	SG&A up for growth support; OM +90–120 bps y/y (Q1/Q2)	SG&A 15.3% of sales; OM +110 bps y/y but down q/q	Leverage pressured by costs

Management Commentary

“We continued to achieve gross margin and earnings improvement despite a nominal increase in sales compared to last year… As a result of these improvements, we saw a 44% increase in earnings over last year.” — Scott A. King, President & CEO (Q3) .
“Incoming orders have continued at a solid pace… pricing strategies contributed to improved gross margin and increased adjusted earnings… refinancing is expected to result in significant interest savings going forward.” — Scott A. King (Q2) .
“We had record incoming orders during the quarter… backlog remains at elevated levels, we still expect backlog to return to more normal levels by the end of the year… We remain optimistic about our full year outlook.” — Scott A. King (Q1) .
Governance: Jeffrey S. Gorman to transition from Executive Chairman to non-executive Chairman effective January 3, 2025 .

Q&A Highlights

The Q3 2024 earnings call transcript was not available via tools; no Q&A details could be reviewed [functions list returned none for transcripts]. Prepared remarks indicate focus on margin execution, refinancing benefits, backlog normalization, and market mix .

Estimates Context

S&P Global consensus estimates could not be retrieved due to API limits; therefore, we anchor to third-party consensus as directional context only. MarketBeat indicates Q3 EPS consensus $0.55 vs actual $0.49 (miss), and revenue consensus $170.81M vs actual $168.18M (miss), suggesting modest underperformance vs expectations .
Given pricing tailwinds and reduced interest burden, we would expect analysts to recalibrate expense assumptions (SG&A run-rate) and mix-related volume expectations, while maintaining stronger margin assumptions on materials/pricing .

Key Takeaways for Investors

Margin execution remains the central driver: pricing realization and lower material costs (incl. LIFO) lifted gross margin to 31.3%; sustaining this mix/pricing discipline is key to offsetting volume softness .
Structural reduction in interest expense post-refinancing is translating to higher net income and deleveraging; expect continued EPS leverage from lower interest costs in Q4 and 2025 .
Demand remains resilient in infrastructure-linked municipal and repair markets, and OEM (computer cooling) — supportive for Q4; monitor construction/industrial/agriculture headwinds for volume recovery .
Fire suppression normalization continues to weigh on y/y comparisons; incoming orders trends (up YTD) suggest stabilization into 2025 .
Dividend increase to $0.185 (Dec 10 payment) underscores long-standing capital return consistency amid deleveraging and margin progress — supportive for total return profile .
Near-term trading: modest miss vs consensus could cap immediate upside, but improving margins and interest tailwinds are positive offsets; watch backlog progress and Q4 order cadence .
Medium-term thesis: deleveraging plus pricing discipline and infrastructure-driven demand can sustain mid-teens operating margins through cycles; execution on SG&A and volume recovery would be catalysts for EPS expansion .

GORMAN RUPP CO (GRC)·Q3 2024 Earnings Summary