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TC

TIMKEN CO (TKR)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 revenue of $1.16B and adjusted EPS of $1.37 both beat consensus; GAAP diluted EPS was $0.99. The company expanded adjusted EBITDA margin 50 bps YoY to 17.4% and generated strong cash from operations ($201M) and free cash flow ($164M) . Versus S&P Global consensus, adjusted EPS beat by $0.13 and revenue beat by ~$37M*.
  • Guidance was updated: FY25 GAAP EPS narrowed to $3.90–$4.00 (from $3.90–$4.20), adjusted EPS narrowed to $5.20–$5.30 (from $5.10–$5.40), and revenue now expected down ~0.75% vs prior guide of -2.0% to -0.5% .
  • CEO Lucian Boldea outlined an 80/20 portfolio approach to structurally improve margins and prioritize the most profitable verticals, with investor day planned in Q2 2026 .
  • Tariffs remain a headwind: FY25 net negative impact now ~$15M (was ~$10M), but management expects pricing and other tactics to recapture margin in 2026 .

What Went Well and What Went Wrong

What Went Well

  • Both revenue ($1,157.1M) and adjusted EPS ($1.37) exceeded Street estimates; adjusted EBITDA margin rose to 17.4% (+50 bps YoY) as operating performance and pricing offset tariffs . Versus S&P Global consensus, adjusted EPS +$0.13 and revenue +$37M*.
  • Engineered Bearings grew sales 3.4% YoY to $765.8M with adjusted EBITDA margin of 18.8%; drivers included renewables, pricing, and lower material/logistics costs .
  • Cash generation was strong: operating cash flow $201.1M (+63% YoY) and free cash flow $163.8M (+86% YoY), strengthening leverage to 2.1x net debt/adjusted EBITDA .

Management quotes:

  • “We intend to approach our portfolio with an 80/20 mindset to structurally improve margins, grow faster in the most profitable verticals, and create significant value for shareholders.” — CEO Lucian Boldea .
  • “We achieved nearly 40% incremental margins in the quarter, driven by improved operating performance, more than offsetting the dilutive impact of tariffs.” — CFO Mike DiSenza .

What Went Wrong

  • GAAP diluted EPS fell to $0.99 (from $1.16), and net income margin compressed to 6.0% (-130 bps YoY), reflecting absence of last year’s real estate gain and tariff costs .
  • Industrial Motion organic sales declined 3.5% despite CGI acquisition and pricing; segment margin dipped to 19.0% (from 19.2%) on lower volume and tariffs .
  • Tariff headwind increased to ~$15M for FY25; Q4 margins expected down ~100 bps YoY due to higher corporate expense, tariffs, and absence of last year’s military marine project .

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Millions)$1,126.8 $1,173.4 $1,157.1
Diluted EPS (GAAP, $)$1.16 $1.12 $0.99
Adjusted EPS ($)$1.23 $1.42 $1.37
Net Income Margin (%)7.3% 6.7% 6.0%
Adjusted EBITDA Margin (%)16.9% 17.7% 17.4%
Cash from Operations ($M)$123.2 $111.3 $201.1
Free Cash Flow ($M)$88.2 $78.2 $163.8

Consensus vs Actual (S&P Global):

MetricQ2 2025 EstimateQ2 2025 ActualQ3 2025 EstimateQ3 2025 Actual
Revenue ($USD Millions)$1,155.6*$1,173.4 $1,119.9*$1,157.1
Primary EPS (Adjusted) ($)$1.361*$1.42 $1.244*$1.37

Values with * retrieved from S&P Global.

Segment Breakdown:

Segment MetricQ3 2024Q2 2025Q3 2025
Engineered Bearings Revenue ($M)$740.7 $777.4 $765.8
Engineered Bearings Adjusted EBITDA ($M)$138.4 $153.4 $144.2
Engineered Bearings Adjusted EBITDA Margin (%)18.7% 19.7% 18.8%
Industrial Motion Revenue ($M)$386.1 $396.0 $391.3
Industrial Motion Adjusted EBITDA ($M)$74.2 $72.6 $74.5
Industrial Motion Adjusted EBITDA Margin (%)19.2% 18.3% 19.0%

KPIs and Balance/Liquidity:

KPIQ2 2025Q3 2025
Net Debt ($M)$1,779.0 $1,663.7
Net Debt / Adjusted EBITDA (x)2.3 2.1
Cash & Equivalents ($M)$419.3 $449.1
Total Debt ($M)$2,198.3 $2,112.8
Total Equity ($M)$3,272.8 $3,296.8

Dividend:

  • Timken declared a quarterly dividend of $0.35 per share (payable Dec 5, 2025), marking 414 consecutive quarters and the 12th straight year of annual dividend growth .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GAAP EPSFY 2025$3.90–$4.20 $3.90–$4.00 Lowered high end; narrowed range
Adjusted EPSFY 2025$5.10–$5.40 $5.20–$5.30 Narrowed (raised low end, trimmed high end)
Revenue Growth vs 2024FY 2025-2.0% to -0.5% ~-0.75% (midpoint) Slight improvement at midpoint
Adjusted EBITDA MarginFY 2025Mid-17% range Low–mid 17% range Slightly more cautious
Free Cash FlowFY 2025$375M (midpoint) $375M (midpoint reaffirmed) Maintained
Tariff ImpactFY 2025~$10M net negative ~$15M net negative Increased headwind

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Tariffs/macroQ1: Est. ~$25M net impact; mitigation via pricing/cost actions . Q2: Headwind revised to ~$10M; plan to offset on run-rate by YE25 .FY25 headwind now ~$15M; pricing actions continue; expect margin recapture in 2026 .Headwind worsened; mitigation progressing
Pricing & incrementalsQ2: Pricing stepping up; 150–200 bps FY pricing; near “almost fully offset” tariffs in quarter .Pricing up sequentially; ~40% incrementals in Q3; further pricing to offset tariffs .Improving price realization
Regional trendsQ2: APAC +2% (China wind); EMEA -5%; Americas -3% .EMEA +2% (first growth in >2 years); APAC +2%; Americas -1% .EMEA inflecting; APAC steady; Americas cautious
Renewables (wind/solar)Q2: China wind strength; solar challenged; some pull-forward ahead of policy change .Continued wind strength in China; solar remains challenged .Wind sustained; solar weak
Industrial Motion platformsQ2: Belts/chain impacted by North America ag weakness; linear motion up .IM organic down; belts/chain still pressured; couplings up; linear flat .Mixed; belts pressure persists
Distribution & inventoryQ2: Distribution outlook trimmed; inventories at good levels .Inventories stable; no signs of restocking; distribution steady within range .Stable; waiting for recovery
Portfolio/auto OEM actionsQ2: Plan to exit/reprice parts of auto OE; expect margin lift in 2H26 .80/20 approach; address remaining auto OE (≈4% of portfolio) with exits/repricing .Executing portfolio prioritization

Management Commentary

  • Strategic focus: “Approach the portfolio with an 80/20 mindset to structurally improve margins, grow faster in the most profitable verticals, and create significant value for shareholders.” — CEO Lucian Boldea .
  • Operational execution: “Adjusted EBITDA was $202M, or 17.4% of sales; we achieved nearly 40% incremental margins, driven by improved operating performance, more than offsetting the dilutive impact of tariffs.” — CFO Mike DiSenza .
  • 2026 outlook tone: “We are reaffirming the midpoint of our earnings guidance… better than expected Q3 offsetting an incremental $0.05 per share headwind from tariffs… cautiously optimistic as we head into next year.” — CFO Mike DiSenza .
  • Investor day: “We plan to host an investor day in the second quarter of next year, where we will outline our strategic vision and priorities in more detail.” — CEO Lucian Boldea .

Q&A Highlights

  • Q4 cadence and organic decline: Management expects a >normal seasonal sequential decline; organic down ~2% YoY in Q4; both segments down, more in IM due to prior-year military marine project .
  • Tariff mitigation: Pricing actions continue; exit YE25 at higher pricing run-rate (>2% in 2H vs ~1.5% FY); recapture margins in 2026; if China tariff step-up occurs, it is not in the current guide .
  • Regional inflection: EMEA posted first growth in over two years (+2%), supported by off-highway, rail, and heavy industries, suggesting potential bottoming .
  • Cost savings trajectory: Company on track for $75M savings (60/40 back-half/front-half weighting), implying ~$15M incremental cost saves in 1H26 .
  • Distribution/inventory: Inventories stable; sales-in/sales-out balanced; no sign of restocking yet .

Estimates Context

  • Q3 2025: Adjusted EPS $1.37 vs consensus $1.244*; revenue $1,157.1M vs consensus $1,119.9M* — both beats. Q2 2025: Adjusted EPS $1.42 vs $1.361*; revenue $1,173.4M vs $1,155.6M* — both beats. Values with * retrieved from S&P Global. Actuals per company press releases .

Where estimates may need to adjust:

  • Narrowed EPS ranges and improved revenue midpoint suggest consensus should reflect stronger Q3 execution but more cautious Q4 margins (down 100 bps YoY) and higher tariff headwind ($15M) .

Key Takeaways for Investors

  • The quarter delivered broad-based beats on adjusted EPS and revenue, with margin resilience despite tariffs — supportive for near-term sentiment and potential estimate revisions higher on Q3 actuals . Versus S&P Global consensus, adjusted EPS and revenue beats were material*.
  • Guidance was prudently narrowed; GAAP EPS high end trimmed, adjusted EPS range tightened, and revenue midpoint improved — favor a balanced positioning into Q4 given expected seasonal and tariff pressures .
  • Strength in Engineered Bearings (renewables, aerospace, general industrial) and robust cash conversion underpin deleveraging and capital allocation optionality (dividend continuity) .
  • Industrial Motion remains mixed (ag/solar headwinds), but couplings and the CGI acquisition are accretive; watch for platform-level margin recovery as cost actions and pricing roll through .
  • Tariff trajectory is the key 4Q–1H26 swing factor; pricing actions and supply chain adjustments are progressing, with management aiming to recapture margins in 2026 .
  • Portfolio 80/20 prioritization and planned auto OE exits/repricing are medium-term margin catalysts, with more detail signaled for investor day in Q2 next year .
  • Near-term trading: Expect focus on Q4 margin trajectory and tariff headlines; medium-term thesis favors self-help (cost, pricing) and portfolio optimization as volumes recover.

Values with * retrieved from S&P Global.