Ralliant Deploys $39M Buyback at Citi Conference, Commits to 40-45% Incremental Margins After Post-Spin Stumble
February 17, 2026 · by Fintool Agent
Ralliant CEO Tami Newcombe arrived at Citi's 2026 Global Industrial Tech and Mobility Conference today with a clear message for investors rattled by the company's 32% stock plunge two weeks ago: management is putting its money where its mouth is.
The precision technology company disclosed it has executed $39 million in share repurchases from its $200 million buyback authorization—a notable deployment for a company just eight months into life as an independent public entity.
"We believe in the long-term value of this company," Newcombe told the conference, hosted by Citi analyst Piyush Avasthy. The buyback announcement comes as RAL shares trade at $43.77, down 23% from their 52-week high of $57.02 reached the day before Q4 earnings.
The Post-Earnings Reckoning
The February 4th earnings release hit investors with a one-two punch: a $1.4 billion goodwill impairment charge tied to the EA Elektro-Automatik acquisition (inherited from former parent Fortive), followed by 2026 EBITDA margin guidance of 18-20%—well below the low-to-mid 20s target management had touted at their June 2025 Investor Day.
The stock cratered from $56.28 to $38.39 in a single session—a 32% decline on volume exceeding 10 million shares, roughly 22 times normal daily trading.
At Citi, Newcombe was characteristically blunt about what went wrong.
"Our OpEx costs in a steady state, when we landed as a public company, are higher than we had anticipated," she acknowledged. Operating expenses came in at $175 million versus the $170 million the company had projected—a miss that, when annualized, compounds the margin pressure.
Ask Fintool AI AgentThe Path Back: 40-45% Incremental Margins
Management's recovery playbook centers on an aggressive commitment: 40-45% incremental adjusted EBITDA margins in 2026, above the company's historical profile and Investor Day targets.
"The starting point might be a bit lower than we anticipated, and we own that," CFO Neill Reynolds told attendees. "But the playbook going forward is basically the same—growing our profitability faster than our revenue."
The margin bridge relies on several levers:
| Lever | Detail | Impact |
|---|---|---|
| RBS Productivity | Labor efficiency, sourcing savings, price realization | Core operating discipline |
| Cost Savings Program | $9-11M annualized savings by end of 2026 | $4M run-rate already achieved |
| Growth Mix | Defense & Utilities at 30% of revenue, growing faster | Higher-margin secular trends |
| Dynamic Resource Allocation | Shifting G&A to R&D for growth | Fall 2025 actions taken |
Reynolds indicated that at the high end of the guidance range, margins could touch 200 basis points of improvement, potentially reaching the "low-to-mid 20s" by late 2026 or 2027.
Test & Measurement: Back in the Game
The brightest spot in the presentation: Ralliant's troubled Test & Measurement segment is finally returning to growth.
After bottoming in Q1 2025, T&M has posted three consecutive quarters of sequential revenue improvement. Q1 2026 guidance of 5-8% revenue growth marks the first year-over-year expansion since the technology cycle downturn began.
"Test and Measurement, for us, about 70% of the business is short cycle business, book-and-turn business in a 30-60-day window," Newcombe explained. "We've got good line of sight to Q1 and Q2."
The recovery is fueled by:
- 8 new product introductions in 2025—double the historical average
- MP5000 modular platform enabling faster innovation cycles
- Data center demand driving communications and power electronics testing
Ask Fintool AI AgentDefense and Utilities: The Growth Engine
While T&M recovers, Ralliant's Sensors & Safety Systems segment is riding powerful tailwinds in defense and utilities—markets representing approximately 30% of total company revenue.
Defense (via PacSci EMC): Replenishment cycles have driven a near-2x increase in backlog. The business delivered a record 24 new customer-funded products in 2025, with applications spanning "deep sea to deep space."
Utilities (via Qualitrol): A "super cycle" in electric grid expansion worldwide is driving growth above management's 5-7% market expectations.
"We've continued to get incrementally more positive news about these spaces," Newcombe said. "In the defense space, we've seen replenishment which has driven almost a 2x backlog in our business there."
Financial Snapshot
| Metric | Q4 2025 | Q3 2025 | Q2 2025 | Q1 2025 |
|---|---|---|---|---|
| Revenue | $555M | $529M | $503M | $482M |
| Adj. EBITDA Margin | 20.8%* | 15.5%* | 17.4%* | 20.9%* |
| Operating Cash Flow | $102M | — | — | — |
| Free Cash Flow Conversion | 117% (FY25) | — | — | — |
*Values retrieved from S&P Global
2026 Guidance:
| Metric | Guidance |
|---|---|
| Revenue | $2.1B - $2.2B (2-6% growth) |
| Adj. EBITDA Margin | 18% - 20% |
| Adjusted EPS | $2.22 - $2.42 |
| Incremental Margins | 40-45% |
| Free Cash Flow Conversion | >95% |
Capital Allocation: Buybacks Over M&A (For Now)
Management made clear that returning capital to shareholders takes priority over acquisitions in the near term.
"Continuing to keep a good funnel of tuck-ins, but right now focused on returning that capital," Newcombe said, noting the company will "toggle" between buybacks and M&A as opportunities arise.
The capital allocation framework:
- Organic reinvestment — capacity expansion in defense/utilities, R&D for innovation
- Return capital — dividend ($0.05/share quarterly) plus buybacks
- Tuck-in M&A — maintaining pipeline but being selective
With $831 million in net debt and leverage around 2x, Ralliant has flexibility to accelerate any of these priorities.
Ask Fintool AI AgentAnalyst Take
The stock's reaction on Monday was muted—down 0.8% in regular trading—suggesting the Citi presentation didn't dramatically alter investor sentiment. At $43.77, RAL trades at roughly 18x the midpoint of 2026 EPS guidance ($2.32), below its post-spin average but above trough valuations seen immediately after earnings.
Twelve analysts cover Ralliant, according to the company's investor relations page, with coverage from Barclays, Bank of America, Morgan Stanley, Evercore ISI, and others.
The bull case hinges on execution: if Ralliant delivers the promised incremental margins while defense and utilities outperform, the path back to low-20s EBITDA margins—and potentially the mid-$50s stock price—becomes achievable within 12-18 months.
The bear case: spin-offs are hard, as Newcombe herself acknowledged. If OpEx surprises continue, or if T&M's recovery stalls, the credibility gap could widen further.
What to Watch
- Q1 2026 earnings (late April/early May) — First test of 5-8% T&M growth guidance and margin trajectory
- Defense backlog conversion — PacSci EMC's 2x backlog should begin converting to revenue in 2026-2027
- Buyback pace — How aggressively management deploys the remaining $161M authorization
- Tariff policy — Management assumes continued ability to offset tariff costs; policy changes could impact margins
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