Enerpac Tool Group (NYSE:EPAC) reported second-quarter fiscal 2026 results that management characterized as a quarter with “a lot to be pleased about,” led by accelerating product growth in its Industrial Tools & Service (ITNS) segment and continued momentum at Cortland. At the same time, the company acknowledged ongoing near-term pressure in its service business—particularly in EMEA—prompting additional restructuring actions and a narrowed full-year outlook.
Quarterly performance: product strength offsets service softness
Second-quarter revenue was $155 million, up 2% organically. ITNS sales increased 1% organically, as a 6% organic increase in product sales was partially offset by a 17% decline in service revenue, according to CFO Darren Kozik. Management said product sales growth was the strongest in 10 quarters, dating back to the fourth quarter of fiscal 2023.
By end market, Kozik said industrial MRO remained soft, but the company continued to see growth in power generation, infrastructure, and defense on a global basis. In the company’s “other segment,” Cortland posted 27% second-quarter growth, which management attributed to continued success generating new projects.
Geographic trends: Americas growth; EMEA service decline weighs
In the Americas, the company delivered 4% growth. Product revenue increased nearly 6% year over year, with particular strength in standard products, while service revenue declined 8%. Kozik noted strength with national accounts on the product side.
In EMEA, product revenue expanded 7% with gains in both standard products and HLP. However, overall regional revenue declined 1% due to a 21% drop in service revenue. Kozik emphasized that service is a larger portion of EMEA revenue relative to other regions, which amplifies the impact of service performance on overall results. He added that Northern Europe was soft, while Southern Europe performed well, including project work tied to power generation.
In Asia Pacific, the company returned to modest growth led by products. Management cited continued weakness in China, but highlighted “bright spots,” including double-digit growth in India on strength in steel, process industries, and heavy equipment manufacturing. In Australia, Enerpac said it benefited from a recovery in mining and healthy oil and gas demand.
Margins, restructuring, and cash flow
Gross margin declined 410 basis points year over year. Kozik said product gross margins remained healthy, but overall margins were pressured by lower service volume. The company also cited foreign exchange as a roughly 50-basis-point headwind to adjusted EBITDA margin.
Enerpac reported adjusted SG&A of 26.4% of revenue, improved from 28.3% in the year-ago period, which management attributed to disciplined cost management and benefits from shifting resources to a low-cost shared service model. Adjusted EBITDA margin was 21.3%, down from 23.2% a year ago.
GAAP EPS was $0.31 versus $0.38 in the prior-year quarter; adjusted EPS was $0.39 in both periods. The company recorded a $3.3 million restructuring charge “primarily related to the service business” and said it expects initial savings benefits beginning in the third quarter with about a one-year payback period.
On the balance sheet, Enerpac ended the quarter with net debt of $89 million, or 0.6x net debt to adjusted EBITDA. Total liquidity, including revolver availability and cash, was $499 million. Year-to-date operating cash flow was $29 million compared with $16 million in the prior-year period, and year-to-date free cash flow increased to $23 million from $5 million in the first half of fiscal 2025.
The company repurchased $51 million of stock in the quarter. Of a $200 million authorization approved in October 2025, approximately $135 million remained, and management said it would continue to repurchase shares opportunistically.
Contract win, restructuring in EMEA services, and Middle East exposure
Management said it took “decisive actions” to address the EMEA market slowdown affecting Hydratight service operations, including rightsizing and headcount reductions to align with current conditions. Sternlieb said the restructuring also supports a strategic transition toward higher-margin service work and profitable growth goals.
Alongside those actions, Enerpac announced a five-year contract award with a major oil and gas company operating in the U.K. North Sea. Sternlieb said the contract is worth “several million dollars annually” and covers maintenance and pipeline service work. Later in the Q&A, he said Enerpac expects revenue from the contract to begin flowing in the fourth quarter of fiscal 2026 and run for about five years.
On geopolitical risks, Sternlieb said the Middle East represents about 10% of total company revenue, including product and service. He said the conflict has led to some pauses in service work due to access constraints and customers shutting sites or deferring work, but he believes much of that work has been “pushed to the right” and may increase post-conflict in some cases due to facility damage. He also noted potential broader impacts from higher oil prices, inflation, and economic headwinds.
Innovation, CONEXPO activity, and fiscal 2026 outlook
Enerpac highlighted recent product launches and customer engagement at CONEXPO-CON/AGG, where management said attendance and engagement were strong and the company booked “meaningful orders” at the show. Sternlieb said this was the first major U.S. trade show where Enerpac exhibited its DTA automated guided vehicles.
Newly launched or showcased solutions discussed on the call included:
- A new line of split flow pumps, including a diesel-powered model added through the acquisition of Hydra-Pac assets and a battery split flow pump designed for enclosed spaces by eliminating emissions and reducing noise
- Intelli-Lift 2.0, which the company described as a software-defined, wireless heavy-lift control platform capable of operating up to eight hydraulic gantry legs synchronously from a single control unit
- New Cribbing Rings, an updated skid track system, and a new lightweight toe jack
In response to questions about the impact of new products, Sternlieb said Enerpac expects some revenue benefit in the second half of fiscal 2026, but that most new products typically take multiple years to ramp due to customer trial cycles and the time needed to globalize and certify products across regions.
Looking ahead, the company narrowed full-year fiscal 2026 guidance. Enerpac now expects net sales of $635 million to $650 million, representing 1% to 3% organic growth. Kozik said this assumes mid-single-digit product growth (or better) offset by a low- to mid-teens decline in service revenue. The company guided to adjusted EBITDA of $158 million to $163 million and adjusted EPS of $1.85 to $1.92, while holding free cash flow guidance at $100 million to $110 million.
On quarterly cadence, management said service pressure is expected to continue in the third quarter with a “rebound” anticipated in the fourth quarter. Kozik also said gross margin is expected to improve sequentially in the second half, and the company aims to maintain or improve SG&A as a percentage of sales for the year. Management pointed to ongoing operating initiatives under its Powering Enerpac Performance (PEP) program, including procurement and manufacturing productivity efforts.
About Enerpac Tool Group (NYSE:EPAC)
Enerpac Tool Group Corp. (NYSE: EPAC) is a global provider of high-pressure hydraulic tools, controlled force products and precision positioning equipment. The company’s products and solutions enable customers in manufacturing, energy, infrastructure, transportation and construction to lift, move, position and secure heavy loads with safety and accuracy. Enerpac’s core portfolio includes hydraulic pumps, cylinders, torque wrenches, torque multipliers, flange spreaders, tensioners and portable bolting tools, complemented by electric and pneumatic tools for a wide range of industrial applications.
In addition to its extensive product lines, Enerpac offers integrated systems and services such as engineered lifting solutions, custom skidding and spreader beam assemblies, mobile bolting units and digital monitoring platforms.
