This morning, we will provide a summary of our third quarter performance and our outlook for fiscal 2026. Before I turn it over to Rich, a quick note on our recently completed acquisition of Facet Filtration. Facet performance will be included in our consolidated fourth quarter earnings results reported in the Aerospace and Defense business unit within Industrial Solutions. I am proud of our team, whose hard work resulted in the company's strongest quarter to date with respect to sales, adjusted operating margin, and adjusted EPS.
Lastly, subsequent to quarter end, we closed our acquisition of Facet Filtration, adding high performance fuel and fluid capabilities to our expanding Industrial Solutions product portfolio. Brad will discuss the quarterly financials and full year guidance in more detail. At a high level, sales were a record $995 million, 6% above prior year, driven by currency translation, net pricing benefits, and volume growth. Operating margin was 16.6%, up 30 basis points over prior year, and an increase of 260 basis points from second quarter.
Expense leverage on higher sales was partially offset by gross margin pressure from production shifts to support customer-specific requirements in power generation within Industrial Solutions. In Mobile Solutions, sales were $630 million, up 8% inclusive of strong volume growth. Aftermarket sales were $498 million, up 8% with growth in all regions and in both channels. We grew double digits in our independent channel, where our product availability, reliability, and consistency continue to drive share gains.
| Metric | Period | Current guidance |
|---|---|---|
| Organic total sales growth | FY2026 | 3% to 5% (midpoint ~1% higher) (raised) |
| Organic operating margin | FY2026 | 15.8% to 16.2% (10-50 bps expansion) (lowered) |
| Mobile Solutions sales | FY2026 | 3.5% to 5.5% (slightly above prior) (raised) |
| On-Road sales | FY2026 | decrease low double digits (tempered truck production) (lowered) |
| Industrial Solutions organic sales | FY2026 | flat to up 2% (midpoint consistent) (reaffirmed) |
| Aerospace and Defense sales | FY2026 | decline mid single digits (program timing) (reaffirmed) |
| Life Sciences sales | FY2026 | 9% to 11% (raised) (raised) |
| Facet interest expense | Q4 FY2026 | roughly $9 million (high watermark, to be paid down) (new) |
| Metric | YoY | Note |
|---|---|---|
| Total sales | +6% to record $995M | Currency translation, net pricing benefits, and volume growth |
| Adjusted EPS | +7% to $1.06 | Higher sales, operating margin expansion, and expense leverage |
| Operating margin | +30 bps to all-time high 16.6% | Expense leverage on higher sales partially offset by industrial gross margin pressure |
| Gross margin | -10 bps to 34.4% | ~100 bps of short-term industrial operating inefficiencies offset pricing, volume, and mix gains |
| Mobile Solutions sales | +8% to $630M | Strong volume growth; aftermarket up 8% in all regions and channels, off-road up 9% |
| Mobile Solutions pre-tax margin | +210 bps to all-time high 20.2% | Volume leverage and favorable aftermarket mix |
| Industrial Solutions sales | -1% to $282M | Volume declines partially offset by net pricing and currency; IFS up 2%, A&D down 14% |
| Industrial Solutions pre-tax margin | -4.7 pts to 13.4% | Power generation production shifts and footprint optimization pressure |
| Aerospace and Defense sales | -14% to $45M | Weaker new equipment sales from supply chain constraints and project timing |
| Life Sciences sales | +13% to $84M | Robust food and beverage new equipment volume (up over 30%) and disk drive strength |
| Life Sciences pre-tax margin | +30 bps to 8.1% | Volume leverage and favorable mix; excluding prior-year earn-out reversal, up more than 8 points |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Power generation super cycle | Booked through fiscal year plus next two years; Mexico ramp inefficiency | EMEA new equipment sales more than doubled; Mexico shift is Q3 low point, full recovery midway through FY27 | Improving |
| Footprint optimization | Four plant closures, two closing in Q3 | Last two plants closed; ramping new sites for ~$10M annualized benefit at FY27 run rate | Progressing |
| Facet acquisition | Announced, close within a couple quarters | Closed subsequent to quarter end; reported in A&D within Industrial; integration underway | Improving |
| Aerospace and Defense | Backlog up over 20%, 2H step-up expected | Near-record backlog; recovery expected to extend into Q1 FY27 due to supply chain and a California plant ramp | Stable |
| Mobile aftermarket OE channel | Destocking in Q2, restock expected | Q2 destock, Q3 restock, with pull-through demand expected in Q4 at high levels | Improving |
| Tariffs and Middle East inflation | ~$25M annualized estimate, managed via pricing | 232 changes negligible; price-cost well positioned, will use surcharges if Middle East inflation flows through | Stable |