Enerpac Tool Group (EPAC) Q4 2026 earnings review
Enerpac sales jump 11%, but fourth-quarter profit still falls
Enerpac Tool Group, the maker of high-pressure hydraulic tools, sold much more gear at year-end while its profit margins shrank. Fourth-quarter sales from businesses owned a year ago jumped 10%, as chief executive Paul Sternlieb pointed to strong Americas tool demand and a rebound in repair services. However, gross margin fell 3 percentage points because of product mix, higher bonus pay and growth spending, so quarterly profit declined.
| Sales from businesses owned a year ago | +10% up from +3% last quarter |
|---|---|
| Gross profit margin | 47.0% down 3.1 percentage points from a year ago |
| Full-year free cash flow | $120M beat the $100–110M plan |
| Fiscal 2027 sales outlook | $825–845M +28% at the middle of the range with SFE Group |
⚖️ Verdict: 🟢 Bullish
The story got better because the service business stopped shrinking and the 2027 plan backs up the fourth-quarter sales jump. Service revenue rose 9% after four quarters of declines, and strong cash flow cut net debt to almost zero right before the SFE Group purchase closed. One caution: fourth-quarter EBITDA margin missed management's 23% to 24% target, and debt costs from the SFE deal will eat up over half of next year's operating profit gain.
The question now is whether Enerpac can turn its larger revenue base into higher profit margins while paying down its acquisition debt. Either SFE Group and the service recovery lift margins back toward 25%, or lower-margin heavy-lifting tools and interest costs keep earnings growth muted. First-quarter gross margin and the post-close debt balance will tell.
🐂 Bull Case
Tool Sales Jumped and 2027 Keeps Growing
Enerpac makes high-pressure hydraulic tools and heavy lifting gear in its main Industrial Tools and Services (IT&S) division. Chief executive Paul Sternlieb pointed to "broad-based product strength across the Americas" as the main driver of the fourth quarter. Sales of tools from businesses owned a year ago rose 11%, more than double the 5% pace of the third quarter.
That late-year jump lifted full-year underlying sales growth to 4%, beating the lowered 1% to 2% target management set three months ago. Better still, finance chief Darren Kozik introduced a fiscal 2027 plan for 4% to 6% underlying sales growth, which says the fourth-quarter surge was not just a one-quarter catch-up.
What to watch: regional underlying sales growth on the conference call and in the annual filing. The release named the Americas as the driver, so investors need to see whether Europe and Asia also grew.
Service Sales Grew After Four Down Quarters
Alongside selling equipment, Enerpac runs an on-site industrial maintenance and repair business inside IT&S. That service line shrank for four straight quarters because of weak demand in the United Kingdom and project delays in the Middle East. In the fourth quarter, Sternlieb noted "encouraging trends in our service business" as revenue reached $29.7 million.
Underlying service sales rose 9% from a year ago, reversing an 8% drop in the third quarter and a 26% drop in the first. Even with that rebound, full-year service sales still finished down 12% at $106.2 million, and the industrial group listed lower full-year service volume as a drag on annual profit.
What to watch: first-quarter service revenue against an easy year-ago comparison when sales fell 26%. A second straight quarter of growth will show that the European restructuring and new contracts have fixed the business.
Cash Flow Topped Plan and Cut Debt
Sternlieb highlighted "robust cash generation" at year-end, and the cash flow statement backed him up. Full-year free cash flow rose 30% to $119.6 million, beating the $100 million to $110 million target by nearly $10 million. By our math, Enerpac generated $59.6 million of free cash flow in the fourth quarter alone, or 32% of sales.
Furthermore, by our math, management paused share buybacks in the fourth quarter, keeping full-year repurchases at the $81.1 million already spent through May. Saving that cash cut net debt from $69.1 million in the third quarter to $7.6 million, or 0.1 times EBITDA excluding one-offs, right before the SFE Group purchase closed.
What to watch: share repurchase spending in the first-quarter filing. Continuing the fourth-quarter pause will show management is putting debt reduction ahead of buybacks after the acquisition.
SFE Deal Lifts 2027 Sales Plan 28%
Enerpac closed its purchase of SFE Group, a maker of pipe-fabrication and orbital-welding equipment, on October 28, 2026. Kozik said the fiscal 2027 outlook "includes approximately 10 months of SFE Group" and sets full-year revenue at $825 million to $845 million. At the middle of the range, total revenue rises 28% from fiscal 2026.
By our math, after stripping out the 4% to 6% underlying growth on Enerpac's existing $652.3 million base, SFE Group and currency add about $150 million of sales in fiscal 2027. That matches the roughly $170 million annual run-rate management cited when it announced the deal in July.
What to watch: SFE Group's standalone revenue and order growth at the November 4 Investor Day. Those figures will show whether SFE is growing in power generation and defense as fast as Enerpac's own heavy-lifting tools.
🐻 Bear Case
Higher Sales Failed to Lift Quarterly Profit
Sternlieb called the fourth quarter strong, and Kozik said the company is "excited to drive profitable growth" in 2027. However, fourth-quarter profit moved the wrong way even as sales jumped 11%. Net earnings fell 13% to $24.4 million, and EBITDA excluding one-offs dropped 5% to $42.1 million.
- Gross margin: 47.0%, down 3.1 percentage points from 50.1% a year ago
- Cost of making products: 52.9% of sales, up 3.0 percentage points by our math
- Selling and overhead costs: 27.7% of sales (25.5% excluding M&A charges, up 0.6 points)
- EBITDA margin excluding one-offs: 22.6%, below the 23% to 24% target set at Q3
Enerpac said earnings fell "primarily due to mix, higher incentive compensation, and investments for future growth". Because heavy-lifting equipment carries lower margins than standard tools, fast sales growth there diluted the margin and kept full-year EBITDA ($154.3 million) below the $158 million to $168 million plan that started the year.
What to watch: gross margin in the first quarter of fiscal 2027. Another reading near 47% would mean product mix and growth spending are permanently eating into tool profitability.
Debt Costs Eat Half the Profit Gain
Sternlieb said the company has "the financial flexibility to continue executing our disciplined capital allocation strategy" after closing SFE Group. Yet the fiscal 2027 outlook shows the heavy cost of borrowing to buy the business. While EBITDA excluding one-offs rises 30% at the middle of the plan to $200 million, profit per share excluding one-offs rises only 11%, to $2.00–$2.15.
By our math, higher interest expense on the acquisition debt, along with depreciation and taxes on the acquired operations, absorbs more than half of the $45.7 million operating cash profit gain. The press release did not print the post-close debt balance or the interest expense assumption for fiscal 2027.
What to watch: the fiscal 2027 interest expense outlook and pro-forma net debt ratio on the conference call. A leverage ratio above 2.8 times EBITDA would leave little cushion if industrial demand slows.
Risks this quarter didn't answer
Four standing concerns and watch items from prior quarters received no detailed numbers in the fourth-quarter earnings release.
- Middle East conflict drag: listed as a risk, but the release did not state whether deferred refinery work recovered in Q4; the call remarks should clarify.
- European industrial demand: regional sales growth was omitted from the release tables; the annual Form 10-K will show EMEA performance.
- UK North Sea service contract: management previously expected revenue to start in Q4, which the call transcript must confirm.
- Service profit margin: still undisclosed despite the 9% sales rebound; the November 4 Investor Day is the next chance for segment margin detail.
💲 Other KPIs
Sales at Cortland Biomedical — Enerpac's smaller division that designs medical textiles and ropes, reported as Other — rose 13% from a year ago in the fourth quarter. Growth slowed from 27%, 27% and 25% in the first three quarters, while its operating profit margin excluding one-offs dipped to 21.0% from 23.0% a year ago.
Stock on hand fell 10.3% from $78.8 million a year ago, even as fourth-quarter revenue grew 10.9%. The toolmaker built inventory to $92.6 million in the second quarter and $85.0 million in the third before shipping it out at year-end, which released cash and helped operating cash flow beat the full-year plan.
The average number of diluted shares fell 4.5% from 53.9 million a year ago and stayed roughly flat with the third quarter's 51.6 million. Enerpac spent $81.1 million buying back shares in the first nine months of the year, which lifted full-year profit per share even though total net earnings declined.
🔮 Guidance
New. The plan calls for revenue to rise 28.0% at the middle of the range from fiscal 2026's $652.3 million. It includes roughly 10 months of SFE Group, which closed on October 28. By our math, after accounting for 5% underlying growth on Enerpac's existing base, SFE Group and currency add about $150 million to the year.
New. The industrial group plans for 5% underlying sales growth at the middle of the range, up from 4% for full-year fiscal 2026 but slower than the 10% pace in the fourth quarter. Management set a 1% to 4% target at the start of fiscal 2026, cut it twice to 1% to 2%, and then finished at 4%.
New. Operating cash profit excluding one-offs rises 29.6% at the $200 million middle of the range, combining Enerpac's $154.3 million base with 10 months of SFE Group. By our math, the middle of the sales and EBITDA ranges points to a 24.0% margin, up from 23.7% in fiscal 2026 and 22.6% in the fourth quarter.
New. Profit per share excluding one-offs grows 11.0% at the $2.075 middle of the range, up from $1.87 in fiscal 2026. That is much slower than the 29.6% rise in EBITDA because interest on the SFE Group debt takes a larger cut of earnings.
❓ Key Questions
Why did fourth-quarter gross margin drop to 47.0%?
Sales from businesses owned a year ago rose 10% and high-fixed-cost service revenue rebounded 9%, yet gross margin fell 3.1 percentage points from a year ago. How much of that drop came from heavy-lifting tool mix versus one-time year-end costs?
What interest bill sits inside the 2027 earnings plan?
The fiscal 2027 plan has EBITDA excluding one-offs rising 30% at the middle of the range, while profit per share rises only 11%. What interest rate and total financing cost does management assume on the SFE Group debt?
DidEnerpac reach its 10 new product launches goal?
Three months ago management said it had launched 8 new products and was on track for 10 in fiscal 2026. The fourth-quarter release gave no update on new launches or the heavy-lifting order backlog.
How did Europe and the Middle East perform in Q4?
The release credited the Americas for product growth and noted a service rebound, but omitted the regional sales table. Did Middle East refinery work resume, and did the UK North Sea contract start generating revenue?