SPX Technologies (SPXC) Q3 2026 earnings review
SPX Technologies raises its sales plan, but cuts profit targets
SPX Technologies, a maker of data-center cooling towers and underground cable locators, grew sales fast while factory ramp costs squeezed margins. Third-quarter revenue rose 21% from a year ago to $715 million, and sales from businesses owned a year ago climbed 12%. Chief executive Gene Lowe raised the full-year sales plan by $40 million, but cut the full-year profit outlook because expanding the cooling factories cost more than planned.
| Sales from businesses owned a year ago | +11.8% total revenue +20.5% to $714.5M |
|---|---|
| HVAC underlying revenue growth | +22.3% +18.9% last quarter |
| HVAC segment profit margin | 23.0% down 1.4 percentage points from a year ago |
| Full-year outlook | Sales raised, profit cut Revenue +$40M; EBITDA -$10M at middle of range |
⚖️ Verdict: 🔴 Bearish
The story got worse because the expected second-half profit margin rebound in the heating and cooling division failed to arrive, ending a six-quarter streak of full-year profit outlook raises. Labor, supply chain and material costs dragged heating and cooling margins down to 23%, well below the 26% second-half rate implied by the prior plan, while $847 million of third-quarter acquisition spending pushed total debt to $1.33 billion. The good news: underlying heating and cooling sales accelerated to 22% growth as new data-center cooling lines began shipping.
The question now is whether the heating and cooling margin squeeze is a brief startup cost while new plants open or a sign that data-center orders carry lower profitability. If the squeeze is temporary, margins should rebound toward 25% as the new production lines fill; if structural, rapid sales growth will keep bringing smaller profit gains. Fourth-quarter heating and cooling margins, which the new plan puts at 24.4% by our math, will test which view is right.
🐂 Bull Case
HVAC Factory Ramp Lifts Underlying Sales 22%
SPX's heating, ventilation and air conditioning (HVAC) division makes cooling towers and air handlers for data centers and commercial buildings. Chief executive Gene Lowe said "Our HVAC capacity expansion projects remain on track to support approximately $1.1 billion of annual data center revenue capacity at full production". Sales from HVAC businesses owned a year ago grew 22.3% in the third quarter, accelerating from 18.9% in the second quarter and 9.6% in the first.
The industrial equipment maker credited "higher volumes of cooling equipment, mainly associated with increased data center demand, resulting from increased capacity" and higher heating sales. Deals for Thermolec, Crawford, Neptronic and FIS Water added another 13.0 percentage points, lifting total segment revenue 35.5% to $525.0 million. Management raised its full-year HVAC revenue plan by $40 million because new factory lines are turning orders into shipments faster.
What to watch: the third-quarter filing's HVAC backlog table, due by November 5. If underlying backlog keeps growing alongside 22.3% underlying sales growth, customer orders are still outrunning the new factory output.
Inspection Unit Margin Holds Up Despite Lower Sales
Detection and Measurement, which makes underground cable locators, transit fare systems and communication gear, faced a tough comparison after a large project moved into the second quarter. Segment sales fell 7.7% from a year ago to $189.5 million, and sales from businesses owned a year ago dropped 7.9%. Even so, segment profit rose 1.7% to $52.6 million, and segment profit margin expanded 2.6 percentage points to 27.8%.
Cost of products sold — the direct cost of making equipment — fell 6.4 percentage points of segment revenue to 50.3%, outweighing a 3.8-point rise in overhead and selling costs. SPX cited "a more favorable product mix within our transportation and communication technologies businesses" and "benefits related to our segment synergy initiatives, primarily within our location and inspection and rehabilitation businesses". The group raised its full-year segment margin plan by 0.75 points.
What to watch: fourth-quarter Detection and Measurement segment margin, which the full-year outlook puts at 25.3% by our math. Holding above 25% on lower revenue would show the cost savings are permanent.
🐻 Bear Case
Factory Ramp Costs Forced a Full-Year Profit Cut
Lowe said the company's resultados "reflect the strength of our business model and the consistent execution of our teams". The numbers tell a harder story inside the main HVAC division, where segment profit margin fell 1.4 percentage points from a year ago to 23.0%. By our math, the prior full-year plan required a second-half HVAC margin of 26.0% to 26.8%, so the third quarter missed that path.
- HVAC cost of making products: 64.5% of segment sales, up 3.6 percentage points from a year ago
- HVAC selling and overhead costs: 12.5% of segment sales, down 2.2 percentage points
- Full-year HVAC margin outlook: cut to 23.10%–23.50% from 24.50%–25.00%
- Full-year profit per share outlook, excluding one-offs: trimmed $0.05 at the middle of the range to $8.35
SPX blamed the margin drop on "higher growth-related costs, largely labor and supply chain inefficiencies, associated with our volume increases and capacity expansion initiatives" plus "the impact of elevated input costs". Because factory startup inefficiencies did not fade in the second half as planned, management cut its full-year profit before interest, taxes, depreciation and amortization (EBITDA), excluding one-offs, by $10 million at the middle of the range despite raising sales by $40 million.
What to watch: fourth-quarter HVAC segment margin, which the new full-year outlook puts at 24.4% by our math. Missing that lower bar would show factory inefficiencies are carrying into 2027.
Buying Spree Pushes Goodwill Past Equity and Triples Debt
SPX has used acquisitions to expand its heating, controls and cooling lineup, adding FIS Water and Neptronic in the third quarter after buying Thermolec and Crawford earlier this year. Supporters view these deals as a smart way to sell more controls through existing HVAC channels, and Lowe said the FIS Water deal is "further strengthening our position in attractive adjacent markets". However, the buying spree has reshaped the balance sheet.
- Cash spent on acquisitions: $847.0 million in Q3 and $1.29 billion over nine months
- Total debt: $1.33 billion at Q3 end, up from $501.6 million at year-end 2025
- Net debt (debt minus cash): $1.21 billion, up from $135.6 million at year-end 2025 by our math
- Goodwill and intangible assets: $3.12 billion, or 127% of stockholders' equity by our math
The heavy deal spending matters because intangible asset write-downs — non-cash charges from past purchases — rose 32% from a year ago to $32.5 million in the quarter, widening the gap between reported profit and profit excluding one-offs. If any newly bought unit misses its targets, SPX faces write-downs against an equity base smaller than its intangible assets.
What to watch: purchase price details and bank leverage ratios in the third-quarter filing. A net leverage ratio above 2.0 times would limit further deal-making until cash flow pays down the credit line.
Inspection Unit Sales Drop as Order Book Shrinks
Detection and Measurement revenue had grown for four straight quarters, aided by project deliveries and the Kranze Technology Solutions purchase. In the third quarter, segment sales fell 7.7% from a year ago to $189.5 million, and sales from businesses owned a year ago dropped 7.9%. The company blamed the drop on "lower project volumes within our communications technologies business".
The decline follows three straight quarters of shrinking segment backlog through June and a $15 million project that moved from the third quarter into the second. Management kept its full-year segment revenue plan unchanged at $750 million to $770 million. By our math, the middle of that range leaves fourth-quarter segment revenue at $199.3 million, down 3.3% from a year ago, confirming a second consecutive quarterly sales contraction.
What to watch: Detection and Measurement backlog in the third-quarter filing. A fourth straight quarterly drop would mean the unit enters 2027 with a smaller order book.
Risks this quarter didn't answer
Four standing concerns from prior quarters cannot be checked from the earnings release alone because SPX discloses the underlying figures only on its conference call or in its quarterly filing.
- Segment order backlog: not in the release; the Form 10-Q filing due by November 5 will show whether HVAC and Detection and Measurement backlogs grew or shrank.
- Data-center cooling revenue: not broken out in the release tables; remarks on the call will show if the full-year target moved from $430 million.
- HVAC growth outside data centers: previously running at 5% to 6%; call commentary will show if commercial building demand slowed.
- Large cloud customer concentration: no update in the release on how fast long-term capacity agreements are turning into binding purchase orders.
💲 Other KPIs
Free cash flow — operating cash left after capital spending on factories and equipment — fell 79.1% from a year ago, down from $69.3 million in the second quarter. Operating cash flow dropped to $60.1 million from $106.8 million a year ago while factory capital spending nearly quadrupled to $40.0 million to fund the HVAC expansion.
Stockpiles of raw materials and unsold goods rose 27.7% from a year ago and 13.1% from the second quarter, outpacing the 20.5% rise in quarterly revenue. Even excluding newly acquired businesses, inventory build absorbed $23.7 million of cash in the third quarter and $90.2 million over the first nine months as factories stocked up for cooling demand.
The average number of shares used to calculate profit per share rose 3.5% from a year ago because the industrial group issued stock in late 2025 to raise cash. That higher share count held GAAP profit per share growth to 25.6% even though net profit from continuing operations rose 30.4%. SPX bought back no shares during the quarter.
🔮 Guidance
Raised. The middle of the full-year range moved up $40 million to $2.775 billion, or 22.5% growth from 2025. By our math, that leaves $814.7 million of revenue for the fourth quarter, up 27.8% from a year ago versus 20.5% in the third quarter. It is the third raise this year (+$40M, +$125M, +$40M), aided by recent HVAC acquisitions.
Cut. The middle of the range for EBITDA excluding one-offs dropped $10 million to $635 million, or 25.1% growth for the year, breaking a streak of two raises (+$7.5M, +$32.5M, -$10.0M). Full-year EBITDA margin excluding one-offs was also cut to 22.75%–23.00% from 23.30%–23.80%. By our math, the outlook still requires $191.4 million in the fourth quarter, up 34.8% from a year ago.
Cut. SPX trimmed the top end of its profit per share outlook, excluding one-offs, by $0.10, lowering the middle of the range by $0.05 to $8.35 (up 23.5% for the year). That ends six straight quarters of increases (+$0.15 and +$0.45 earlier this year). By our math, the plan leaves $2.43 per share for the fourth quarter, up 29.3% from a year ago.
Mixed: revenue raised, margin cut. The heating and cooling revenue midpoint rose $40 million to $2.015 billion (+32.7% for the year), but segment margin dropped 1.45 percentage points at the midpoint to 23.30%. By our math, the fourth quarter needs $615.4 million of HVAC sales (+42.7% from a year ago) at a 24.4% margin, up from 23.0% in the third quarter.
Unchanged on revenue; raised on margin. SPX kept full-year segment revenue at a $760 million midpoint while lifting segment margin by 0.75 percentage points to a 27.25% midpoint. By our math, that leaves fourth-quarter segment sales at $199.3 million, down 3.3% from a year ago, with segment margin stepping down to 25.3% from 27.8% in the third quarter.
❓ Key Questions
How much did FIS Water and Neptronic add to Q3?
SPX spent $847 million on acquisitions in the third quarter and raised full-year HVAC sales by $40 million, the exact size of its total revenue raise. Investors need the acquired revenue and backlog figures to see if underlying fourth-quarter sales expectations changed.
When will HVAC factory startup inefficiencies roll off?
Management previously expected HVAC margins to rebound above 26% in the second half as startup costs faded, but instead cut the full-year HVAC margin outlook by 1.45 points. Clarifying how much of the cost drag is temporary labor versus permanent input inflation is critical.
What is the current backlog in both segments?
The earnings release omits segment backlog, which lives in the Form 10-Q filing. After HVAC underlying sales accelerated to 22.3% and Detection and Measurement sales fell 7.9%, order intake numbers will show whether the cooling boom is still building the 2027 order book.
Did the full-year data-center revenue target move from $430 million?
Lowe reaffirmed the $1.1 billion full-production capacity target for data-center cooling, after raising the 2026 data-center revenue plan from $300 million to $350 million to $430 million in prior quarters. Updating the 2026 figure will show how fast new plants are filling.