ESCO’s second quarter results were met with a negative market reaction, as the company’s revenue fell slightly short of Wall Street expectations despite solid year-over-year growth. Management cited strong order activity across aerospace, utility, and test segments as key drivers of performance, with CEO Bryan Sayler highlighting “continued order strength” and a record backlog. Notably, the Utility Solutions group, led by Doble, delivered double-digit growth supported by rising demand for grid modernization and electrification, while the Test business saw robust industrial shielding and data center orders. The quarter also reflected the early benefits of ESCO’s enterprise-wide continuous improvement initiative.
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ESCO (ESE) Q2 CY2026 Highlights:
- Revenue: $339 million vs analyst estimates of $341.4 million (14.4% year-on-year growth, 0.7% miss)
- Adjusted EPS: $2.20 vs analyst estimates of $2.12 (3.9% beat)
- Adjusted EBITDA: $83.76 million vs analyst estimates of $84.55 million (24.7% margin, 0.9% miss)
- The company slightly lifted its revenue guidance for the full year to $1.32 billion at the midpoint from $1.31 billion
- Management raised its full-year Adjusted EPS guidance to $8.35 at the midpoint, a 2.8% increase
- Operating Margin: 14.8%, in line with the same quarter last year
- Backlog: $1.54 billion at quarter end, up 31.7% year on year
- Market Capitalization: $7.78 billion
While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From ESCO’s Q2 Earnings Call
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Thomas Moll (Stephens): asked about the composition of new data center customers in the Test business. CEO Bryan Sayler clarified that growth is concentrated in commercial data centers with government and critical utility data, and noted expanding adoption, but did not disclose specific customer names.
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Scott Deuschle (Deutsche Bank): questioned sequential margin declines in the Utility Solutions group despite rising sales. CFO Chris Tucker cited unfavorable product mix and timing of expenses, along with ongoing weakness in the renewables (NRG) segment.
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Will (CJS Securities): inquired about defense business growth drivers and the mix of programs versus aftermarket. Sayler said the “core business in submarine programs” is the main accelerator, with aftermarket growth steady but not the primary contributor.
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Tomohiko Sano (JPMorgan): pressed for detail on NRG’s return to growth and headwinds. Sayler replied recovery is unlikely until next year, driven by tax credit expirations and market normalization, with a faster rebound expected for solar than wind.
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Thomas Moll (Stephens): followed up on Megger integration timeline and impact on guidance. Tucker stated that, if closed as planned, Megger would be included in the company’s next annual guide and that financing terms are already secured.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will closely monitor (1) the pace and success of the Megger integration and realization of projected synergies, (2) ongoing order trends and backlog conversion in aerospace and defense, and (3) the trajectory of Doble’s utility segment, particularly in condition monitoring and grid modernization. The recovery pace in renewables and developments in operating system implementation will also be critical signposts.
ESCO currently trades at $300.57, down from $328.03 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).
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