Enpro Raises 2026 Guidance Again as AST Margins Surge
Enpro posted 17.6% revenue growth in the second quarter, its fastest pace in over a year, and lifted full-year guidance for the second straight time.
Enpro (NPO) reported second-quarter revenue growth of 17.6% year over year, an acceleration from 10.9% in the first quarter and the fastest pace in the company's recent trajectory, which had climbed from 9.9% in the third quarter of 2024 to 14.3% in the fourth.
The advanced sensors and thermal technologies segment, known as AST, drove the improvement. Segment sales rose 21.8% year over year in the second quarter, up from 11.1% growth in the first quarter and 17.3% in the third quarter of 2024. AST's adjusted segment EBITDA margin expanded 430 basis points year over year to 23.9%, from 19.6% a year earlier, as fixed costs were absorbed across a larger revenue base and foreign-exchange movements provided a tailwind. Sealing Technologies, the company's other segment, grew sales 15.3% year over year, roughly matching its 10.8% pace in the first quarter, though its adjusted segment EBITDA margin slipped 60 basis points to 33.2% from 33.8%. Combined, total adjusted segment EBITDA margin rose 100 basis points year over year to 29.8%.
Companywide, adjusted EBITDA margin expanded 90 basis points year over year to 25.6%, continuing a steady climb from 25.2% in the first quarter and 23.5% in the fourth quarter of 2024. Operating margin rose 110 basis points to 17.0% from 15.9%, while gross margin improved to 44.0% of sales, or $149.0 million on $338.8 million in revenue, from 43.3% a year earlier. Adjusted diluted earnings per share grew 23.2% year over year to $2.50, up from $2.14 the prior quarter and accelerating from 12.6% growth in the first quarter.
GAAP net income told a narrower story, rising just 2.7% to $27.1 million from $26.4 million despite the double-digit sales growth. A new $16.1 million environmental reserve charge, appearing for the first time this quarter, offset much of the operating leverage that lifted adjusted results. Corporate expense also climbed to $15.7 million from $12.1 million a year earlier, on higher incentive compensation and $1.3 million of restructuring costs, following a similar rise to $13.7 million in the first quarter from $11.3 million.
Enpro raised its full-year 2026 guidance for the second consecutive quarter. The company now expects revenue growth of 14% to 16%, up from the 10% to 14% range given in the first quarter, adjusted EBITDA of $330 million to $340 million, up from $315 million to $330 million, and adjusted diluted earnings per share of $9.30 to $9.80, up from $8.85 to $9.50. The guidance has now been lifted twice since it was first introduced alongside fourth-quarter results, when Enpro projected 8% to 12% revenue growth, $305 million to $320 million in adjusted EBITDA, and $8.50 to $9.20 in adjusted diluted earnings per share.
The fourth quarter of 2024 included a one-time $67.2 million pre-tax non-cash pension settlement loss tied to the termination of Enpro's U.S. defined benefit pension plan, which drove a $32.0 million GAAP net loss that quarter versus $13.9 million in net income a year earlier. That charge is absent from subsequent quarters, with only a small residual pension gain appearing in the second quarter of 2026.
Enpro reduced revolving debt by $30 million during the quarter, cutting total debt to $575.5 million and bringing net leverage to 1.6 times trailing-twelve-month adjusted EBITDA at quarter-end. Six-month free cash flow rose to $61.4 million, net of $29.5 million in capital expenditures, from $52.8 million a year earlier, aided by higher net income and lower cash taxes.