SPX Corporation Charts Aggressive Growth in Earnings Call

SPX Corporation ((SPXC)) has held its Q4 earnings call. Read on for the main highlights of the call.

SPX Corporation’s latest earnings call struck an optimistic tone, underscored by strong revenue and profit growth, record backlogs, and robust free cash flow. Management balanced this with a candid view of near‑term hurdles, including project timing shifts and start‑up costs tied to major capacity expansions, but reiterated confidence in execution and its multi‑year growth trajectory.

Full-Year Earnings Growth and EPS Outperformance

SPX reported a 21% year‑over‑year increase in both adjusted EBITDA and adjusted EPS for the full year, signaling strong operating leverage. Adjusted EPS reached $6.76, landing toward the upper end of management’s guidance range and reinforcing the company’s track record of delivering on financial commitments.

Q4 Revenue Acceleration and Margin Expansion

In the fourth quarter, revenue climbed 19.4% year over year while adjusted EBITDA grew roughly 22%, driving about 50 basis points of margin expansion. Adjusted EPS in Q4 advanced 25% to $1.88, highlighting both solid top‑line momentum and disciplined cost control late in the year.

Segment Income Growth and Profitability Gains

Consolidated segment income in Q4 increased $27.0 million, or 21%, reaching $156.0 million as segment margins expanded about 30 basis points. These gains underscore broad‑based operating improvements across the portfolio, with both core businesses contributing to higher profitability.

HVAC Segment Growth and Expanding Backlog

The HVAC segment posted a 16.4% revenue increase in Q4, with 10.3% organic growth and 5.5% from acquisitions, reflecting healthy demand across key applications. Segment income rose $17.0 million, up 18%, with margin up 40 basis points, while the HVAC backlog climbed to $585 million, up 22% organically and supporting visibility into future growth.

Detection & Measurement Momentum and Record Backlog

Detection & Measurement revenue surged 26.3% in Q4, largely driven by the KTS acquisition, which contributed 23.2% growth, while organic revenue grew 1.7%. Segment income advanced $10.0 million, or 27%, with margins up 20 basis points, and the D&M backlog reached a record $350 million, up roughly 43% organically at year‑end.

Balance Sheet Strength and Cash Flow Conversion

SPX closed the year with $366 million of cash and $502 million of total debt, translating to leverage of about 0.3x under its bank covenant, or roughly 1.0x including recent deals. Adjusted free cash flow of $294 million represented about 90% conversion of adjusted net income, giving the company ample flexibility to fund expansion and acquisitions.

2026 Outlook: Double-Digit Growth in Revenue and Earnings

For 2026, SPX guided revenue to between $2,535 million and $2,605 million, with adjusted EBITDA of $590 million to $620 million, implying around 20% year‑over‑year EBITDA growth and about 23.5% margin at the midpoint. Adjusted EPS is projected at $7.60 to $8.00, signaling roughly 15% growth, supported by a consolidated segment income margin target of 24.6% to 25.1%.

HVAC Capacity Expansion and Capital Investment Plan

The company is aggressively expanding HVAC capacity, highlighted by the purchase of a 459,000‑square‑foot facility in Madison, Alabama, and the Tamco plant in Tennessee slated to begin production by the end of Q1 2026. SPX expects to spend about $60 million on expansion capex in 2025 and around $100 million in 2026, enabling roughly $700 million of incremental capacity at full ramp.

Strategic Acquisitions Bolster Portfolio and Margins

Recent acquisitions of Thermalek, Air Enterprises, and Ron Industries add electric heat and engineered air movement capabilities that deepen SPX’s HVAC offering. Combined, these businesses are expected to contribute roughly $110 million of annual revenue with segment margins slightly above the existing segment average, enhancing both scale and profitability.

Data Center Growth and Olympus Max Traction

SPX is benefiting from rapidly expanding data center demand, with data center revenue reaching about $200 million in 2025, or roughly 9% of total revenue. Management expects data center revenue to approach the low double digits as a share of sales in 2026, driven in part by Olympus Max, which secured around $50 million of bookings in 2025 that should convert into 2026 revenue.

Project Pull-Forward Weighs on 2026 D&M Growth

A key customer advanced roughly a $20 million Detection & Measurement project from 2026 into 2025, lifting the current year’s results but creating a headwind for next year. Management estimates this timing shift will shave about 5% from 2026 D&M growth, explaining why guidance for that segment’s top line is relatively flat year over year.

Capex Timing and Ramp-Up Risk in New Facilities

SPX acknowledged that its sizable 2026 capex program, especially for the Madison facility, introduces timing and execution risk around when new capacity becomes revenue‑generating. Madison is expected to have only assembly capability in the second half of 2026, with initial production in 2027 and full capacity closer to 2028, leaving some exposure to equipment delivery and ramp delays.

Start-Up Costs Temporarily Pressure HVAC Margins

While HVAC revenue is guided higher, management flagged temporary start‑up costs associated with new plants as a roughly 50 basis point margin headwind in 2026. These costs will limit near‑term margin expansion even as volumes grow, but are framed as investments that should support stronger profitability once facilities reach scale.

Rising Data Center Exposure Brings Concentration Risk

The anticipated roughly 50% growth in data center revenue in 2026 boosts SPX’s participation in a high‑growth end market but also increases concentration risk. Management cautioned that shifts in customer timing, project mix, or design choices could create volatility, making flawless execution and diversification across customers more critical.

Moderate Organic Growth Outside Hotspots

Organic growth in some areas remains modest, with Detection & Measurement posting just 1.7% organic growth in Q4 and certain HVAC end markets, such as battery automotive, semiconductor, chemical, and commercial real estate, showing softness. This uneven backdrop means SPX’s strongest organic momentum is concentrated in data centers and select verticals rather than across all markets.

Backlog Quality and Longer-Dated Projects

Although SPX’s backlogs are at record levels, management noted a growing share of multiyear projects that can push revenue recognition further out. This mix shift supports long‑term visibility but somewhat mutes near‑term revenue conversion, making the timing of project execution an important factor for quarterly results.

Leverage Uptick Following M&A Deployment

Including the latest acquisitions, pro forma leverage rises to about 1.0x from 0.3x reported, reflecting greater use of the balance sheet to fund deals. Management emphasized that integration and synergy capture will be key to realizing expected accretion while preserving the financial flexibility that has underpinned its expansion strategy.

Forward-Looking Guidance and Growth Drivers

SPX’s 2026 guidance embeds strong growth across both segments, with HVAC revenue targeted at $1,800 million to $1,840 million and segment margins of 24.5% to 25.0%, including the temporary margin drag from start‑up costs. Detection & Measurement is guided to $735 million to $765 million of revenue with segment margins of 24.75% to 25.25%, implying roughly 140 basis points of margin expansion at the midpoint, driven by favorable mix and cost initiatives alongside record backlogs.

SPX’s earnings call painted a picture of a company leaning into secular growth themes like data centers and advanced HVAC while managing the growing pains of rapid expansion. With strong cash generation, a scaled M&A program, and clearly articulated capacity plans, the company appears well positioned, though investors will be watching execution on new facilities, data center projects, and integration to sustain its momentum.