Enpro (NPO) Q2 Revenue Rises 6% | The Motley Fool

Enpro (NPO 4.59%), a specialized manufacturer serving critical markets like semiconductors, aerospace, and life sciences, reported its second quarter 2025 earnings on August 5, 2025. Revenue (GAAP) was $288.1 million, beating consensus GAAP revenue estimates by $4.5 million, or 1.6%. However, non-GAAP earnings per share came in at $2.03, falling short of the $2.07 analyst consensus for non-GAAP EPS. Compared to the prior year, non-GAAP EPS declined by 2.4%. Despite pressured margins and increased operating expenses, the company raised its full-year 2025 guidance, citing robust demand in key market segments. Sales growth was solid, but higher costs and currency headwinds reduced profitability, leading to a mixed, but overall constructive, quarterly assessment.

Source: Analyst estimates provided by FactSet. Management expectations based on management’s guidance, as provided in Q1 2025 earnings report.

Business Overview and Strategic Priorities

Enpro designs and manufactures high-performance components and solutions for demanding applications across semiconductors, aerospace, life sciences, and other advanced industrial sectors. Its portfolio includes products such as dynamic seals, gaskets, and advanced surface treatment services. The company’s business is built around supplying critical parts and technologies for sophisticated manufacturing and operational environments—often where reliability and safety are paramount.

In recent years, Enpro has concentrated on penetrating strategic, high-growth markets with strong barriers to entry. Its key success factors are its focus on recurring, proprietary products—particularly in the Sealing Technologies segment—and ongoing investments in research and development. The business also invests in its workforce, aiming to cultivate a culture of innovation and operational agility. Strategic acquisitions, such as those of Advanced Micro Instruments and Alluxa, and divestitures of non-core assets, bolster its alignment with core markets and support improved margins.

Quarter in Detail: Segment Results and Key Events

Revenue grew across both main operating segments, with Sealing Technologies sales up 1.9% and Advanced Surface Technologies sales up 14.5%, but profitability was impacted by higher operating costs and currency swings. In Sealing Technologies, which produces dynamic seals and gaskets for applications like aerospace and food manufacturing, sales reached $187.5 million, an increase of 1.9%. However, Adjusted segment EBITDA dropped by 3.2% from the prior-year period, and Adjusted EBITDA margin narrowed to 33.8%. The company cited strength in aerospace—up over 20% year-over-year within the Sealing Technologies segment in Q1 2025—and recovery in food and pharmaceuticals as drivers, with soft demand in commercial vehicle original equipment manufacturing offsetting gains elsewhere. The margin decline followed record adjusted segment EBITDA margin levels of 35.5% in Q2 2024 and was also influenced by foreign exchange and delivery timing.

The Advanced Surface Technologies segment, focused on services like precision cleaning and optical coatings for semiconductor and photonics manufacturers, delivered GAAP sales of $100.9 million. Year-over-year, this was an increase of 14.5%. Adjusted segment EBITDA improved by 3.7%, but Adjusted segment EBITDA margin fell to 19.6%, as investments in growth initiatives and negative foreign exchange effects reduced leverage. The company noted strong demand for leading-edge precision cleaning solutions, especially in the semiconductor sector. Qualification work and early revenue at the new Arizona facility helped set the stage for future growth as the existing California site approaches capacity.

Across the business, about two-thirds of revenue in the Sealing Technologies segment comes from recurring aftermarket sales—these are replacement parts and services sold into existing customer installations, rather than original equipment. This recurring nature helps buffer the business against the more volatile new equipment cycle, especially in sectors like commercial vehicles where demand is currently weak. Strategic pricing actions, including a general price increase of roughly 2% in January 2025, also supported revenue growth.

Enpro continued to refine its portfolio during the quarter by integrating past acquisitions and focusing on segments with the highest growth and margin potential. In recent quarters, it divested businesses like GGB and GPT to enhance its focus. Capital allocation remains a core strength: operating cash flow (GAAP) for the first six months of 2025 was $73.2 million, with free cash flow of $52.8 million for the six months ended June 30, 2025. Enpro extended its financial flexibility by securing a new $800 million revolving credit facility in April 2025 and completing a $450 million notes offering in May 2025. This led to a net leverage ratio of 1.4 times trailing twelve month adjusted EBITDA and consolidated cash balances of $107.1 million at quarter-end. Dividend payments for the first six months of 2025 totaled $13.2 million, with the quarterly dividend unchanged at $0.31 per share.

Looking Ahead: Guidance and Outlook

Management raised its full-year 2025 outlook, increasing guidance to revenue growth of 5%-7%, adjusted EBITDA in the range of $270 million to $280 million, and adjusted diluted earnings per share in the range of $7.60 to $8.10 per share. The company now expects revenue growth between 5% and 7%, compared to previous guidance of low- to mid-single-digit revenue growth. Adjusted EBITDA is projected at $270 million to $280 million, up from the prior adjusted EBITDA range of $262 million to $277 million. Likewise, non-GAAP diluted earnings per share guidance has increased to $7.60 to $8.10, from a prior range of $7.00 to $7.70 (adjusted diluted earnings per share).

This guidance hinges on continued robust demand in end markets like aerospace, semiconductors, and food and pharma. Management cited particular confidence in Advanced Surface Technologies, where a positive sales outlook for the second half of 2025 is expected. However, commercial vehicle original equipment demand is forecast to remain soft for the remainder of the year, though strong recurring aftermarket exposure should temper the impact. Enpro continues to focus on disciplined capital deployment and innovation, but the company also noted ongoing margin pressure from operating investments and foreign exchange risk. The quarterly dividend was maintained at $0.31 per share.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.