SPXC Earnings Recap
Beat 7 of last 7 quarters
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SPX Technologies is a direct beneficiary of the AI infrastructure buildout, with data center cooling demand accelerating and driving capacity expansions. The raised data center growth outlook and strong backlog signal sustained investment in AI data center physical infrastructure, positioning SPX as a key supplier of engineered cooling solutions.
SPX Technologies reported strong Q1 results with revenue up 17.4% and adjusted EPS up 22% to $1.69. HVAC revenue grew 22% (9.6% organic) with backlog up 38% organically, while D&M revenue grew 8.3% (3% organic) with segment margin up 410 bps. The company raised full-year EPS guidance and began production at new capacity facilities in Tennessee and Olathe. Management also highlighted the successful sale of Crawford United's non-core business for ~$60 million in proceeds.
Management raised full-year 2026 adjusted EPS guidance by $0.15 to a midpoint of $7.95, reflecting strong Q1 results and additional data center volume in the second half. The updated guidance includes a $0.05–$0.10 impact from Section 232 tariffs, predominantly in HVAC in Q2, but management expects no tariff impact in 2027. Data center growth outlook was raised to 50%–70% for the year, with capacity expansions on track: Olathe at full capacity by mid-2027, Tennessee in 2027, and Madison ramping to full capacity by mid-2028. Management expressed confidence in delivering traditional incremental margins in HVAC through the back half and into next year, and sees a robust M&A pipeline with leverage capacity below target.
“The demand strength is very strong. We would say accelerating. We're seeing this across our different product lines. We're seeing some of our key customers really looking to accelerate, and we're able to expand capacity in this year. That's how we've taken our growth rate from 50% to 70% in data centers this year.”
on Data center demand
“We are increasing our adjusted EPS guidance by $0.15 to a midpoint of $7.95 to reflect our strong Q1 results, particularly in D&M, and additional data center-related volume anticipated to be delivered in the second half of this year.”
on Guidance raise
“We are superb at large, complicated cooling. And so I think our background – so I think where technology is evolving for these very large-scale data centers, you're seeing some that are gigawatt, some even larger, it fits well with what we are good at.”
on Data center competitive position
Can we just talk just on your HVAC business. Very strong growth even with data centers. But if you back data centers out, what end markets really stand out to you in terms of strength?
Outside of data centers, health care and pharma remain very strong, power is strong (linked to data center), and aftermarket is strong. Softness persists in commercial real estate and hotels, while battery and semiconductor are lower but seeing new bidding opportunities.
Can we just talk about this? The step-up in the HVAC orders in the quarter, and just the timing of shipments around that, as well as when you talk about the front log, as we see that backlog number step up to where it is, you're just trying to think about moving forward and expectation setting and the degree to which there was a sort of concentrated amount of activity?
Backlog strength is driven by data center demand, with orders coming through for 2026 and opportunities for 2027. The market is very healthy and momentum is strong, setting up well for the year.
So you mentioned there were some start-up costs and related inefficiencies with HVAC capacity expansions. Curious if you'd be able to quantify how much of that HVAC margin miss versus your expectations was due to the capacity ramp?
Start-up costs were expected, roughly $8-9 million predominantly in the first half. Q1 margin performance was on track; excluding start-up costs, operating leverage and acquisition accretion would show roughly 40 basis points of margin lift.