Enpro (NYSE:NPO) reported higher second-quarter sales and earnings as demand strengthened across its Advanced Surface Technologies business, particularly in semiconductor-related applications, while its Sealing Technologies segment benefited from acquisitions, aerospace demand and domestic industrial growth.
Sales rose 17.6% year over year to $338.8 million in the second quarter, while adjusted EBITDA increased more than 22% to $86.9 million. Adjusted EBITDA margin expanded 90 basis points to 25.6%, and adjusted diluted earnings per share increased 23.2% to $2.50.
“We are pleased with our strong first half results and improved outlook for the rest of the year,” Vaillancourt said, citing customers’ needs for products that help them operate “safely, reliably, and efficiently.”
Semiconductor demand lifts Advanced Surface Technologies
Advanced Surface Technologies, or AST, posted 21.8% sales growth during the quarter, with improving sequential orders and particularly strong demand for precision cleaning services linked to advanced-node chip production. The segment’s adjusted EBITDA rose 48.5% from a year earlier, while its adjusted EBITDA margin increased 430 basis points to 23.9%.
Chief Financial Officer Joe Bruderek said the margin improvement was primarily driven by stronger sales, production volumes and operating leverage. The year-over-year comparison also benefited from the normalization of an unfavorable foreign-exchange item in the prior-year quarter involving Taiwanese working capital.
Management said semiconductor customer build plans and lead times provide visibility through 2027 for its semiconductor-facing products and solutions. Demand is also healthy for in-chamber tools, precision machining and optical coatings, although Vaillancourt said coatings growth was somewhat slower than the company’s cleaning and machining businesses.
James Gentile, vice president of investor relations, said Enpro’s precision-cleaning business is entirely tied to leading-edge semiconductor production. The company is increasing capacity across geographies in response to current and anticipated demand.
Enpro raised its expected capital expenditures and capitalized software spending for 2026 to $60 million to $65 million, from a prior expectation of about $50 million. Vaillancourt said the additional spending will accelerate AST cleaning capacity investments, including the second phase of an Arizona project, capacity additions in Milpitas, California, and further investment in Taiwan.
Sealing Technologies gains from acquisitions and industrial demand
Sealing Technologies sales increased 15.3% to $216.2 million. The segment recorded 5% organic growth, with the balance supported by the fourth-quarter 2025 acquisitions of AlpHa Measurement Solutions and Overlook Industries.
The segment benefited from strong aerospace demand and double-digit organic growth in domestic general industrial markets. Bruderek said the domestic industrial performance included chemical process industries, data-center-related infrastructure activity and demand in compositional analysis, including natural-gas applications.
Sealing Technologies adjusted EBITDA increased 13.3%, and its 33.2% adjusted EBITDA margin remained above 30% for the 10th consecutive quarter. Management attributed the result to operating performance, strategic pricing, acquisition contributions and foreign-exchange tailwinds, partly offset by commercial-vehicle softness and growth investments.
Commercial vehicle markets remained weak, primarily in trailers, though management said it is seeing early signs of improvement. Vaillancourt said Enpro has added capacity to better serve both original-equipment and aftermarket demand when the trailer market recovers. Aftermarket sales represented 60% of Sealing Technologies revenue in the quarter.
Management also cited softness in Europe, including smaller general industrial and food and biopharmaceutical positions. For the second half, Enpro expects Sealing Technologies organic growth in the high single digits, excluding acquisition contributions. AlpHa and Overlook are expected to contribute $60 million to $65 million of revenue in 2026.
Outlook raised as backlog and orders improve
Enpro increased its full-year 2026 outlook, with the majority of the raise tied to AST, according to Bruderek. The company now expects:
- Sales growth of 14% to 16%, compared with prior guidance of 10% to 14%.
- Adjusted EBITDA of $330 million to $340 million, up from $315 million to $330 million.
- Adjusted diluted EPS of $9.30 to $9.80, compared with prior guidance of $8.85 to $9.50.
For AST, Enpro expects approximately 20% year-over-year growth in the second half of 2026. The company expects both segment revenue growth and adjusted EBITDA margin to approach 25% as it exits the year.
Vaillancourt said Enpro is targeting long-term mid-single-digit organic growth in Sealing Technologies and high-single-digit to low-double-digit organic growth in AST through 2030. Both segments are targeted to generate adjusted EBITDA margins of 30%, plus or minus 250 basis points, over that period.
Cash flow, debt reduction and environmental reserve
Enpro generated more than $60 million of free cash flow in the first half, even as it invested in working capital and spent nearly $30 million on capital expenditures and capitalized software. The company repaid $80 million of revolving debt during the first half, reducing its leverage ratio to 1.6 times trailing 12-month adjusted EBITDA.
Net debt stood at approximately $500 million as of June 30, including $450 million of senior notes due in 2033 and $130 million drawn on its revolving credit facility, net of $77 million in cash.
During the quarter, Enpro paid a quarterly dividend of $0.32 per share, totaling $6.9 million, and said it retains a $50 million share repurchase authorization.
In response to an analyst question, Bruderek said the company increased environmental reserves related to legacy uranium mines in Arizona dating back decades before Enpro was founded. Gentile said the reserve totaled $16 million and reflected what the company considers a probable remediation solution with government agencies and local communities. The first cash outflow is not expected for about three years, and the project could extend for as long as a decade, he said.
About Enpro (NYSE:NPO)
Enpro Group, Inc (NYSE: NPO) is a global industrial technology company specializing in engineered products designed to perform in critical and harsh environments. The company’s product portfolio spans proprietary bearing materials and surface enhancement technologies, high-performance sealing solutions, and fluid handling components. Enpro’s offerings are tailored for markets such as semiconductor manufacturing, aerospace, energy, chemical processing, life sciences and general industrial applications.
Formed in December 2002 as a spin-off from the aerospace and defense supplier Goodrich Corporation, Enpro has grown through a combination of targeted acquisitions and focused organic investment in research and development.
