Engineered products manufacturer ESCO (NYSE: ESE) fell short of the market’s revenue expectations in Q2 CY2026, but sales rose 14.4% year on year to $339 million. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $1.32 billion at the midpoint. Its non-GAAP profit of $2.20 per share was 3.9% above analysts’ consensus estimates.
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ESCO (ESE) Q2 CY2026 Highlights:
- Revenue: $339 million vs analyst estimates of $341.4 million (14.4% year-on-year growth, 0.7% miss)
- Adjusted EPS: $2.20 vs analyst estimates of $2.12 (3.9% beat)
- Adjusted EBITDA: $83.76 million vs analyst estimates of $84.55 million (24.7% margin, 0.9% miss)
- The company slightly lifted its revenue guidance for the full year to $1.32 billion at the midpoint from $1.31 billion
- Management raised its full-year Adjusted EPS guidance to $8.35 at the midpoint, a 2.8% increase
- Operating Margin: 14.6%, in line with the same quarter last year
- Free Cash Flow Margin: 14%, down from 21.9% in the same quarter last year
- Backlog: $1.54 billion at quarter end, up 31.7% year on year
- Market Capitalization: $8.49 billion
Company Overview
A developer of the communication systems used in the Batmobile of “The Dark Knight,” ESCO (NYSE: ESE) is a provider of engineered components for the aerospace, defense, and utility sectors.
Revenue Growth
A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, ESCO grew its sales at an excellent 12.5% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. ESCO’s annualized revenue growth of 15.1% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated. 
This quarter, ESCO’s revenue grew by 14.4% year on year to $339 million but fell short of Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 7.2% over the next 12 months, a deceleration versus the last two years. This projection doesn’t excite us and suggests its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.
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Operating Margin
ESCO has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 14.5%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
Looking at the trend in its profitability, ESCO’s operating margin rose by 3.9 percentage points over the last five years, as its sales growth gave it operating leverage.
In Q2, ESCO generated an operating margin profit margin of 14.6%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
ESCO’s EPS grew at 24.4% compounded annual growth rate over the last five years, higher than its 12.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
We can take a deeper look into ESCO’s earnings to better understand the drivers of its performance. As we mentioned earlier, ESCO’s operating margin was flat this quarter but expanded by 3.9 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For ESCO, its two-year annual EPS growth of 42.6% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.
In Q2, ESCO reported adjusted EPS of $2.20, up from $1.60 in the same quarter last year. This print beat analysts’ estimates by 3.9%. Over the next 12 months, Wall Street expects ESCO’s full-year EPS to grow 8.9% from $8.07 to $8.79.
Key Takeaways from ESCO’s Q2 Results
It was great to see ESCO’s full-year EPS guidance top analysts’ expectations. We were also glad its EPS guidance for next quarter exceeded Wall Street’s estimates. On the other hand, its revenue slightly missed and its EBITDA fell slightly short of Wall Street’s estimates. Zooming out, we think this was a mixed quarter. The market seemed to be hoping for more, and the stock traded down 1.1% to $324.21 immediately after reporting.
So should you invest in ESCO right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here (it’s free).
