Ametek's Backlog Conversion Rates, Order Sustainability Claims Clash in 2026 Q2 Earnings Call

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Date of Call: Aug 4, 2026

Financials Results

• Revenue: $2.04B, up 15% YOY, with organic sales up 10%
• EPS: $2.09 per diluted share, up 17% YOY, above guidance range of $1.96 to $2.00
• Operating Margin: 26.6%, up 60 basis points YOY, with core margins up 110 basis points YOY

Guidance:

• For 2026, overall sales expected up ~10% YOY, organic sales up mid-to-high single digits.
• Diluted EPS expected in range of $8.20 to $8.30, up 10-12% YOY, increased from prior $7.94 to $8.14 range.
• Q3 overall sales expected up high single digits YOY.
• Q3 adjusted earnings expected $2.08 to $2.10 per share, up 10-11% YOY.
• Full-year effective tax rate expected between 18.5% and 19%.
• Full-year capital expenditures expected ~$160M, or ~2% of sales.
• Full-year free cash flow conversion expected 110-115% of net income.

Business Commentary:

Record Sales and Earnings Growth:

• Ametek reported record sales of $2.04 billion for Q2 2026, up 15% from the same period in 2025, with organic sales growth of 10%.
• The company also reported record operating income of $544 million, an 18% increase year-over-year, and record diluted earnings per share of $2.09, up 17%.
• This growth was driven by strong demand across attractive end markets, including semiconductor, energy, aerospace, defense, and automation, as well as strategic acquisitions.

Strong Orders and Backlog Growth:

• Orders reached a record $2.3 billion, up 28% versus the prior year, with organic orders up 25%.
• This resulted in a record backlog of $4.11 billion, up 21% from the end of the previous year.
• The increase was attributed to broad-based growth across all divisions, supported by strong positions in attractive markets and a positive outlook for continued orders.

Core Margin Expansion:

• Operating margins were reported at 26.6%, up 60 basis points from the prior year, with core margins at 27.1%, up 110 basis points.
• The Electromechanical Group (EMG) saw a significant 290 basis point increase in core operating margins.
• Margin expansion was driven by strong sales growth, excellent productivity improvements, positive price growth that offset inflation and tariffs, and strategic cost management.

Outstanding Cash Flow Generation:

• Ametek generated record free cash flow of $452 million, up 37% from the previous year, with a conversion rate of 111% of net income.
• This was supported by strong operational execution, disciplined working capital management, and high free cash flow conversion efficiency.

Strategic Acquisitions and Growth Initiatives:

• The acquisition of Indicor instrumentation is expected to close in the second half of the year, contributing to growth.
• Ametek continues to invest in new product development, with new product vitality at 25% in Q2.
• These initiatives are part of Ametek's strategy to align its portfolio with secular growth drivers and enhance shareholder value.

Sentiment Analysis:

Overall Tone: Positive

• "Ametek delivered fantastic results in the second quarter with double-digit organic sales growth, excellent orders growth, strong core margin expansion, outstanding cash flow generation, and record earnings ahead of our expectations." "Our colleagues continue to deliver exceptional high-quality results and position Amatek for continued growth." "I'm very pleased with our performance this quarter and in the first half of the year." "Ametek delivered another outstanding quarter with excellent orders, revenue and earnings growth, robust margin expansion, and strong free cash flow conversion."

Q&A:

• Question from Deanna Dre (RBC Capital Markets): Could you walk through typical end market and regional data points and color, and whether you're seeing positive inflections in the non-data center part of the industrial economy?
  Response: Growth was broad-based across Process (up high teens), Aerospace & Defense (mid-teens organic), Power (mid-single-digit organic), and Automation & Engineering Solutions (mid-teens organic). Geographically, U.S. (low double-digits), Asia (low double-digits), and Europe (mid-single-digits) were all strong. Growth is driven by multiple secular themes including AI/semiconductor, power grid build-out, aerospace, defense modernization, and medtech, providing durability.

• Question from Matt Somerville (DA Davidson): Can you talk about the build in backlog and how the duration/visibility compares to historical average?
  Response: Backlog was $4.11B, up 21% year-over-year, with a positive book-to-bill of 1.12. Approximately 80% is expected to ship within the next 12 months, with strong execution and order momentum providing visibility.

• Question from Matt Somerville (DA Davidson): How much of your business is tied to semiconductics/AI data center infrastructure, and does that inform a greater ability to capture price?
  Response: About half of the business is tied to data center/AI, power, defense, and aerospace themes. The differentiated, engineered product portfolio allows for price increases to offset inflation and tariffs, with new product vitality at 25% supporting this.

• Question from Nicole DeBlasi (Deutsche Bank): Any notable large/lumpy orders or sustainability of order strength into second half, and color on July?
  Response: Orders were excellent with June being the strongest month on record. July orders were very good. Underlying multi-year infrastructure spend and regulatory mandates provide durability, with growth coming from multiple secular themes.

• Question from Nicole DeBlasi (Deutsche Bank): Given strong order growth, why is organic revenue growth modeled at high single digits in Q3, and any differences between EMG and EIG?
  Response: The guide incorporates prudence/conservatism but is confident. The H2 organic sales guide was increased by 1.5-2 points. Both groups are expected to perform well.

• Question from Daniel Tachiko (BMO Capital Markets): Where did you see the most acceleration in the quarter, and any markets below expectations?
  Response: Semiconductor (especially in EIG) and MedTech (especially Paragon in EMG) were standout performers. All markets were strong.

• Question from Daniel Tachiko (BMO Capital Markets): Update on AI pilot programs internally and commercial opportunities.
  Response: AI is being used across functions to improve efficiency and accelerate growth, including due diligence, customer service, supply chain, product design, and predictive maintenance. The company is in the early stages of deploying AI across its growth model.

• Question from Deanna Dre (RBC Capital Markets): What drove the 110 bps core margin expansion beyond organic sales?
  Response: Driven by strong incrementals (~40% in both groups), excellent productivity (enterprise target increased to $160M), and positive price growth that more than offset inflation and tariffs.

• Question from Deanna Dre (RBC Capital Markets): Update on Indicor acquisition synergies and excitement.
  Response: Excitement is high; the acquisition is progressing well with regulatory approval expected in H2. Confidence is growing in 10-12% cost synergies from global sourcing, shared services, and facility rationalization.

• Question from Chris Gringa (TD Cowan): How is activity in the UAV market trending and what opportunities exist?
  Response: Significant opportunities in UAV programs (e.g., three new programs won), with Ametek providing sensing, power distribution, and cooling solutions. Defense modernization is a non-discretionary driver.

• Question from Chris Gringa (TD Cowan): Any color on MedTech strength and life sciences?
  Response: Paragon (MedTech) saw outstanding order growth. In life sciences, automation businesses serving the sector are also doing extremely well.

• Question from Andrew Aubin (Bank of America): Where does capacity utilization stand and how much of CapEx is growth?
  Response: Capacity is not at a limit; growth CapEx is about two-thirds of the $160M, with the business having high return on tangible capital and flexibility to ramp.

• Question from Andrew Aubin (Bank of America): Update on Faro integration and performance.
  Response: Integration is on plan, with Faro's 3D metrology solutions complementing Creaform. Expectation is for substantial growth and margin upside over the next 6-12 months.

• Question from Christopher Glenn (Oppenheimer and Company): Could you clarify the 35% organic orders growth in EMG and the role of automation?
  Response: Automation (including life sciences) was a major driver, slightly lower than MedTech but still a significant contributor.

• Question from Christopher Glenn (Oppenheimer and Company): Are defense inputs comparable between U.S. and allies?
  Response: More input from the U.S. due to its larger defense infrastructure, but there's a notable increase from NATO allies as well.

• Question from Andy Kaplowitz (Citigroup): Why is mid-single-digit organic sales growth the right number for the power business, and could it grow faster?
  Response: Growth could be faster; orders momentum is strong and supports the broader power grid build-out, with sales growth expected to increase going forward.

• Question from Andy Kaplowitz (Citigroup): Will Faro improvement help overall margins in EIG?
  Response: Yes, Faro's margin improvement will help EIG margins, with the benefit expected in the upcoming quarter.

Contradiction Point 1

Backlog Durability and Order Visibility

Inconsistent portrayal of backlog duration and order sustainability, affecting expectations on revenue visibility and business continuity.

Matt Somerville (DA Davidson) - Matt Somerville (DA Davidson)

2026Q2: Backlog $4.11B, up 21%; positive book-to-bill of 1.12. ~80% expected to ship within next 12 months, with strong execution and pipeline filling into 2027. - Dave DiPico(CEO)

How does the current backlog build's duration and visibility compare to Ametek’s historical average? - Nicole DeBlasi (Deutsche Bank)

2026Q2: Backlog reached a record $4.11B, up 21% YoY, with a positive book-to-bill of 1.12. The order strength is driven by a multi-year infrastructure build-out. - Dave Zapico(CEO)

Contradiction Point 2

EMG Margins and Synergies

Inconsistent attribution of margin drivers and synergy realization timing, impacting the understanding of profitability drivers and future financial performance.

Deanna Dre (RBC Capital Markets) – Follow-up - Deanna Dre (RBC Capital Markets) – Follow-up

2026Q2: EMG core margin up 290 bps (due to Paragon new products and cost structure); EIG up 40 bps. Strong incrementals (~40%), productivity ($160 million target), and positive price growth. - Dave DiPuri(CFO)

What drove the 110 bps core margin expansion, and is there any update on Indicor acquisition synergies? - Scott Graham (Seaport Research Partners)

2026Q2: The expansion was driven by strong incrementals (~40% in both groups), positive pricing, and excellent productivity (reaching $160M enterprise-wide target). EMG's core margin expanded 290 bps, largely due to Paragon's new product phasing and a leaned-out cost structure. - Dave Zapico(CEO)

Contradiction Point 3

Order Growth Sustainability and Guidance Conservatism

Contradiction on whether strong order growth is broad-based and sustainable or includes lumpiness, affecting the perceived reliability of future performance.

Nicole DeBlasi (Deutsche Bank) - Nicole DeBlasi (Deutsche Bank)

2026Q2: Underlying capital spend by customers is driving multi-year infrastructure build-out; growth is broad-based across AI, power, defense, energy, and commercial aerospace. - Dave DiPico(CEO)

Can you provide details on any notable large/lumpy orders, the sustainability of order strength into the second half, and any comments on July orders? - Nicole DeBlase (Deutsche Bank)

2026Q1: Larger orders are expected to continue being booked, representing a broad-based pickup across markets (industrial, defense, etc.), not just a one-time event. Some lumpiness is acknowledged, but the underlying pipeline is strong. - Dave DiPico(CEO)

Contradiction Point 4

Backlog Conversion Rate Expectation

Contradiction in the expected rate at which the backlog will be converted to sales, influencing revenue forecasting and operational planning.

What impact have recent market trends had on revenue growth? - Matt Somerville (DA Davidson)

2026Q2: Backlog: $4.11 billion, up 21%; positive book-to-bill of 1.12. ~80% expected to ship within next 12 months, with strong execution and pipeline filling into 2027. - Dave DiPico(CEO)

Can you discuss the build in your backlog, its duration/visibility compared to Ametek’s historical average, the percentage of your business tied to semiconductors/data center/AI, and whether this influences your ability to capture pricing? - Deane Dray (RBC Capital Markets)

2025Q4: Backlog conversion is expected to be in the same 30%-50% range as historically. - Dave DiPico(CEO)

Contradiction Point 5

Core Margin Expansion Trajectory

Contradiction in the expected path for core margin expansion in the near term, impacting financial planning and investor expectations for profitability.

Nicole DeBlasi (Deutsche Bank) - Nicole DeBlasi (Deutsche Bank)

2026Q2: Guidance: Increased second-half organic sales guide by 1.5–2 points; Q3 guide incorporates prudence but confidence in delivery. - Dave DiPico(CEO)

"Given strong order growth, why is organic revenue growth projected to decelerate to high single digits in Q3, and what factors, including any conservatism in the model and differences between EMG and EIG, drive this expectation?" - Jamie Cook (Truist Securities, Inc.)

2025Q4: Core margins expanded 100 bps in Q4 2025. For 2026, reported incremental margins are expected to be 35%, with 30 bps of margin expansion, reflecting prudence but no surprises. - Dave DiPico(CEO)

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