AMETEK's Q3 2025: Contradictions Emerge on Process Market Outlook, Paragon Profitability, Tariff Impact, and A&D Growth

Date of Call: None provided

Financials Results

• Revenue: $1.89B, up 11% YOY
• EPS: $1.89 per diluted share, up 14% YOY
• Operating Margin: 27% excluding recent acquisitions, up 90 basis points vs prior year

Guidance:

• Full-year sales expected to be up mid single digits vs 2024.
• Full-year diluted EPS now $7.32–$7.37, up 7%–8% vs prior year (prior guide $7.06–$7.20).
• Q4 sales expected to be up ~10%; Q4 EPS $1.90–$1.95 (up 2%–4% vs prior year; 6%–9% adjusting for last year’s low tax rate).
• Effective tax rate expected ~18%–18.5%.
• CapEx ~ $150M for the full year.
• Free cash flow conversion expected ~110%–115% of net income.
• Incremental $90M planned for organic growth (R&D, sales, digital).

Business Commentary:

* Strong Financial Performance: - AMETEK reported sales of $1.89 billion in Q3 2025, an 11% increase year-on-year, with organic sales growth of 4%. - This growth was driven by strong operational performance, with a record operating income of $496 million, up 11% over the previous year.

• Margin Expansion and Earnings Improvement:
• AMETEK achieved record EBITDA margins of 31.3% and earnings per diluted share of ```$1.89,up 14% year-on-year.

• Margin expansion was due to strong performance in the Electronic Instruments Group and the Electromechanical Group.

• Pandemic Recovery and Order Growth:

• The company's orders rose by 13% to a record $1.97 billion, with organic orders up 7%, leading to a record backlog of $3.54 billion.

• This growth was attributed to the resolution of supply chain issues and destocking, particularly in the Electromechanical Group.

• Regional and Segment Performance:

• Sales in the U.S. were up mid single digits, while international sales rose low single digits, with strength in Europe and Asia excluding China.
• Segment performance was strong across all businesses, notably in Aerospace & Defense, Power & Industrial, and Automation & Engineered Solutions.

Sentiment Analysis:

Overall Tone: Positive

• Management commented: "outstanding results" with "record $1.89 billion" sales (up 11% YOY), "record earnings of $1.89 per diluted share, up 14% YOY," EBITDA $592M (up 11%) with 31.3% EBITDA margin, and they increased full-year EPS guidance to $7.32–$7.37.

Q&A:

• Question from Deane Michael Dray (RBC Capital Markets): Maybe we can start with a tour of your key platforms and regions and what stands out in particular. Looks like Paragon really had a strong quarter as well. Also, any comments about tariffs driving softness in China?
  Response: Broad-based strength: Process sales up low teens (organic slightly down); Aerospace & Defense organic low double digits; Power & Industrial organic mid single digits (power strongest); Automation high single-digit organic; Paragon strong; Europe up low double digits; China weak due to tariff renegotiation causing delayed orders.

• Question from Matt J. Summerville (D.A. Davidson): Can you double-click on Paragon—organic sales performance, order growth, go-forward organic algorithm, and profitability versus expectations?
  Response: Paragon had outstanding double‑digit orders, restructuring about halfway done (including plant actions), margins now in line with AMETEK and management targets >35%+ EBITDA when integration/turnaround completes (~~1 year).

• Question from Andrew Burris Obin (Bank of America): Can you talk about strength in Europe, verticals and geographies, and order progression through the quarter and into October?
  Response: Europe strength was broad across automation, EMIP, MAD and aerospace (Europe up low double digits); September was strongest month for sales and orders and October month‑to‑date is very solid—momentum sustained into Q4 so far.

• Question from Christopher M. Snyder (Morgan Stanley): Q4 guide is +10% but Q3 was +11%—how does that decompose between organic, M&A and FX for Q4?
  Response: Q4 ~10% guide includes acquisitions contributing mid‑to‑high single digits; organic could step back modestly; FX expected to be neutral for Q4.

• Question from Christopher M. Snyder (Morgan Stanley): On the industrial and power business—are gains tied to data center power or broader industrial demand?
  Response: Strength is primarily on the power side—backup power, UPS for microgrids/data centers, RTDS simulation work with hyperscalers; industrial demand is solid but upside is from power-related opportunities.

• Question from Julian Mitchell (Barclays): Please help us understand progress at FARO and organic trends—how is integration proceeding and organic performance trending?
  Response: FARO met its sales and profit commitments; integration progressing well with Creaform; FARO not included in AMETEK organic (won't be until one year post‑acquisition).

• Question from Rob Wertheimer (Melius Research): Why is EMG outpacing EIG—geographic, selling cycle, or inventory dynamics?
  Response: EMG benefited from the end of a destock cycle and strong demand for specialized OEM/discrete products (Paragon, automation, EMIP), driving outsized growth; EIG did not experience the same destock/reshoring tailwinds.

• Question from Andrew Burris Obin (BNP): Some customers hesitate to spend—are your customers more confident now and how did pricing track vs cost (inflation/tariffs)?
  Response: Customers are coming back in AMETEK's niche markets; pricing actions offset inflation and tariffs with a positive spread—pricing more than covered cost pressures this quarter.

• Question from Nigel Edward Coe (Wolfe Research): On automation—how much of the high single-digit growth is easy comps/destock vs true end‑market demand; and EMG margin sustainability with Paragon?
  Response: Automation strength driven by discrete automation (precision OEMs) recovering post‑destock; some easy comps but underlying demand is returning; Paragon should provide upside to EMG margins and management expects potential to set new record margins.

• Question from Robert Jamison (Vertical Research): Thoughts on short‑cycle dynamics heading into next year and what you saw in the quarter/early Q4?
  Response: Short‑cycle bottomed; upward trend in automation/EMG and med‑tech observed; visibility improving though timing uncertain—management sees constructive momentum into next year.

• Question from Robert Jamison (Vertical Research): Update on M&A pipeline and areas of interest?
  Response: Pipeline remains very strong across current end markets, management is active and disciplined on returns with capacity to fund deals and intends to continue strategic acquisitions.

• Question from Joseph Giordano (TD Cowen) (asked by Michael): On Aerospace & Defense—was content growth related to FARO, and what is a normalized growth range going forward?
  Response: FARO is not in A&D; A&D organic was low double digits in the quarter and management maintains expectation of high single‑digit growth for the year, with balanced strength across OEM, aftermarket and defense.

• Question from Scott Graham (Seaport Research): Has the emphasis on front‑end/top‑line initiatives started to broaden wins across end markets as industrial activity improves?
  Response: Yes—management believes AMETEK is well positioned to capture broader organic growth as industrial demand recovers, citing consistent execution and long‑term ~4% organic average with the ability to scale above that.

Contradiction Point 1

Process Market Outlook and Expectations

It involves differing views on the process market outlook and expectations for organic sales, which are crucial for understanding the company's growth trajectory.

Can you provide details on Paragon's organic sales, order growth, and profitability compared to initial expectations? - Matt J. Summerville (D.A. Davidson)

2025Q3: The process market outlook is more optimistic, with improved visibility and strong pipeline. Organic sales are expected to be flat to down low single digits for the year. - David A. Zapico(CEO)

Can you provide your perspective on the end market and regional trends given the fluid trading environment? - Deane Dray (RBC Capital Markets)

2025Q2: We now expect organic sales for our Process businesses to be flat to down low single digits for the full year. - David A. Zapico(CEO)

Contradiction Point 2

Paragon's Profitability and Margins

It highlights differing statements about Paragon's profitability and margins, which are key performance indicators for the company's acquisition strategy.

Can you outline your key platforms and regions and highlight what's notable, specifically regarding Paragon? - Deane Michael Dray (RBC Capital Markets)

2025Q3: Paragon has shown strong performance with significant orders and profitability improvements. The restructuring is approximately halfway done, with cost structure reduction and new program wins. Margins are now in line with AMETEK's margins, and expectations are for a 35%+ EBITDA business post-completion. - David A. Zapico(CEO)

Can you provide an update on Paragon's performance? - Jeffrey Sprague (Vertical Research)

2025Q2: Paragon had another excellent quarter, Jeff. Orders growth was robust, and sales were strong. Paragon EBITDA margins are now in line with AMETEK. We see meaningful margin runway ahead. They're a 30-plus percent EBITDA margins, and we're very excited about what we're seeing. - David A. Zapico(CEO)

Contradiction Point 3

Paragon Medical Orders and Performance

It involves the performance and order trends of Paragon Medical, a significant part of the company's operations, which impacts expectations for growth and profitability.

Can you elaborate on Paragon's organic sales, order growth, and profitability compared to initial expectations? - Matt J. Summerville (D.A. Davidson)

2025Q3: Paragon had another excellent quarter with double-digit orders, driving EMG orders. - David A. Zapico(CEO)

Can you provide details on the recent inflection in Paragon Medical's orders and the broader medical business? Also, discuss AMETEK's order cadence and any signs of demand destruction? - Matt Summerville (D.A. Davidson)

2025Q1: Paragon Medical saw a destocking period after acquisition, but now customers are beginning to restock. - Dave Zapico(CEO)

Contradiction Point 4

Tariff Impact and Mitigation Strategies

It addresses the impact of tariffs on the company's operations and financial performance, which is crucial for understanding risk management and potential financial implications.

Can you summarize your key platforms and regions and explain what differentiates Paragon? - Deane Michael Dray (RBC Capital Markets)

2025Q3: The annual tariff impact is estimated at $100 million. This includes 145% tariffs on China imports and 98% compliance with USMCA guidelines. - Dave Zapico(CEO)

Can you detail the impact of tariffs, especially regarding China’s sourcing percentage of COGS? - Deane Dray (RBC Capital Markets)

2025Q1: The tariff impact from China is part of the $100 million total. The shipping delay in Q2 could impact earnings by $0.10 or more due to high-margin products. - Dave Zapico(CEO)

Contradiction Point 5

Aerospace & Defense Growth Expectations

It involves differing expectations for the growth rate of the Aerospace & Defense segment, which is a key area of focus for the company's strategic growth.

Can you provide more details on A&D performance and future growth expectations? - Joseph Giordano (TD Cowen)

2025Q3: Aerospace and defense businesses experienced low double-digit organic growth across commercial OEM, aftermarket, and defense markets. - David A. Zapico(CEO)

How do you view the aerospace vs defense outlook and profitability as OE shifts from aftermarket? - Brett Linzey (Mizuho)

2024Q4: Our Aerospace & Defense business grew mid-single digits in Q4. We expect ongoing strength in both segments, with commercial stronger than defense. Commercial will grow mid-single digits, and defense mid-single digits. - David Zapico