SPXC Q1 Earnings Call: Acquisitions and Tariff Management Drive Upward Guidance

Industrial conglomerate SPX Technologies (NYSE: SPXC) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 3.7% year on year to $482.6 million. The company’s full-year revenue guidance of $2.23 billion at the midpoint came in 3.3% above analysts’ estimates. Its non-GAAP profit of $1.38 per share was 17.6% above analysts’ consensus estimates.

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StockStory’s Take

SPX Technologies’ first-quarter results reflected steady execution in both its HVAC and Detection & Measurement segments, with management crediting the quarter’s performance to recent acquisitions and ongoing margin discipline. CEO Eugene Lowe pointed to the contribution from the newly acquired KTS and Ingenia businesses, as well as robust demand across core HVAC platforms, especially in heating and data center-related cooling applications. New product launches and a strong project backlog in Detection & Measurement further supported segment results, despite organic revenue remaining flat overall.

Looking ahead, management lifted full-year guidance, citing confidence in integration efforts and expected synergies from the April acquisition of Sigma and Omega. Management discussed how pricing actions and supply chain adjustments are expected to partially offset the impact of tariffs, but acknowledged some headwinds in Europe and Asia. CFO Mark Carano noted, “We tried to be very thoughtful about the impact here from tariffs and our ability to raise price,” signaling a cautious approach to cost recovery throughout the year.

Key Insights from Management’s Remarks

Management highlighted several factors influencing first-quarter results and set the stage for full-year execution:

• Acquisitions Boosting Diversification: The addition of Sigma and Omega to the HVAC segment, along with KTS and Ingenia, broadened product offerings and expanded SPX Technologies’ addressable market. Management emphasized cross-selling opportunities, especially leveraging strong U.S. distribution channels to accelerate Sigma and Omega’s growth beyond Canada.
• Tariff Impact Mitigated by Pricing: Tariff-related headwinds were addressed through targeted price increases and surcharges. CFO Mark Carano quantified the net tariff impact for the year at $6 million, with about $20 million in gross costs offset by $14 million in pricing actions. Management expects the ability to offset these costs to improve as legacy contracts roll off.
• Product Innovation and Data Center Growth: New HVAC products, particularly the Everest cooling solution and adiabatic offerings, are gaining traction in data center applications. Management sees rising data center demand as a meaningful opportunity, with additional patents pending for these technologies.
• Detection & Measurement Momentum: The Detection & Measurement segment benefited from a strong project mix and backlog growth, particularly in defense and infrastructure applications. Management cited healthy frontlog activity and highlighted the importance of new platforms such as KTS digital interoperability solutions.
• Operational Flexibility and Backlog Strength: Management credited the company’s high proportion of replacement sales and government-mandated solutions for reducing cyclicality. Backlogs in both segments increased sequentially, supporting confidence in the near-term outlook despite some regional market softness.

Drivers of Future Performance

SPX Technologies’ updated outlook is driven by acquisition integration, pricing discipline, and product innovation, as management aims to offset external cost pressures and regional demand uncertainty.

• Synergy Realization from Acquisitions: Integration of Sigma and Omega is expected to expand the HVAC addressable market and unlock cross-selling potential, while KTS and Ingenia add to segment growth and operational leverage.
• Pricing Strategy to Address Tariffs: Management will continue to implement price increases and surcharges to offset tariff impacts, with the expectation that mitigation efforts will be more effective as contracts renew and supply chain adaptations take effect.
• End-Market and Macro Sensitivity: SPX Technologies’ high proportion of replacement and mandated sales is expected to provide some insulation from broader economic cycles, but management cautioned that a recession could still create demand air pockets, particularly in project-based businesses.

Top Analyst Questions

• Brad Hewitt (Wolfe Research): Asked for clarity on the net financial impact of tariffs and whether the cut to organic EBITDA guidance reflects this. Management detailed the cost breakdown and offsetting price actions, noting most of the impact is expected in the first half of the year.
• Brad Hewitt (Wolfe Research): Inquired about growth prospects and EBITDA margins for Sigma and Omega post-acquisition. CEO Eugene Lowe described the business as complementary, with room to improve growth and margins as synergies are realized.
• Bryan Blair (Oppenheimer): Sought management’s view on order trends and demand volatility by platform in the face of tariffs. Management responded that demand is steady, with increased optimism in data center-related HVAC applications and some caution in Europe and Asia.
• Bryan Blair (Oppenheimer): Asked about Ingenia’s revenue trajectory and long-term growth. Management indicated capacity is ramping toward a $140 million annual run rate, with U.S. expansion and strong market demand underpinning future growth.
• Ross Sparenblek (William Blair): Questioned the organic versus acquisition-driven growth in Detection & Measurement backlog. Management confirmed a mix of both, highlighting strong organic project wins as well as KTS contributions.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be monitoring (1) the pace and effectiveness of integrating Sigma and Omega within the HVAC segment, (2) the ability to maintain margin performance as tariff mitigation strategies are implemented, and (3) the sustainability of backlog growth in both HVAC and Detection & Measurement. Additional focus will be placed on whether new product launches—particularly in data center cooling—translate into measurable revenue acceleration.

SPX Technologies currently trades at a forward P/E ratio of 24.2×. At this valuation, is it a buy or sell post earnings? See for yourself in our free research report.

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