Ralliant (NYSE:RAL) raised its full-year 2026 outlook after reporting 17% third-quarter revenue growth, as demand for defense products, utility equipment and test instruments helped both of its business segments post double-digit organic growth.
Revenue rose to $620 million, while adjusted earnings per share increased 64% to $0.93 on a normalized basis. The company generated $102 million in free cash flow and said its book-to-bill ratio remained above 1.1 in both segments, indicating orders exceeded revenue.
President and CEO Tami Newcombe said demand accelerated during the quarter and that an expanding backlog was improving visibility. “Based on these indicators, we are raising our full year 2026 guidance by more than our Q3 beat,” she said.
Higher outlook and margin gains
Ralliant now expects full-year revenue of $2.34 billion to $2.36 billion, an increase of $75 million at the midpoint from its prior forecast. It projected an adjusted EBITDA margin of approximately 21.5% and adjusted earnings per share of $3.10 to $3.16.
For the fourth quarter, the company forecast revenue of $620 million to $640 million, an adjusted EBITDA margin of 23.5% to 24.5% and adjusted earnings per share of $0.93 to $0.99. Its full-year guidance includes anticipated tariff refund benefits of approximately $2 million in the second quarter, $7 million in the third and $5 million in the fourth.
Third-quarter adjusted EBITDA margin was 23.5%, up 400 basis points from a normalized year-earlier comparison. CFO Neill Reynolds said the improvement reflected higher sales volumes, pricing and accelerated savings from the company’s Enterprise Productivity Program. Ralliant normalized its first three quarters of 2025 to reflect fully ramped post-spin costs.
Adjusted gross margin expanded 190 basis points to more than 53%. A $7 million tariff refund accounted for 115 basis points of that expansion, Reynolds said. Excluding the refund, adjusted gross margin increased 75 basis points and adjusted EBITDA margin rose approximately 290 basis points.
Defense backlog tops $1.5 billion
Revenue in the Sensors and Safety Systems segment rose 15% to $376 million, with its adjusted EBITDA margin increasing 270 basis points to 30.5%. The segment benefited from higher defense production and record utility revenue, Reynolds said. It also received the majority of the third-quarter tariff refund.
Ralliant’s defense and space revenue grew 21%, and its multi-year backlog in that business surpassed $1.5 billion. Newcombe said the company began receiving orders tied to contract actions supporting Lockheed Martin’s THAAD and PAC-3 missile defense programs.
During the question-and-answer session, Newcombe said the backlog includes firm purchase orders for the first year of the programs and that additional orders could follow. She said the company’s existing defense footprint can meet its expectations through 2027, independent of a planned site in Solon, Ohio. Ralliant could consider a fourth defense site at some point, she added.
Utility revenue rose 16% as customers invested in power infrastructure. Newcombe said the business posted its highest book-to-bill ratio of the year alongside record quarterly revenue. The company is expanding its Fairport, New York, site to support future demand.
Test demand and productivity savings
Test and Measurement revenue increased 20% on a reported basis to $244 million and rose 21% organically. Its adjusted EBITDA margin expanded 670 basis points to 19.3%, helped by volume, pricing and productivity savings.
Within the company’s end markets, diversified electronics revenue grew 48%, while semiconductor revenue fell 7% against a comparison with a large customer project completed in the prior-year quarter. Excluding that project, semiconductor revenue grew in the high teens, Newcombe said.
Ralliant increased its estimate for 2026 savings from its Enterprise Productivity Program to $16 million to $18 million, from $10 million to $12 million. It expects to exit the year with $30 million to $35 million in annualized run-rate savings, against a target of $50 million to $60 million by 2028.
Reynolds said the supply chain remains challenging, with elevated inflation and limited availability of certain inputs. Newcombe said the company expects pricing to increase by more than 3% this year and has selectively added inventory to support supply.
Early view of 2027
Although Ralliant did not issue formal 2027 guidance, executives pointed to backlog, customer demand and productivity savings as support for continued growth. Reynolds said a high-20s adjusted EBITDA margin for Sensors and Safety Systems and a margin of at least 20% for Test and Measurement were reasonable possibilities for 2027.
Reynolds also cautioned that tariff refund benefits received in 2026 would not repeat next year. He said the company would typically expect a seasonal decline in revenue and margins from the fourth quarter to the first, though its backlog could help it perform somewhat better than historical patterns.
Ralliant ended the quarter with $366 million in cash and cash equivalents and $1.15 billion in debt. It returned $167 million to shareholders through the first three quarters, including $150 million in share repurchases and $17 million in dividends.
About Ralliant (NYSE:RAL)
Ralliant Corporation (NYSE: RAL) is an industrial technology company that develops and supplies highly engineered products and solutions for customers with demanding measurement, monitoring, sensing and reliability requirements. Its offerings are designed to support the performance, safety and efficiency of industrial equipment and processes.
The company’s portfolio includes test and measurement instruments, sensing and monitoring technologies, power and electrical solutions, and products used to improve the reliability and maintenance of industrial assets.
