Snapshot
Ametek Inc/ reported $2.00B of revenue in Q4 2025, up 13.4% year over year, with diluted EPS of $1.73 and an operating margin of 25.3%.
- Revenue
- $2.00B
- YoY growth
- +13.4%
- Diluted EPS
- $1.73
- Operating margin
- 25.3%
What management said
- •Any references made on this call to historical results will be on an adjusted basis, excluding after-tax, acquisition-related intangible amortization, and excluding acquisition-related costs.
- •In the quarter, we established records for sales, orders, operating income, EBITDA, diluted earnings per share, operating cash flow, and free cash flow.
- •Today, we announced the acquisition of LKC Technologies, an attractive technology acquisition, which broadens our med tech exposure.
- •Fourth quarter sales were a record $2 billion, up 13% from the same period in 2024.
- •Organic sales were up 5%, acquisitions added 7 points in the quarter, and foreign currency was a 1-point tailwind.
- •Orders were very strong in the quarter, with overall orders up 18% to a record $2 billion and organic orders up 7% versus the prior year, leading to a record backlog of $3.58 billion.
- •Sales and orders growth consistently improved throughout the year, with the fourth quarter growth the strongest of the year.
- •Operating income was a record $523 million, a 12% increase over the fourth quarter of 2024.
- •EBITDA in the quarter was a record $618 million, up 10% versus the prior year, and EBITDA margins, a strong 30.9%.
- •Diluted earnings per share were a record $2.01, up 7% versus the fourth quarter of 2024, and above our guidance range of $1.90-$1.95 per share.
- •Adjusting for an abnormally low tax rate in last year's fourth quarter, diluted earnings per share would have increased 11% in the quarter on a 5% increase in organic sales, reflecting strong incremental margins.
- •EIG delivered excellent operating performance in the fourth quarter, with record sales and operating profit, along with impressive core margin expansion.
What went well
- •AMETEK delivered record fourth quarter results with double-digit growth in sales, orders, and operating profit, plus robust core margin expansion and strong cash flow growth.
- •Fourth quarter sales were a record $2 billion, up 13% versus the prior year, with organic sales up 5%, acquisitions adding 7 points, and foreign currency a 1-point tailwind.
- •Orders were up 18% to a record $2 billion with organic orders up 7%, driving a record backlog of $3.58 billion, and December was the strongest single-month order month on record.
- •Core operating margins reached 27.6% in the quarter, up 100 basis points, with EIG core margins up 50 basis points and EMG operating margins up 240 basis points to 22.7%.
- •Free cash flow was a record $527 million, up 6%, with free cash flow to net income conversion of 132% in the quarter.
- •Diluted earnings per share were a record $2.01, up 7% and above the $1.90-$1.95 guidance range; the Electromechanical Group grew organic sales 14% with every division up double digits.
What went wrong
- •EIG organic sales grew only 2% in the quarter, coming in below management's earlier expectation, as process and analytical instrumentation growth was slower than anticipated.
- •The effective tax rate rose to 16.3% from 12.8% in the prior-year fourth quarter, and adjusting for last year's abnormally low rate, EPS growth would have been higher.
- •Industrial markets remained sluggish through 2025 amid ongoing macroeconomic uncertainty and roughly three years of negative PMI prints, with process businesses showing negative organic growth in the first half of the year.
- •FARO came in at a lower margin (roughly 15% EBITDA) creating initial margin dilution, with about $17.6 million in one-time charges and a couple of years needed to reach the 30% target.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| G&A expense (% of sales) | FY2026 | 1.6% | approximately 1.5% | lower |
| Effective tax rate | FY2026 | 17.8% | 18.5%-19.5% | higher |
| Capital expenditures | FY2026 | $130M | approximately $160M (about 2% of sales) | higher |
| Depreciation and amortization | FY2026 | — | approximately $430M (incl. ~$210M after-tax intangible amortization, or $0.91/share) | — |
| Free cash flow conversion | FY2026 | 113% | 110%-115% of net income | steady |
| Overall organic sales | FY2026 | — | low- to mid-single-digits (both EIG and EMG) | — |
| Reported incremental margins | FY2026 | 45% (Q4 core) | approximately 35% | lower |
| Operating margin expansion | FY2026 | — | approximately 30 basis points | — |
| Process segment organic sales | FY2026 | — | up low single digits | — |
| Aerospace & Defense organic sales | FY2026 | — | high single-digit growth | — |
| Power business organic sales | FY2026 | — | up mid-single digits | — |
| Automation and Engineered Solutions organic sales | FY2026 | — | up mid-single digits | — |
| Healthcare (Paragon/Rauland) growth | FY2026 | high single digits (FY2025) | up mid-single digits | lower |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Total sales | +13% | Organic growth of 5%, acquisitions adding 7 points, and a 1-point foreign currency tailwind. |
| EIG sales | +13% | Organic up 2%, acquisitions adding 10 points and FX a 1-point tailwind, with steady improvement in growth rates through 2025. |
| EMG sales | +15% | Organic up 14% with every division growing double digits, led by Paragon Medical and broad-based strength. |
| EMG operating income | +28% | Strong broad-based growth and operating execution, lifting margins 240 basis points to 22.7%. |
| Operating income | +12% | Record $523 million driven by core margin expansion of 100 basis points. |
| Process businesses sales | up mid-teens | Contribution from FARO and Kern acquisitions, with organic growth turning positive at low single digits for the first time. |
| Aerospace & Defense sales | low double-digit | Broad-based growth across commercial OE and aftermarket businesses with expanding platform content. |
| Power business sales | mid-single digits | Strength in RTDS and Power Instruments driven by grid modernization and data center build-out. |
| China sales | low double-digit | Strength in process, power, and automation businesses despite broader deflation and a real estate hangover. |
| Healthcare (Paragon/Rauland) | low double-digit (Q4) | Strong demand in medical platforms across both EIG and EMG; full-year up high single digits. |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Acquisitions and M&A pipeline | — | Closed FARO, Kern (~$1B, ~$400M sales) and announced LKC Technologies; strong pipeline with more larger deals and over $5 billion of capacity while keeping investment-grade rating. | rising |
| Pricing versus inflation and tariffs | — | Positive price-cost spread in Q4 (about 50 bps above inflation plus tariffs); confident pricing will continue to offset inflation and known tariffs in 2026. | steady |
| Short-cycle / process recovery | Negative organic growth early in 2025 | Process organic growth turned positive at low single digits in Q4 with steady improvement and a healthy project pipeline. | rising |
| FARO integration and margin improvement | — | Two business units formed; targeting doubling of EBITDA margins from mid-teens to ~30% and 10% ROIC by year three, a couple of years out. | rising |
| Paragon margin progression | — | Now at EBITDA margins in line with AMETEK, with another leg of improvement expected over the next 12-18 months. | rising |
| Data center and power demand | Discussed last call | Reconfigured defense products and power systems support grid modernization and the data center ecosystem. | rising |
| Conservative / prudent 2026 guidance | — | Management repeatedly described the guide as prudent given macro uncertainty and tougher comps, especially in EMG. | steady |
Q&A summary
Can you drill into the medical portfolio performance across EIG and EMG and the medium-to-long-term outlook for Paragon and Rauland?
Broader healthcare is about 21% of the business; Paragon and Rauland were up low double digits in Q4 and high single digits for full-year 2025, with mid-single-digit growth guided for 2026 against tougher comps.
How are you thinking about strategic price capture going forward after years of inflation and tariff pressure?
Q4 had a positive price-cost spread (about 50 bps above inflation plus tariffs); management expects to again offset inflation and known tariffs in 2026, with price increases sticking due to the differentiated, mission-critical product portfolio.
Can you run through end markets and regional dynamics?
Process up mid-teens (low single-digit organic), Aerospace & Defense up low double digits, Power up mid-single digits, Automation up low double digits; geographically US and international both up mid-single digits, Asia up 10% with China up low double digits.
EIG organic growth of 2% was below expectations; what are your 2026 expectations for that segment?
EIG turned positive in Q4 on improving process performance; for 2026 both EIG and EMG are expected up mid- to high single digits overall with low- to mid-single-digit organic growth.
Can you update us on the FARO acquisition progress and key learnings?
Acquired at about 2.7x sales; targeting more than doubling EBITDA margins from mid-teens to ~30% and 10% ROIC by year three; two business units formed and integration with Creaform metrology going well, with ~$17.6 million of one-time charges taken.
Why do Q1 and 2026 margins look down year-on-year, and when does expansion return?
FARO's lower margin weighs on Q1 reported margins, but on a core basis Q1 margins are expected to expand in line with the full-year guide of about 30 bps expansion and ~35% incremental margins.