メタラス（MTUS）2026年第3四半期決算説明会：防衛分野の成長と2026年ガイダンス

メタラス（Metallus, Inc.、NYSE: MTUS）は、航空宇宙・防衛部門の過去最高の業績、価格改善、および良好な製品ミックスに支えられ、2026年第3四半期の売上高と調整後EBITDAが増加したと発表しました。経営陣は第4四半期に季節的な圧力を予想しているものの、2027年にはさらなる増益を見込んでいます。

要点

• 第3四半期の売上高は前年同期比10%増の3億3,700万ドルとなり、調整後EBITDAは前期比および前年同期比でそれぞれ19%増の3,450万ドルとなりました。
• 航空宇宙・防衛部門の出荷量は前年同期比34%増、前期比10%増の約2万2,000トンに達しました。同部門が出荷量に占める割合は13%でしたが、売上高では20%を占めました。
• メタラスは、航空宇宙・防衛部門の年間売上高ランレート目標である2億5,000万ドルを達成しました。米国国防後方支援庁（DLA）との新規契約には、約1億2,500万ドルの初回注文と、5年間で最大9億9,500万ドルの上限額が含まれています。
• 経営陣は、季節的要因により第4四半期の出荷量が前期比で一桁台後半の減少となると予想していますが、前年同期は上回る見込みです。
• 2026年通期の調整後EBITDAは1億ドルから1億500万ドルの間になると見込まれています。第4四半期の調整後EBITDAは前期比では減少するものの、前年同期を上回る見通しです。
• メタラスは第3四半期末時点で、現金9,860万ドル、総流動性3億8,900万ドルを保有し、有利子負債残高はありませんでした。

主要財務データ

メタラスは当四半期中に約19万株を360万ドルで買い戻しました。自社株買いの残枠は7,820万ドルでした。2022年初頭以降、自社株および転換社債の買い戻しにより、発行済希薄化後株式数は26%（1,420万株）削減されました。

事業および営業業績

航空宇宙・防衛

第3四半期の成長は航空宇宙・防衛部門が牽引しました。同市場における売上高は前年同期比41%増加し、より高付加価値な製品ミックスが同社の収益性を支えました。

DLAとの契約には約1億2,500万ドルの初回納入注文が含まれ、5年間の発注期間における最大契約額は9億9,500万ドルに達します。メタラスは、初出荷が2027年第2四半期に開始され、2027年後半から2028年にかけて本格化すると見込んでいます。初回注文は受領から2年以内に履行する必要があります。

同社はまた、弾薬プログラムを支援する完成・完全組立コンポーネントについて、新たな主契約者から1,000万ドルの注文を獲得しました。経営陣は、将来のDLA発注は保証されていないものの、今回の新規DLA注文によって航空宇宙・防衛部門の売上高は従来の年換算目標である2億5,000万ドルを継続的に上回る見込みであると述べました。

自動車・産業・エネルギー

自動車向けの出荷量と売上高は、納入時期の影響で前期比では減少したものの、前年同期比ではほぼ横ばいでした。経営陣は、受注残高、既存プログラム、および新規プラットフォームの獲得に支えられ、需要は堅調であると説明しました。

産業向けの出荷量は前期比および前年同期比ともに3%減少しました。経営陣は第3四半期の出荷圧迫の一因として、溶解工場の電力削減を挙げており、により溶解生産量が約1万トン減少しました。産業向けの受注高は前年同期の水準を上回って推移しており、建設機械および一般機械顧客からの需要に支えられています。

エネルギー向けの出荷量は前期比で減少したものの、前年同期比では増加しました。同社は、主要顧客からの棒鋼および鋼管に対する強い需要の兆候を報告しました。

経営陣の見通し

• 2026年通期の調整後EBITDAは1億ドルから1億500万ドルとなる見込みです。
• 第4四半期の出荷量は、主に通常の年末の季節要因により第3四半期から一桁台後半の減少が見込まれますが、2025年第4四半期の水準は上回る見通しです。
• 第4四半期の価格および製品ミックスは前期比でやや低下する見込みですが、これは構造的な価格変更ではなく製品ミックスを反映したものです。
• 第4四半期の調整後EBITDAは前期比では減少するものの、前年同期比では増加する見込みです。
• 年次の定期修繕メンテナンスにより、停止コストの増加、固定費レバレッジの低下、溶解炉稼働率の低下を通じて、第4四半期の調整後EBITDAは第3四半期比で約1,000万ドルから1,500万ドル押し下げられる見通しです。
• 通期の設備投資額は、主に米国政府が資金提供するプロジェクト向けの約3,500万ドルを含め、合計約7,000万ドルとなる見込みです。
• 2026年の調整後実効法人税率は27%から30%になると予想されています。
• 経営陣は、より強固な受注残高と2027年第2四半期まで延びる顧客からの受注に支えられ、2027年も引き続き増益成長の年になると見込んでいます。

メタラスは10月初旬、年次価格協定の対象外である顧客に対し、棒鋼および焼入れ・焼き戻しシームレス機械構造用鋼管の価格を1トン当たり60ドル値上げしました。経営陣は、この効果が2027年を通じて徐々に拡大すると期待しています。同社は引き続き、条鋼製品の注文の約70%を年次契約とすることを目標としています。

リスクと注視事項

電力削減は引き続き操業上の制約となっています。第3四半期の溶解炉稼働率を3ポイント押し下げ、産業向け出荷に影響を与えました。

第4四半期の業績は、季節的な出荷減と年次定期修繕メンテナンスによる財務的影響に直面します。また、インフレ圧力により値上げによる効果の一部が相殺される見込みです。

年次協定に基づく価格設定はスポット市場での値上がり幅を下回る可能性があり、また既存の受注残があるため、価格転嫁の実現が2027年第1四半期後半または第2四半期前半にずれ込む可能性があります。

メタラスはDLAの初回注文を開始・履行する生産能力を有していますが、同契約と他の防衛分野での成長機会とのバランスを考慮しつつ、長期的な資金ニーズを継続的に評価しています。経営陣は、新規の設備投資が業績に貢献するまでには数年かかる可能性があると指摘しました。

アナリストとの質疑応答の要点

1月にクリストファー・ウェストブルックス氏がマイケル・ウィリアムズ氏の後任として社長兼CEOに就任するにあたり、経営陣は戦略の継続性を予想しています。短期的な優先事項には、既存受注の着実な履行、DLA契約の完遂、および2027年の増益成長の推進が含まれます。

DLA受注に関して経営陣は、他の航空宇宙・防衛向け売上と同様に売上が計上され、生産は2027年から2028年にかけて拡大していくと述べました。拡張の選択肢の評価も継続しているものの、既存の生産能力で初回の確約分に対応するには十分です。

経営陣は、第4四半期に予想される価格の前期比低下について、基礎的な価格下落ではなく、主に製品ミックスによるものであると説明しました。以前に実施した値上げ効果は継続しており、年次契約交渉は約3分の1が完了しています。

決算説明会文字起こし全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Hello, everyone. Thank you for joining us, and welcome to the 3Q 2026 Metallus, Inc. Earnings Call. [Operator Instructions]

I will now hand the conference over to Jenna Johnson. Please go ahead.

Jenna Johnson

Good morning, and welcome to Metallus' Third Quarter 2026 Conference Call. I'm Jenna Johnson, Senior Manager, Finance and Investor Relations for Metallus. Joining me today are Mike Williams, Chief Executive Officer; Kris Westbrooks, President and Chief Operating Officer; and John Zaranec, Executive Vice President and Chief Financial Officer. You should have received a copy of our press release, which was issued last night.

During today's conference call, we may make forward-looking statements as defined by the SEC. Actual results may differ materially from those projected or implied due to a variety of factors, which we describe in greater detail in yesterday's release. Please refer to our SEC filings, including our most recent Form 10-Q, which will be filed later today as well as the risk factors included in our earnings release, all of which are available on the Metallus website. Where non-GAAP financial information is referenced, additional details and reconciliations to its GAAP equivalent are included in the earnings release and the earnings presentation available on the Investor page at metallus.com.

Now I'll turn the call over to Mike Williams for his remarks.

Michael Williams

Thank you, Jenna, and good morning, everyone. Our third quarter results reflect strong execution across the organization. Through a continued focus on operational excellence, commercial discipline and strategic initiatives, we increased profitability both sequentially and year-over-year for the third consecutive quarter. Additionally, we achieved our $250 million annualized aerospace & defense run rate sales target. This milestone was made possible by our dedicated teams working across the organization and expanding partnerships with customers in this market.

During the quarter, we also reached several milestones that support our long-term growth strategy. In August, we commissioned the new strategic manufacturing assets supporting critical defense materials, a significant milestone in our long-term growth strategy. We were honored to host representatives from the U.S. Army, regional economic development organizations, customers and government leaders as we showcased investments that strengthen the domestic munition supply chain and support U.S. national security. In late September, we were awarded a contract by the U.S. Defense Logistics Agency, or DLA, to supply steel for critical defense applications. The contract includes an initial delivery order valued at approximately $125 million and a ceiling of up to $995 million over a 5-year ordering period. The award reflects Metallus' ability to produce specialty steel products that meet the rigorous performance, quality and traceability requirements of critical defense applications. It also highlights our team's metallurgical expertise in partnering with our customers to find critical solutions for their evolving needs. Additionally, we continue to gain traction with new participants in the defense market.

We recently secured a $10 million purchase order from a new prime contractor for finished fully assembled components supporting a growing munitions program. This order is another sign that our capabilities and reputation are helping us provide solutions for new customers. Together, the customer momentum and recently achieved AS9100 certification provides external validation that our focus and investment in aerospace & defense is working. These wins are not isolated events. They reflect the sustained deliberate effort we have made to grow and deepen our presence in this expanding market.

Finally, as previously announced, I plan to retire as Chief Executive Officer at the end of the year. Kris Westbrooks, our President and Chief Operating Officer, will succeed me. This planned transition reflects the Board of Directors' commitment to a well-planned and seamless succession and positions Metallus to build on its established momentum into the future.

With that, I'll turn the call over to Kris to walk through our third quarter highlights and end market performance in more detail.

Kristopher Westbrooks

Thanks, Mike. Good morning, everyone. I'll start with our third quarter highlights, then discuss demand across our end markets and close with our positive outlook for 2027. Third quarter adjusted EBITDA was $34.5 million, increasing 19%, both sequentially and year-over-year. The quarter benefited from a favorable product mix, record aerospace & defense sales and shipments and the continued impact of disciplined pricing actions.

Turning to operations. Melt utilization reached 76% in the third quarter, excluding a 3 percentage point impact of electricity curtailments. Underlying operating performance improved during the third quarter despite the increased weather and grid-related disruptions. We continue to take steps to reduce the operational impact of electricity curtailments and meet growing customer demand. Additionally, our team completed its planned annual shutdown maintenance at the melt shop in October. I'm encouraged by the melt shops performance to date in the fourth quarter following the shutdown maintenance.

Turning to our end markets. As expected, automotive shipments and sales declined sequentially due to timing and were relatively flat year-over-year. Automotive is a core part of our portfolio and demand trends remain steady in this market, supported by a healthy order book. Our existing auto programs, platform wins and customer relationships provide a solid foundation. We remain focused on delivering the performance and partnership our customers expect. Industrial shipments declined slightly at 3% sequentially and year-over-year. Spot price increases implemented throughout 2026 continue to benefit base sales per ton and total sales within the industrial market. Inventory levels in the industrial distribution supply channel remained low, reflecting strong demand and tight supply. A strong trade environment and ongoing supply chain reassessments are resulting in customers increasing their needs from domestic suppliers. This is supported by industrial bookings, which remain elevated compared with a year ago and positions Metallus to capture additional industrial opportunities.

Leading our third quarter end market performance was aerospace & defense, or A&D for short. A&D shipments reached nearly 22,000 tons in the quarter, up 34% year-over-year and 10% sequentially. Net sales increased 41% year-over-year in the A&D market. And as Mike mentioned, we achieved our $250 million annualized sales run rate target. Our continued progress in end market diversification is also improving profitability. While aerospace & defense accounted for 13% of total shipment volume, the A&D sales contribution was much larger at 20% of sales in the quarter. This underscores how higher-value A&D product offerings strengthen product mix and profitability.

In Energy, shipments declined sequentially but increased year-over-year. The U.S. rig count is up approximately 10% from a year ago. We are seeing strong bar and tube demand signals from key customers. Energy remains a strategic market for Metallus. And although energy shipments represent a smaller proportion of overall shipments, we see continued opportunities for growth in this sector.

Finally, let me briefly update you on our 2027 outlook at a high level. Market conditions remain favorable, and our order book has grown both sequentially and year-over-year. These conditions provide solid visibility with customer orders booking into the second quarter at this time. The strong market demand, combined with our strategic advancements and continued operational execution, reinforces our confidence in another year of anticipated profitable growth as we plan for 2027.

With that, I'll turn the call over to John Zaranec to walk through the financial highlights of the quarter.

John Zaranec

Thank you, Kris. During the third quarter, our team delivered improvements in profitability on both a sequential and year-over-year basis for the third consecutive quarter, consistent with our guidance. We also continued to diversify sales across our markets, expanding our margin through favorable mix. From a top line revenue perspective, third quarter net sales totaled $337 million, a year-over-year increase of $31.3 million or 10%, primarily driven by higher shipments in aerospace & defense and energy markets. Net income was $23.8 million in the third quarter or $0.55 per diluted share. On an adjusted basis, net income was $14.9 million or $0.35 per diluted share. Adjusted EBITDA was $34.5 million in the third quarter, both a sequential and year-over-year increase of $5.5 million or 19%. The increased sequential profitability was primarily driven by improved base prices and mix, partially offset by planned shutdown maintenance timing, higher operating costs to support demand and an increase in electricity curtailments, as Kris previously discussed.

In the third quarter, we generated $6.8 million of operating cash flow, reflecting solid profitability, partially offset by investments in inventory to support the continued ramp-up of our business and our annual insurance premium payment in July. In the third quarter, capital expenditures totaled $13.1 million, including approximately $4.9 million related to the projects primarily funded by the U.S. government. Consistent with our previous communications, planned capital expenditures for the full year are expected to be approximately $70 million, inclusive of approximately $35 million of capital expenditures primarily funded by the U.S. government. At the end of the third quarter, the company's cash and cash equivalents balance was $98.6 million.

As it relates to government projects, during the third quarter, as Mike noted, the company celebrated the commissioning of new assets supporting critical defense materials, and we further strengthened our long-term growth outlook with a new commercial DLA award, including an initial $125 million purchase order and a contract value of up to $995 million over the next five years. We are currently establishing the production and shipment schedule for the initial DLA order as well as assessing any longer-term capital requirements. The first order must be fulfilled within two years of receipt, and we anticipate shipments to commence in the second quarter of 2027 and ramp further throughout the remainder of next year.

Now switching to pensions. In the third quarter, the company made no required pension contributions related to the U.S. bargaining plan, consistent with our guidance. Based on our updated actuarial analysis, no additional pension contributions are expected for the remainder of 2026. As a reminder, our 2026 pension contributions represent a reduction of over 60% when compared to 2025.

In terms of shareholder return activities, in the third quarter, the company repurchased approximately 190,000 shares of common stock at a cost of $3.6 million. At the end of September, a balance of $78.2 million remained under our existing share repurchase program. Since the inception of common share repurchases in early 2022, combined with the convertible note repurchase activities, we've reduced diluted shares outstanding by a significant 26% or 14.2 million shares. These actions reflect the strength of the company's balance sheet and confidence in through-cycle cash flow generation. As it relates to liquidity, total liquidity remained strong at $389 million as of September 30, 2026. At the end of the third quarter, the company had no outstanding borrowings.

Turning to the near-term outlook. Commercially, fourth quarter shipments are expected to be lower than the third quarter by a high single-digit percentage, primarily due to normal year-end seasonality. However, shipments are expected to be higher when compared to the prior year fourth quarter. Lead times for bar and tube products currently extend into the second quarter of 2027. Based on lead times and anticipated product mix, fourth quarter price and mix are expected to be slightly lower than in the third quarter.

The company recently announced price increases of $60 per ton on both bar and quench and temper seamless mechanical tubing, effective early October for customers not covered by annual pricing agreements. Based on lead times and order backlog, the company expects to realize the benefit of these price increases ramping throughout 2027. We are also in the middle of our annual customer contract season. And while we expect pricing expansion when compared to last year's annual contracts, historically, the annual contract prices are lower than the spot price market increases. We will share more on the pricing impact on 2027 anticipated results during our year-end call in February.

From an operational perspective, annual shutdown maintenance in the fourth quarter is expected to unfavorably impact adjusted EBITDA by approximately $10 million to $15 million compared to the third quarter, reflecting incrementally higher shutdown costs, lower fixed cost leverage and lower melt utilization, consistent with prior year timing. And finally, an adjusted effective income tax rate between 27% and 30% is expected for the full year 2026. Given these elements, the company expects fourth quarter 2026 adjusted EBITDA to be lower sequentially but higher than the prior year fourth quarter. We expect full year adjusted EBITDA for 2026 to be between $100 million to $105 million.

Before we conclude today's prepared remarks, I would like to turn the call back over to Mike for some closing comments.

Michael Williams

Thank you, John. This is my final earnings call as CEO of Metallus. I'd like to take a moment to reflect on the company's progress over the past six years. Metallus is a stronger company today based on a strong foundation of metallurgical expertise and world-class specialty solutions. We have improved operational performance, strengthened our commercial discipline and invested in capabilities that differentiate us in specialty metals. We've expanded in aerospace & defense while continuing to serve our automotive, industrial and energy customers. We've also deepened customer and stakeholder relationships.

Together, we have strengthened our financial position, supported by a solid balance sheet and nearly $400 million in liquidity. Additionally, our share repurchase program has meaningfully reduced our share count. These achievements reflect years of disciplined financial decisions, a balanced approach to capital allocation and consistent execution.

Serving as CEO has been a privilege. I'm grateful to our employees, customers, suppliers, shareholders and Board of Directors for their trust and partnership throughout these years and for the opportunity to help shape Metallus' future. This is my final earnings call as CEO. I leave knowing the company is well positioned for its next chapter. Kris Westbrooks will become President and CEO in January. As we prepare for that transition, Metallus is building on this foundation and we'll continue to pursue opportunities ahead to drive profitable growth for all stakeholders. I also want to express my complete confidence in Kris as he prepares to assume his new role. He is a proven leader who understands our business, our customers, our strategy and most importantly, our culture. Our priorities remain clear: operate safely, serve our customers reliably, execute our strategic initiatives and create sustainable long-term value for our shareholders. Thank you for your continued confidence in Metallus and for the opportunity to serve as the CEO. I look forward to watching the company's continued success in the years ahead.

With that, Kris and John will handle your questions this morning. Operator, can you please open up the line for questions?

Operator

[Operator Instructions] Your first question from the line of Aaron Reed with Northcoast Research.

質疑応答

Aaron Reed

I just want to congratulate you on the quarter and then congratulate Mike on your retirement. One of the first questions I have is, with the retirement, should we expect any strategic shifts once Westbrooks takes over at year-end? Or do we expect a fairly stable continuation here going forward? How should we think about that?

Kristopher Westbrooks

Aaron, this is Kris. Thanks for the question. One of the purposes of the succession planning process is to have that consistency and strategy we've been working together over the past few years to develop that to roll that out. And we're sitting here today with a really strong order book, a new order from the Defense Logistics Agency that we're going to deliver on, and that's going to be our focus in the near term. deliver on that order book, drive a stronger 2027. And as we advance the company, obviously, our strategy will continue to evolve. We want to drive the company's growth profitably, and you'll hear more about that in the future.

Aaron Reed

Very exciting. And for my follow-up question here, I just wanted to touch on the A&D space. So now that you've hit the $250 million run rate, what's the next target? Or another way, how quickly do you expect further DLA orders beyond the initial $125 million?

Kristopher Westbrooks

So we're working through the timing right now with that initial DLA order. It's a significant one. As we noted, we can't begin to ship on that until the second quarter. So we're in the process of scheduling that out. We have two years to deliver on that commitment. We're optimistic that there will be future orders, but there's no guarantees for that. So safe to say with that new order, that's going to put us north of the $250 million target consistently. And we're going to continue to monitor that as we schedule out the DLA and continue to drive additional new orders into our book, we'll revisit that target.

Operator

Your next question from the line of Dave Storms with Stonegate.

David Storms

Mike, congrats on your retirement here. Kris, I know last year around this time, we were discussing targeting approximately 70% of your long-term products under annual agreements heading into the new year. Is that still the target going into 2027? And just maybe any further thoughts on commitments, how those negotiations are going, anything of that nature?

Kristopher Westbrooks

Sure. Thanks, Dave. You're accurate. We're still targeting about 70% of our long product orders to be on annual contract. We're about 1/3 of the way through those negotiations right now. So still a lot of work to be done. It's premature for us to comment on the size of the average price increase given those negotiations, but we are optimistic we'll realize base price increases as we move into 2027. There are a few other factors, though, we should all keep in mind. It's a competitive process. So that's something that we're working through with our customers confidentially with them.

Similar to a few years ago, sometimes there's also a lag in price realization. We do have a backlog right now. We're working through in a long order book. So you may see that price realization not occur immediately in January, but trend a little bit later into Q1 and even early Q2. And then lastly, there still are some inflationary pressures out there that we expect to be impacting our financial results, and that will partially offset some of those price increases. But overall, we're encouraged by the work that's been done to date. And we do expect a net positive benefit from pricing to flow through the bottom line, and we'll provide additional information as we complete those negotiations and have our call in February.

David Storms

Understood. That's great color. I appreciate that. And then maybe just as a follow-up, I know I believe it was John's prepared remarks that you're still assessing new assets needed, capital requirements for the DLA project. With this initial order, maybe can you give us a sense of what your expectations were going into it? Do you think you have the capacity to fill this order and then maybe new assets would come with any follow-on orders? Or is there a different way we should be thinking about this?

Kristopher Westbrooks

We're currently working through that right now. We have capacity to start the order and deliver on our near-term commitments and ultimately fulfill it. It's just how do you balance that with our growth opportunities in other spaces within the defense area. So we're working through that right now. Even if we were to put in capital, you're a couple of years out from seeing the benefit of that. So our focus is on delivering that order with existing capacity and continuing to look for opportunities as it makes sense to grow the overall portfolio.

Operator

[Operator Instructions] Your next question from the line of Samuel McKinney with KeyBanc Capital Markets.

Samuel McKinney

Congrats to Mike on the retirement. It's been great working with you the last few years.

Michael Williams

Thanks, Sam.

Samuel McKinney

In the industrial end market, it was made clear on the last earnings call that the backlog had nearly doubled year-over-year with strength in equipment and providing you strong visibility into second half shipments. With the third quarter shipments down versus the second quarter, I think it would be helpful if you could provide some more detail on that decline, whether it was prioritizing other end markets or simply demand that didn't come to fruition from some of those major industrial customers? Anything there would be helpful.

Kristopher Westbrooks

Thanks, Sam. Yes, that's a good point. Yes, we're still seeing solid demand from the industrial markets. The order book is up slightly, still at a solid level. We're seeing good demand from a construction equipment perspective as well as general machinery.

What we did impact -- have impacted in Q3 was around the melt shop curtailments. That was a few percentage points of utilization, equivalent to about 10,000 tons of melt production, and that had to be distributed amongst our order book, and we felt some of the impact in the industrial markets in the third quarter impacting those shipments. We still have good visibility into the future, and we're optimistic about where those markets, specifically industrial is going as we move forward, but you did see the lower shipments in Q3 as a result of that downtime.

Samuel McKinney

Okay. And then just given the strength of the overall steel market and continued price increases for you guys flowing into the order book, can you elaborate just a bit more on your expectation for fourth quarter pricing to decline sequentially? I assume it's a mix thing as you shift more focus to the base end markets like auto and industrial. But any more color would be helpful as we think through the end of the year.

Kristopher Westbrooks

That's exactly right, Sam. It's more of a mix element that we're experiencing in fourth quarter. There's no systemic changes in pricing. We're still seeing the benefits of what we implemented earlier this year as we head into 2027 as well. It's just the mix of products that our customers need in the fourth quarter that's going to drive, we believe, that base pricing to be down some.

Operator

Your next question from the line of John Franzreb with Sidoti & Company.

John Franzreb

Again, congratulations to Mike. Just on the DLA contract, I'm kind of curious about the timing of the flow-through of the revenue. How should we be thinking about that over the next year or two years? How does that timing kind of play out on the top line?

Kristopher Westbrooks

We expect it to ramp throughout 2027 into 2028. The order came in, in late Q3 2026. We have two years to supply that. Obviously, we want to fulfill that order efficiently as quickly as we can, but we also have other customer orders to balance. And our goal is to balance all of those while still supporting the DLA with their initial order. So we do expect it to ramp throughout the year, and it's going to hit the top line just like a regular sale into the aerospace & defense market.

John Franzreb

Okay. Kris. So it's not going to kind of -- you can use some downtime maybe and use that as an opportunity to maybe balance the shipments, nothing like that's going to happen.

Kristopher Westbrooks

With the current order book, I don't see that. And maybe in a weaker market, you would take a different approach. We're going to obviously make it as efficiently as we can. So if there's an opportunity to have a longer run of this product to drive efficiency and increase yield in our shop, then we're going to do that, and that will benefit everyone.

John Franzreb

Got it. And just maybe if you could provide a little bit more color what you're seeing in the automotive market. It was down sequentially, normally, third quarter is relatively strong in the auto sector. You just said that you expect it to be down a little bit in Q4. What are you anticipating in the coming quarters in the auto side?

Kristopher Westbrooks

It's been pretty steady. If you look at Q2 was a strong auto shipment quarter, which really drove some of the decline that you saw in Q3. And if you were to normalize for all of that, I think you look at our auto shipments as being up year-over-year, but fairly steady as we head into 2028. 2027, you'll see some programs beginning to drop off, and we're quoting new opportunities and it may even be in a different market like industrial, for example. So we're still well positioned there. It's an important part of our mix. I think we finished in the high 30% on a percent of sales for the quarter in automotive, which is about what we're targeting.

Operator

There are no further questions at this time. I will now turn the call back to Jenna for closing remarks.

Jenna Johnson

Thank you for joining us today, and that concludes our call.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.