PHINIA Q3 Adjusted EPS Rises 15% as Aftermarket Offsets Power Systems Decline

PHINIA Inc. (NYSE: PHIN) reported modest third-quarter sales growth and higher adjusted profitability, while issuing an updated 2026 outlook that includes an expected fourth-quarter contribution from its recently completed acquisition of the stoba Group. Adjusted diluted earnings per share increased 15.1% year over year as stronger Aftermarket Solutions results offset declines in Power Systems.

Net sales for the quarter ended September 30 rose to $912 million from $908 million a year earlier. Higher sales in the Americas and $21 million from tariff pass-through were partly offset by the non-repeat of favorable customer pricing actions recorded in 2025. Foreign exchange added $4 million, primarily reflecting the Chinese yuan and Brazilian real, partly offset by the euro and Indian rupee.

Adjusted EBITDA increased to $135 million from $133 million, and the adjusted EBITDA margin widened to 14.8% from 14.6%. PHINIA attributed the improvement in core performance largely to favorable product mix, partially offset by the absence of the prior-year pricing benefits. The timing of research and development costs also affected the year-over-year comparison.

GAAP net earnings were $67 million, or $1.80 per diluted share, compared with $13 million, or $0.33 per share, in the prior-year quarter. Adjusted net earnings rose to $68 million from $63 million, while adjusted diluted EPS increased to $1.83 from $1.59. Adjusted operating income was $102 million, compared with $101 million, and the adjusted operating margin reached 11.2% from 11.1%.

Adjusted free cash flow declined to $73 million from $104 million a year earlier. Net cash provided by operating activities was $87 million, while capital expenditures, including tooling outlays, totaled $17 million. PHINIA returned $76 million to shareholders during the quarter through $65 million of share repurchases and $11 million of dividends. The company ended the period with $436 million of cash and cash equivalents, $813 million of liquidity and net leverage of 1.3 times.

Aftermarket offsets weaker Power Systems results

Power Systems sales decreased to $561 million from $571 million. Segment adjusted operating income fell to $68 million from $76 million, reducing the margin to 12.1% from 13.3%. PHINIA said the results largely reflected the non-repeat of favorable customer pricing actions recognized in 2025 and the timing of tariff-recovery mechanisms. Foreign-exchange tailwinds, particularly from the Chinese yuan, supported sales, while the timing of research and development spending also affected operating income.

Aftermarket Solutions sales increased to $351 million from $337 million, driven by higher sales in the Americas. Segment adjusted operating income rose to $60 million from $51 million, and the margin expanded to 17.1% from 15.1%. Product mix supported profitability, partially offset by pricing, tariff-recovery timing and foreign-exchange headwinds.

Across the company, total segment adjusted operating income was $128 million, compared with $127 million a year earlier, with a 14.0% margin in both periods.

PHINIA also reported new business and product activity across alternative fuels, commercial vehicles and aftermarket markets. Awards included a methanol engine program in China, a compressed-natural-gas injector program in India and a gasoline direct-injection pump for a range-extender application in North America. Product launches included a heated-tip injector for a flex-fuel sport utility vehicle in Brazil, a fuel-delivery module for North American medium-duty trucks and buses, and a 500-bar gasoline direct-injection system for hybrid applications in China.

Updated full-year outlook includes stoba contribution

For full-year 2026, PHINIA expects net sales of $3.625 billion to $3.675 billion, representing year-over-year growth of 4% to 6%. The updated guidance includes the expected fourth-quarter contribution from the stoba Group acquisition, which closed on October 1, 2026.

The company projects adjusted EBITDA of $500 million to $520 million and an adjusted EBITDA margin of 13.7% to 14.1%. Adjusted free cash flow is expected to range from $220 million to $250 million, with an adjusted effective tax rate of 28% to 30%.

PHINIA’s longer-term targets remain average organic revenue growth of 2% to 4% from 2021 through 2030, an adjusted EBITDA margin of 14% to 15%, adjusted free-cash-flow conversion above 40% and net leverage of about 1.5 times. The organic growth target excludes contract manufacturing revenue for BorgWarner, which ended in the third quarter of 2024, and future acquisitions, while including SEM.

The company identified economic and transportation-market weakness, geopolitical tensions, tariffs and trade restrictions, customer pricing pressure, commodity-cost volatility and supply-chain disruption among its risks. Other uncertainties include changing emissions rules and powertrain demand, reliance on a limited number of original-equipment customers, execution of acquisitions and restructuring initiatives, cybersecurity disruptions and risks associated with its separation from its former parent.