Ralliant Raises 2026 Outlook After Q3 Revenue Rises 17%

Ralliant (NYSE: RAL) raised its full-year 2026 outlook after third-quarter revenue increased 17% year over year, supported by broad growth in defense, utilities and diversified electronics. The company also reported a 400-basis-point expansion in normalized adjusted EBITDA margin, reflecting higher sales volume, pricing, productivity savings and a tariff-refund benefit.

Revenue for the quarter ended October 2 rose to $620.1 million from $529.1 million a year earlier. Organic revenue growth was also 17.2%, with both operating segments posting double-digit gains and book-to-bill remaining above 1.1.

GAAP net earnings increased to $86.1 million, or $0.77 per diluted share, from $39.9 million, or $0.35 per share. Adjusted net earnings were $104.5 million, while adjusted diluted earnings per share rose 64% from the normalized year-earlier result to $0.93.

Adjusted EBITDA increased to $145.8 million from normalized adjusted EBITDA of $103.0 million in the prior-year quarter. The corresponding margin reached 23.5%, up from 19.5%. Adjusted gross margin expanded 190 basis points to 53.1%, which Ralliant attributed primarily to operating leverage from higher revenue and price-cost management under the Ralliant Business System.

The quarter included a $7 million benefit from refunds related to tariffs imposed under the International Emergency Economic Powers Act. Ralliant said the refunds contributed about $0.05 to adjusted EPS, with most of the benefit recorded in Sensors & Safety Systems.

Defense, grid and electronics demand drive segment growth

Sensors & Safety Systems revenue increased 15% to $375.9 million, including 15.1% organic growth. Adjusted EBITDA margin rose to 30.5% from a normalized 27.8%, aided by operating leverage, pricing, productivity savings and stronger defense margins.

Defense and Space organic revenue grew 21% as increased production capacity supported higher output. The segment’s backlog surpassed $1.5 billion as Ralliant began receiving orders under contracts with defense prime customers for surge demand tied to critical missile programs.

Utilities organic revenue rose 16%, marking a second consecutive quarter of record revenue as production increases supported customers’ grid investments. Industrial Manufacturing and other end markets also generated double-digit growth, which the company linked to investment in AI enablement.

Test & Measurement revenue advanced 20% to $244.2 million, with organic growth of 20.7%. Its adjusted EBITDA margin increased to 19.3% from a normalized 12.6%, driven by higher volume, pricing and savings from the Enterprise Productivity Program.

Diversified Electronics organic revenue climbed 48% as customer investment increased across compute and power infrastructure. Communications grew 4%, with commercial communications growth partly offset by defense communications shipments that lagged order growth and funnel development.

Semiconductor revenue declined 7% against a large project completed in the third quarter of 2025. Excluding that comparison, Ralliant said the business grew at a high-teens rate, supported by demand for equipment used to test laser chips for data-center optical interconnects.

Productivity savings and cash flow support investment

Ralliant increased its expected 2026 in-year savings from the Enterprise Productivity Program to $16 million to $18 million, up from $10 million to $12 million. It expects annualized run-rate savings of $30 million to $35 million upon exiting 2026 and continues to target $50 million to $60 million by 2028.

The program focuses on labor and indirect-spending optimization, vendor consolidation, centralized purchasing and AI-enabled employee productivity. Management said the initiative supports its path toward the midpoint of a low-to-mid-20% through-cycle adjusted EBITDA margin range by 2028.

Operating cash flow was $111.3 million in the quarter, and capital expenditures were $9.4 million, resulting in free cash flow of $101.9 million. Trailing-12-month free cash flow totaled $303.0 million, representing 93.5% conversion of adjusted net earnings.

As of October 2, Ralliant held $365.8 million in cash and had $1.15 billion of debt. Net leverage declined to 1.5 times trailing-12-month adjusted EBITDA under its credit agreement, reaching the low end of the company’s long-term target range of 1.5 to 2.0 times.

Ralliant returned $167 million to shareholders year to date, including $150 million of share repurchases and $17 million of dividends. It had $400 million remaining under its $500 million repurchase authorization and said it targets buybacks equal to about 50% of free cash flow over time. Repurchases remain subject to market conditions and may be suspended or discontinued.

Full-year outlook raised

Ralliant now expects 2026 revenue of $2.34 billion to $2.36 billion, compared with its prior range of $2.25 billion to $2.30 billion. The company projects organic revenue growth of 13% to 14%, up from the previous 8% to 11% range.

Full-year adjusted EBITDA margin is expected to be approximately 21.5%, compared with the earlier range of 20% to 21%. Adjusted EPS is projected at $3.10 to $3.16, versus the prior forecast of $2.76 to $2.90.

For the fourth quarter, Ralliant expects revenue of $620 million to $640 million, organic growth of 12% to 15%, adjusted EBITDA margin of 23.5% to 24.5%, and adjusted EPS of $0.93 to $0.99.

The outlook includes an anticipated $5 million fourth-quarter benefit from tariff refunds and assumes tariff policies announced through October 30 remain in place. It also assumes no more severe disruption from the conflict in the Middle East. Other uncertainties cited by the company include geopolitical conditions, tariffs, currency movements, government spending and contracting requirements, inflation, interest rates and the execution of productivity, capacity and investment plans.