Timken Raises 2026 Adjusted EPS Outlook as Q3 Margin Expands

The Timken Company (NYSE: TKR) raised its full-year 2026 adjusted earnings outlook after third-quarter sales, margins and earnings increased from a year earlier, supported by higher pricing across both operating segments and volume growth in Industrial Motion. The quarter also included a net benefit of about $0.13 per share from refunds tied to International Emergency Economic Powers Act tariffs.

Timken now expects 2026 adjusted diluted earnings per share of $6.35 to $6.50, compared with its August outlook of $6.05 to $6.35. The midpoint represents growth of about 20% from adjusted EPS of $5.33 in 2025. The company maintained its full-year sales growth forecast at 5.5%, including 3.5% organic growth, and kept its free cash flow outlook at $375 million to $400 million.

For the quarter ended Sept. 30, net sales rose 4.7% to $1.21 billion from $1.16 billion a year earlier. Organic sales, excluding acquisitions and currency effects, increased 2.8%. Acquisitions added 1.8% to reported growth, while foreign exchange contributed 0.1%.

Adjusted EBITDA increased to $224.6 million from $201.7 million, lifting the adjusted EBITDA margin to 18.5% from 17.4%. Timken said positive price-cost performance helped offset inflationary pressures. The results also benefited from about $12 million of net IEEPA tariff refunds, although higher manufacturing costs and material and logistics expenses weighed on the year-over-year comparison.

GAAP diluted EPS rose to $1.34 from $0.99, while adjusted EPS increased 20% to $1.65 from $1.37. Net income attributable to Timken was $93.8 million, up from $69.3 million.

Industrial Motion leads segment growth

Industrial Motion generated the stronger sales increase, with revenue rising 12.4% to $440 million. Organic sales grew 7.3%, while acquisitions contributed 5.3% and currency reduced growth by 0.2%. Segment adjusted EBITDA increased to $87 million from $75 million, and the adjusted margin expanded to 19.8% from 19.0%.

Timken said its Automation & Robotics business delivered double-digit organic growth during the quarter. The company also completed a minority investment in an early-stage manufacturer of electroadhesive technology to support its automation strategy.

Engineered Bearings sales increased 0.7% to $771.4 million, including organic growth of 0.5%. Adjusted EBITDA rose to $156 million from $144 million, with the adjusted margin improving to 20.2% from 18.8%.

By geography, organic sales increased 6% in the Americas and 3% in Asia-Pacific but declined 3% in Europe, the Middle East and Africa.

Portfolio changes and cash generation

Timken completed the sale of its belts business on Sept. 28 as part of its portfolio optimization program. Management expects the divestiture to structurally increase Industrial Motion margins beginning in the fourth quarter. The sale and the planned closure of the belts manufacturing facility in Springfield, Missouri, resulted in $90.4 million of impairment, restructuring and reorganization charges during the first nine months of 2026.

The company is also implementing its 80/20 program to reduce complexity and streamline manufacturing and supply-chain operations. Training across the enterprise was largely complete, and Timken said related actions were underway. Its operating structure has been aligned around targeted vertical markets, with more than 80% of incremental capital and resources intended for those areas.

Third-quarter net cash from operating activities increased to $256.1 million from $201.1 million. Free cash flow rose to $221.4 million from $163.8 million as operating cash generation increased and capital expenditures declined to $34.7 million from $37.3 million.

Net debt was $1.52 billion at Sept. 30, down from $1.56 billion at the end of 2025. The ratio of net debt to trailing adjusted EBITDA improved to 1.7 times from 2.0 times. Timken repurchased 504,000 shares during the quarter and paid a quarterly dividend of $0.36 per share.

Full-year outlook

Timken expects its full-year adjusted EBITDA margin to be in the mid-18% range, compared with 17.4% in 2025. Its outlook assumes a 26.5% adjusted tax rate, about $92 million of interest expense, roughly $28 million of noncontrolling interest, capital expenditures equal to about 3.1% of sales and approximately 70 million diluted shares.

The company projects mid-single-digit organic growth in Aerospace & Defense and Infrastructure, high-single-digit growth in Automation & Industrial Solutions, and results ranging from flat to a low-single-digit change in Industrial Transportation & Mobility. Power & Electrification sales are expected to decline by a mid-single-digit percentage, reflecting lower wind-energy sales in China. The total organic sales forecast remains unchanged at 3.5% growth.

Timken said the implied fourth-quarter adjusted EPS outlook does not include any potential net impact from IEEPA-related items. Its forecasts remain subject to changes in customer demand, tariffs and trade restrictions, geopolitical conditions, inflation in materials and production costs, logistics disruptions, foreign-exchange and interest-rate movements, and the company’s ability to execute restructuring, acquisitions and other strategic initiatives.