IDEX Báo cáo kết quả kinh doanh quý 3/2026: EPS đã điều chỉnh đạt kỷ lục và nâng dự báo cả năm

Điểm tin chính

• Doanh thu hữu cơ quý 3 tăng 8% so với cùng kỳ năm ngoái, dẫn đầu là mức tăng 13% của mảng Công nghệ Sức khỏe & Khoa học (HST). Mảng Công nghệ Chất lưu & Đo lường (FMT) và Sản phẩm PCCC & Đa dạng hóa (FSDP) lần lượt tăng 4% và 6%.
• EPS đã điều chỉnh đạt mức kỷ lục 2,33 USD, tăng 15%, trong khi biên EBITDA đã điều chỉnh mở rộng 50 điểm cơ bản lên 27,8%.
• Đơn hàng hữu cơ tăng 13% lên gần 1 tỷ USD, ghi nhận tăng trưởng ở cả ba mảng kinh doanh. Tỷ lệ đơn hàng trên doanh thu (book-to-bill) duy trì ở mức trên 1x.
• Trung tâm dữ liệu, bán dẫn, vũ trụ và quốc phòng, cùng mảng nước tiếp tục là các thị trường tăng trưởng chính. Ban lãnh đạo cũng ghi nhận nhu cầu công nghiệp mở rộng và những tín hiệu cải thiện sớm trong ngành nông nghiệp và năng lượng.
• IDEX đã nâng triển vọng tăng trưởng hữu cơ năm 2026 lên 6,5%-6,8% và dự báo EPS đã điều chỉnh lên 8,91-8,96 USD.
• Dòng tiền tự do tăng 14% lên 214 triệu USD, tương ứng tỷ lệ chuyển đổi 124%. Thanh khoản cuối quý vượt 1,2 tỷ USD.

Dữ liệu tài chính quan trọng

Tính từ đầu năm đến nay, doanh thu hữu cơ tăng 6%, biên EBITDA đã điều chỉnh mở rộng 50 điểm cơ bản và EPS đã điều chỉnh tăng 14%.

Kết quả hoạt động kinh doanh

Công nghệ Sức khỏe & Khoa học

Đơn hàng hữu cơ của HST tăng 21% lên mức kỷ lục quý 3 là 468 triệu USD, trong khi doanh thu hữu cơ tăng 13%. Tăng trưởng tập trung vào thiết bị gốc và vật tư tiêu hao bán dẫn, các ứng dụng trung tâm dữ liệu, cùng mảng vũ trụ và quốc phòng.

Ban lãnh đạo cho biết trung tâm dữ liệu, bán dẫn, vũ trụ và quốc phòng hiện chiếm hơn một phần ba doanh thu HST. Tổng cộng các mảng này mang lại mức tăng trưởng khoảng 50% từ đầu năm đến nay. Công ty cũng cho biết các doanh nghiệp được thâu tóm đóng góp hầu như toàn bộ mức tăng trưởng hàng quý của HST.

Biên EBITDA đã điều chỉnh của HST mở rộng 110 điểm cơ bản lên 28,8%, chủ yếu nhờ đòn bẩy sản lượng. Mott đóng góp tích cực nhờ cơ cấu sản phẩm thuận lợi và các sáng kiến cải tiến liên tục ở giai đoạn đầu.

Doanh thu mảng khoa học sự sống đi ngang. Mức tăng trưởng ở mức một chữ số tầm trung đối với nhu cầu thiết bị phân tích cơ bản đã bị bù trừ bởi việc đóng cửa theo kế hoạch của một nền tảng cũ, điều mà ban lãnh đạo dự kiến sẽ cơ bản hoàn tất vào cuối năm.

Công nghệ Chất lưu & Đo lường

Đơn hàng hữu cơ của FMT tăng 11% lên mức kỷ lục quý 3 là 349 triệu USD, và doanh thu hữu cơ tăng 4%. Bán dẫn, nước sinh hoạt đô thị và máy bơm công nghiệp dẫn đầu tăng trưởng doanh thu.

Nền tảng Nước Thông minh (Intelligent Water) tăng trưởng ở mức một chữ số tầm cao. Các sản phẩm của nền tảng này kết hợp giám sát dòng chảy, kiểm tra đường ống bằng robot, phần mềm tích hợp AI, công cụ phục hồi và phân tích thông qua nền tảng đám mây periSPEC.

Van hóa chất và nông nghiệp vẫn giảm so với cùng kỳ năm ngoái, mặc dù cả hai đều cải thiện so với quý trước. Ban lãnh đạo cũng đề cập đến hoạt động đơn hàng tốt hơn trong mảng năng lượng và nông nghiệp so với cùng kỳ năm trước.

Biên EBITDA đã điều chỉnh của FMT tăng 20 điểm cơ bản lên 33,9%, do năng suất và đòn bẩy sản lượng đã bù đắp dư thừa cho cơ cấu sản phẩm không thuận lợi.

Sản phẩm PCCC & Đa dạng hóa

Đơn hàng hữu cơ của FSDP tăng 1%, trong khi doanh thu hữu cơ tăng 6%. Cả ba mảng kinh doanh đều ghi nhận tăng trưởng, dẫn đầu là BAND-IT nhờ nhu cầu hàng không vũ trụ mạnh mẽ. Mảng phân phối thiết bị (Dispensing) đã tăng trưởng trở lại khi mức nền so sánh trở nên dễ dàng hơn trong nửa cuối năm.

Biên EBITDA đã điều chỉnh mở rộng 140 điểm cơ bản lên 28,5%, được hỗ trợ bởi năng suất, đòn bẩy sản lượng và cơ cấu sản phẩm.

Định giá và Phân bổ Vốn

Việc điều chỉnh giá đóng góp khoảng 2% vào doanh thu năm 2026, bao gồm cả quý 3. Ban lãnh đạo cho biết chênh lệch giá/chi phí vẫn ở mức tích cực xét theo giá trị tuyệt đối và kỳ vọng việc tăng giá sẽ tiếp tục vượt qua lạm phát chi phí.

IDEX đã chi 54 triệu USD cho cổ tức và mua lại 75 triệu USD cổ phiếu trong quý. Công ty dự kiến duy trì việc mua lại ở mức khoảng 75 triệu USD mỗi quý trong phần còn lại của năm 2026, tùy thuộc vào tỷ lệ đòn bẩy, các thương vụ thâu tóm bổ trợ và các quyết định danh mục đầu tư.

Danh mục các thương vụ thâu tóm tiềm năng tiếp tục sôi động, tập trung vào các giao dịch bổ trợ kết nối với các nền tảng tăng trưởng hiện có. Ban lãnh đạo đánh giá định giá của các giao dịch lớn hơn là khá cao và nhắc lại ý định giữ vững kỷ luật đầu tư.

Dự báo của Ban lãnh đạo

Ban lãnh đạo dự kiến biên lợi nhuận quý 4 sẽ giảm so với quý trước do số ngày sản xuất ít hơn và các đợt tạm dừng hoạt động để bảo trì theo kế hoạch. Dư nợ thấp hơn cùng thu nhập từ lãi cao hơn dự kiến sẽ mang lại lợi ích khiêm tốn ngoài hoạt động kinh doanh chính (below-the-line).

Về dài hạn, ban lãnh đạo duy trì khung biên lợi nhuận tăng thêm ở vùng tiệm cận 40% (high-30% đến 40%), sau khi trừ đi khoản tái đầu tư. Công ty dự kiến gia tăng chi tiêu cho nhân tài trong các mảng kinh doanh tăng trưởng nhanh, đồng thời tiếp tục áp dụng mô hình hoạt động 80/20 để phân bổ lại nguồn lực.

Rủi ro và Các điểm cần theo dõi

• Các đơn hàng trung tâm dữ liệu có thể đến theo từng đợt lớn và khó dự đoán, tạo ra sự biến động đơn hàng theo quý dù triển vọng nhu cầu của ban lãnh đạo vẫn tích cực.
• Ban lãnh đạo đang theo dõi tổng công suất của hệ sinh thái trung tâm dữ liệu mở rộng như một yếu tố rào cản tiềm ẩn đối với tốc độ mở rộng.
• Lạm phát vẫn ở mức cao, với giá năng lượng tăng tiếp tục gây áp lực lên chi phí đầu vào, mặc dù việc điều chỉnh giá và năng suất đã giúp chênh lệch giá/chi phí duy trì ở mức tích cực.
• Mảng hóa chất vẫn yếu đáng kể do giá đầu vào cao. Nông nghiệp và năng lượng đã cho thấy sự cải thiện sớm, nhưng ban lãnh đạo đánh giá các tín hiệu này ở mức khiêm tốn và thừa nhận sự không chắc chắn vẫn tiếp diễn.
• HST sẽ đối mặt với mức nền so sánh cùng kỳ khó khăn hơn vào năm 2027 sau sự tăng trưởng mạnh mẽ ở mảng trung tâm dữ liệu, bán dẫn, vũ trụ và quốc phòng.
• Biên lợi nhuận quý 4 dự kiến sẽ giảm so với quý trước do ảnh hưởng thông thường từ số ngày sản xuất và hoạt động bảo trì.

Điểm nổi bật trong phần Q&A với chuyên gia phân tích

Nhu cầu công nghiệp: Ban lãnh đạo ghi nhận sự cải thiện từng bước ở các đơn hàng nhỏ hàng ngày, bao gồm cả nhu cầu từ nhà phân phối. Đơn hàng trước mùa vụ của mảng nông nghiệp được cải thiện, trong khi hoạt động tự động hóa kho cảng và liên quan đến đường ống hỗ trợ các chỉ số năng lượng tốt hơn. Hóa chất vẫn là mảng yếu nhất.

Mức độ rõ ràng của mảng HST: IDEX cho biết lượng đơn hàng tồn đọng (backlog) hỗ trợ đà tăng trưởng tiếp tục sang năm 2027. Các đơn hàng trung tâm dữ liệu khó dự đoán hơn so với mảng kinh doanh thời gian thực hiện ngắn điển hình của công ty, nhưng ban lãnh đạo bày tỏ sự tự tin vào nhu cầu hiện có và lượng đơn hàng tồn đọng.

Mở rộng danh mục sản phẩm: Ban lãnh đạo cho biết khả năng thích ứng các công nghệ hiện có vào các ứng dụng mới giúp mở rộng cơ hội thị trường của công ty. Các ví dụ bao gồm công nghệ lọc kim loại xốp của Mott trong ứng dụng bán dẫn và vũ trụ, cũng như năng lực mạ điện và khắc laser của Muon trong trung tâm dữ liệu và vũ trụ.

Triển vọng mảng khoa học sự sống: Ban lãnh đạo dự kiến lực cản từ chương trình cũ sẽ cơ bản qua đi vào cuối năm. Công ty mô tả danh mục đổi mới sáng tạo của khách hàng là lành mạnh nhưng không xác định một chu kỳ sản phẩm đơn lẻ nào là động lực tăng trưởng chính trong tương lai.

Biên lợi nhuận tăng thêm: Ban lãnh đạo cho biết sản lượng cao hơn sẽ hỗ trợ biên lợi nhuận tăng thêm hợp nhất ở khoảng từ tiệm cận 40% (high-30% đến 40%). Khung này bao gồm các khoản đầu tư tăng trưởng theo kế hoạch vào nhân tài và công suất.

Toàn văn Biên bản Cuộc họp Kết quả Kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Hello, everyone. Thank you for joining us, and welcome to the IDEX Corporation Third Quarter 2026 Earnings Conference Call. [Operator Instructions]

I will now hand the conference over to Jim Giannakouros, Vice President of Investor Relations. Jim, please go ahead.

James Giannakouros

Good morning, everyone, and welcome to IDEX's Third Quarter 2026 Earnings Conference Call. We released our third quarter financial results earlier this morning and you can find both our press release and earnings call slide presentation in the Investors section of our website, idexcorp.com.

On the call with me today are Eric Ashleman, President and Chief Executive Officer of IDEX; and Sean Gillen, our Chief Financial Officer. Today's call will begin with Eric providing highlights of our third quarter results and an update on our business outlook and strategies. Then Sean will discuss additional financial details and our updated outlook for 2026. Following our prepared remarks, we will open the line for questions.

But before we begin, please refer to Slide 2 of our presentation, where we note that comments today will include forward-looking statements based on current expectations. Actual results could differ materially from these statements due to a number of risks and uncertainties, which are discussed in our press release and SEC filings. As IDEX provides non-GAAP financial information, we have provided reconciliations between GAAP and non-GAAP measures in our press release and in the appendix of our presentation materials, which are available on our website.

With that, I will turn the call over to Eric.

Eric Ashleman

Thanks, Jim. Good morning, everyone, and thank you for joining us today. I'm on Slide 3. IDEX delivered another strong quarter with Q3 results ahead of our expectations on sales, margins and earnings. Sales and adjusted EPS were both records. Organic sales grew 8%. Adjusted EBITDA margin expanded 50 basis points year-over-year to 27.8% and adjusted EPS grew 15% to $2.33. Year-to-date, organic sales are up 6%, adjusted EBITDA margin is up 50 basis points and adjusted EPS is up 14%. These results are consistent with our long-term growth expectations and reflect deliberate choices to build integrated growth platforms and tune our capabilities towards advantaged markets guided by 8020.

In addition to the strong sales and earnings performance, orders were again a highlight in the quarter, growing 13% year-over-year, reaching nearly $1 billion. We saw organic order growth in all 3 segments with continued strong growth in HST and broadening growth across our industrial businesses in FMT. We are raising our full year 2026 outlook due to the strong Q3 results and are expecting to close out the year with momentum. Sean will get into greater detail on our results and guidance later in the call.

Before turning it over to him, I'd like to provide an update on our performance in certain advantage markets. Please turn to Slide 4. As discussed on previous calls, data centers, semiconductor, space and defense and water continue to lead the way for growth at IDEX. While the order and sales numbers inflected noticeably in 2026, this is a story that's been building for a few years, confirming the original strategic thesis powering so much of our post-pandemic capital deployment. Thoughtful 8020 is shaping both growth and profitability as we apply it along the way. We'll touch a bit more on that on the next slide. In data centers, our teams win by solving increasingly more difficult technical problems as the industry scales, our primary solutions include thermal management technologies for clean behind-the-meter power generation and solutions that improve reliability of liquid cooling systems. We expect demand in this space to remain healthy.

In semiconductor, we are seeing strong demand across several applications, including filtration, sealing, optics and thermal management solutions that sit inside process tools and metrology equipment. Roughly half of our semiconductor business is tied to consumables that provide a more recurring revenue stream. In FMT, we sell high purity pumps and heaters that support ultrapure water applications and wafer fabrication. In space and defense, our optics help satellites transmit, receive and filter signals across low earth orbit. We are helping set critical specifications in these growing markets. And once established, these specifications can support revenue streams for decades. We are also seeing growth in optical solutions supporting next-generation defense applications. Space launch and lift capacity is reaching an inflection point, supporting even more robust growth in the years to come, and Mott is solving problems to help make that possible through bespoke filtration solutions. They are also involved in a number of development projects within defense applications that are moving at speed, not previously seen within those markets.

Finally, in our FSDP segment, BAND-IT engineered clamping products are growing strongly across commercial aerospace, defense and spacecraft platforms. Our Intelligent Water platform within our FMT segment continues to grow nicely and profitably up high single digits in the third quarter. Last month, at WEFTEC, North America's largest annual water show, we host investors and showcased how we've brought together leading positions in flow monitoring, robotic pipe inspection, AI-enabled software and rehab tools, all connected through [ periSPEC ], our cloud-based platform. Our ultimate product here is analytics and information. We help municipalities diagnose their problems before they commit capital to fix them.

Please turn to Slide 5. I want to spend a moment on an underappreciated driver of our growth within integrated platforms, which we have deployed within the fast-growing advantage markets I covered on the last slide. Our ability to tune our solutions laterally and quickly to faster-growing verticals is a distinct competitive advantage that's unique to IDEX. First, we take advantage of our fundamental component orientation to deliver powerful solutions at relatively low levels of total systems cost. This has always powered our superior profitability and cash generation and our ability to command price ahead of cost while opening doors to top customer technical talent.

Next, we've connected teams carefully within integrated platforms where a tight band of technical capabilities, aligns with specific targeted advantage markets. We apply our proprietary 8020 playbook across this matrix to pinpoint areas where resources should be augmented or reduced. Finally, we lean on our entrepreneurial culture, flat organizational structure and celebration of local decision-making autonomy to fuel agility and speed as we dynamically shift resources and capital to best optimize growth and value platform.

I'd like to take you through 3 examples of this important competitive advantage. So you can best appreciate its impact on current performance. At Mott, our command of porous metal filtration has long served both legacy and transformational energy markets. Those same basic technical capabilities solve atomic level purity challenges in semiconductor manufacturing. As this market has experienced significant growth, our teams have swung resources and modest incremental capital quickly to meet customer requirements, all within the same 4 walls in Connecticut. At Muon, our electroforming expertise, which has long been deployed in critical care respiratory applications now enables fast, accurate fiber alignment for optical circuit switching and data centers. The component level technology and process methodology are the foundation with our best-in-class engineers applying their know-how to tune them to a new application. The team saw the opportunity, made the commitment to an identified as market, dedicated talent and capacity and aligned incentives to make it happen. Great win for IDEX.

Finally, Muon's laser etching of glass and ceramics has been engineered to produce precision RF antennas for space applications. This came about from a customer access point elsewhere within the platform. It simply would not have happened without the cross-business communication that we formalized within our material science solutions platform. This tunability, which clearly helps us grow faster, also helps us optimize profitability as we do it. Recall that we lifted the Muon business to HST's average segment margin level in Q3 last year. This year, the business has grown 20% organically year-to-date, driven by strength in our [indiscernible] markets and margins have advanced further.

At Mott, as we shifted resources towards fast-growing and highly profitable areas within semiconductor and space and defense, we're enjoying growth rates above the segment average in those [indiscernible] markets and have driven meaningful improvement in margin. We still have a few larger calls to execute on some legacy business that will set us up well for 2027 and beyond. Why does tunability ultimately matter? It allows us to respond quickly to unpredictable shifts in today's most dynamic markets while also supporting margin expansion in a dimension that's additive to basic growth leverage.

Please turn to Slide 6. Switching gears, I'd also like to highlight the overall FMT segment for a moment. Coming into 2026, we plan for a relatively flat revenue year in the segment. Orders and sales have tracked ahead of that plan all year and organic sales growth stepped up to 4% in the third quarter. This performance goes beyond the dynamics in water that I just discussed. We are seeing a broadening of demand in our industrial businesses and stabilization with indicators of future growth in areas like ag and energy.

Lastly, I want to touch on inflation. It has proven stubborn and elevated energy prices continue to push input costs higher, but the IDEX model is built to handle this. Our components perform mission-critical functions at a small share of our customers' total system cost, so we can price for the value we deliver. We do that in a measured way as conditions warrant rather than in large calendar-driven steps. Combined with continuous improvement and the benefits of 8020, that enables us to manage effectively through inflationary environments. Price/cost was positive on a dollar basis again this quarter and our team's expanded margins while absorbing higher costs.

With that, I'll turn it over to Sean to walk through the quarter in more detail, including segment performance and our updated outlook.

Sean Gillen

Thanks, Eric. Good morning, everyone. I'll first add some detail on the consolidated results Eric covered. I'm on Slide 7. Third quarter results exceeded our guidance on every key measure. Organic revenue grew 8% above our 5% to 7% range with notable strength again in HST and solid contribution from FMT and FSDP. Adjusted EBITDA margin of 27.8% was above our 27% to 27.5% range and adjusted EPS of $2.33 was above our $2.20 to $2.25 range. Orders totaled nearly $1 billion, up 13% organically, with growth in all 3 segments.

HST orders grew 21% and FMT orders grew 11%. Book-to-bill remained north of 1x in the quarter. As expected, orders stepped down sequentially from a very strong second quarter, primarily due to timing in data center order activity, which was still up significantly year-over-year. Order activity remained strong in areas influenced by artificial intelligence as well as continued strength in municipal water, mining, space and defense and commercial aerospace. Organic sales grew 8%, with HST up 13%, FMT up 4% and FSDP up 6%. Growth was driven primarily by volume with a positive price contribution. Price/cost remained positive on a dollar basis with targeted pricing and productivity, keeping us ahead of inflation, and we expect that to continue.

Adjusted gross margin expanded 70 basis points to 45.2%, driven mostly by volume leverage and productivity. Adjusted EBITDA margin expanded 50 basis points to 27.8%. Free cash flow was $214 million, up 14%, representing 124% conversion. We ended the quarter with liquidity of over $1.2 billion.

Now some color by segment. I'm on Slide 8. In HST, organic orders grew 21% to $468 million, a third quarter record, and organic sales grew 13%. Volumes increased in our advantaged markets, including semiconductor OE and consumables, data center applications and space and defense. Nearly all of this growth is coming from businesses we acquired over the past several years and in areas where we focused our integrated growth strategies. That momentum continues to build visibility into 2027.

Our life sciences business trended in line with our expectations. Overall, growth was flat with base analytical instrument demand growing mid-single digits, which was partially offset by the expected roll-off of the legacy platform. We expect to largely lap by year-end. HST adjusted EBITDA margin expanded 110 basis points to 28.8%, driven mostly by volume leverage. Flow-through was in the high 30s in line with expectations and 8020 work in our highest-yielding areas is underway. Mott, the largest acquisition in IDEX's history contributed positively on strong mix and early traction on continuous improvement work the teams are executing.

Please turn to Slide 9. In FMT, organic orders grew 11% to $349 million, a third quarter record, and organic sales grew 4%. Order strength reflects continued momentum in longer lead time areas as well as in our base industrial businesses. Additionally, we saw some improvement in order activity in energy and agriculture compared to last year's quarter. Sales growth was led by semiconductor and municipal water as well as year-over-year growth at our leading industrial pumps businesses. We continue to see year-over-year declines in chemical valves and agriculture, but have seen sequential improvement in each. FMT adjusted EBITDA margin expanded 20 basis points to 33.9% as productivity and volume leverage more than offset some headwinds in mix.

Please turn to Slide 10. FSDP organic orders grew 1% and organic sales grew 6%. All 3 businesses in FSDP grew in the third quarter. BAND-IT led this growth as it continues to benefit from strong aerospace demand. as expected, dispensing returned to growth in the quarter as its comparisons are easier in the second half. FSDP adjusted EBITDA margin expanded 140 basis points to 28.5% and driven by productivity, volume leverage and mix.

Please turn to Slide 11, where I'll touch on capital deployment. Gross leverage improved to 1.8x from 2.1x a year ago on strong cash flow and earnings growth. We continue to invest in our business with CapEx up from last year to support growth. We also returned capital to shareholders, paying $54 million in dividends and repurchasing $75 million of shares in the quarter. We plan to maintain repurchases at around $75 million per quarter through the rest of 2026, and we can [indiscernible] above that based on leverage, bolt-on M&A and 8020 led portfolio decisions. Our M&A pipeline remains active, focused on bolt-ons that attach to our growth platforms.

Now to our updated guidance for 2026. Please turn to Slide 12. We are raising our full year outlook to reflect our third quarter outperformance and continued momentum we're seeing in several areas. We now expect organic growth of 6.5% to 6.8%, up from 5% to 6%. We are tightening our adjusted EBITDA margin expectation for the full year to 27.1% to 27.3%. And we are raising adjusted EPS by $0.16 at the midpoint to $8.91 to $8.96, up from $8.70 to $8.85. At the midpoint, this represents double-digit growth year-over-year.

A couple of fourth quarter specific notes. Consistent with prior years, we expect fourth quarter margins to step down sequentially. This is largely driven by fewer production days and planned maintenance shutdowns that result in lower sales and margin. We saw the same pattern last year. Below the line, lower debt balances and higher interest income provide a modest tailwind. Our outlook reflects the visibility we have in our advantaged markets and stable to improving short-cycle industrial demand. We continue to expect CapEx of approximately $110 million and free cash flow conversion of at least 100% for the full year. Looking further out, we continue to view high 30s to 40% incrementals net of reinvestment as the right framework for IDEX. FMT has long shown it drives those levels with positive volumes and HST there this year through volume leverage and 8020 in our acquired businesses. We'll, of course, get into more granular details when we share our 2027 outlook on the fourth quarter call.

With that, I'll turn the call back over to Eric.

Eric Ashleman

Thanks, Sean. I'm on Slide 13. Stepping back, what I'm most pleased with this quarter isn't any single number. It's the compounding effect of our everyday execution and the reshaping of our portfolio. The businesses we've acquired in advantaged markets have shaped our deployment of integrated platforms that are leading the way for growth. Now with the margin profile we expect at IDEX. And our premier industrial businesses are lean and well positioned. As demand improves, they'll do what they've always done, expand margins and generate strong cash flow on incremental volume. This is the algorithm we want our portfolio to deliver. HST growing high single digits through a cycle in our industrial businesses outgrowing their markets.

With that growth, we expect high 30s to 40% incremental margins, resulting in sustainable double-digit earnings growth. Capital allocation is a key part of that algorithm. Our strong cash flow funds investment in our businesses and acquisitions in advantaged areas to extend our growth platforms. Alongside that, we'll continue to return capital to shareholders through our dividend and share repurchases. To put with discipline, that capital builds on the earnings growth our businesses generate on their own. Our strategy is working and there is significant runway ahead.

I want to close by recognizing our teams across IDEX whose focus and discipline continue to turn our strategy into results. So participants on the call, we appreciate your continued interest in IDEX, and I'll now turn the call back to the operator for your questions.

Operator

[Operator Instructions] Your first question comes from the line of Mike Halloran with Baird.

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Michael Halloran

A couple of questions, Eric, maybe just spend a little time talking about that broadening of growth comment. What are the indicators of growth that you're seeing, where you're seeing the broadening most specifically. And then in those areas that are still down over year and stabilizing, maybe just touch on what you're seeing there. If there's actually signs of improvement? Are we just at the point where we bottomed out enough to talk about a sustainable floor that you can build off over time?

Eric Ashleman

Yes. Well, we see nice little step-ups in the broader kind of small volume order rates throughout the year. You might recall, we noted some that we'd seen in June as we ended Q2, saw that continue into July. We kind of saw the same phenomenon in September with continuation in October. So just a nice step up. As we talked about those diagnostic businesses for us, when they move together, it generally tells us something, tells us that there's a driver out there. So we've seen that as well. These are modest rates, but they're nice incremental step-ups and best reflected in kind of the daily order requirements, a lot of them coming from distributors and people like that.

To the second part of your question, we've kind of pointed to 3 fatigue areas for us. Chemicals, ag and energy. And I would say 2 of the 3, we are seeing some indicators pointing to better days ahead. Ag, it's been a certainly a tough cycle there, but we do a lot of preseason ordering because of the seasonality of that business. We kind of stage orders now ahead of next year's planning season. And that's improved for us this year. Again, it's kind of a modest number, but it's been a while since we've seen it. We think it's being driven by some of the commentary we've heard out of the industry, lower dealer inventories for heavy equipment better crop pricing in certain areas, still a lot of challenges for farmers, but we do see some signs of life there.

And I would say, energy is the other one. We've got some terminal automation business. We haven't had in a while. There's some things we're doing in pipeline work with our FMD business. Still a lot of uncertainty around it. But again, some indicators pointing to better days there. Chemicals is probably the one area I would say, continues to be very fatigued, I think, largely because of the dependence on input pricing at an elevated level.

Michael Halloran

That's great. That's helpful. And then maybe just on the M&A side of things. I know there's been a little less activity for you lately, somewhat intentional, but you're below the kind of the 2% gross leverage levels. Any change in the thought process and how aggressive you want to be particularly because a lot of the acquisitions you've done over the last 3, 5 years have really proven out to be beneficial. And also maybe just some thoughts on the pipeline and what you're seeing out there?

Eric Ashleman

Well, we're certainly aggressive in the activity level. Recall, kind of our model is to have a lot of proprietary conversations with folks that may not think that the time is good to sell, but we try to convince them otherwise. We're doing a lot of that work around those recently acquired businesses. So in some cases, we're meeting people for the first time. And so those conversations are happening aggressively in earnest.

And I mentioned the tunability factor and how that drives our business. That's the kind of stuff we're looking for. Other technologies, other capabilities, other access points that allow us to do even more of that. So lots of work happening there, but the nature of proprietary discussions like that is they can take a little longer. And so activity level, really, really high. I'd say from kind of on a larger front, we are always thinking about other capabilities or things we might want to bring into IDEX in a larger way. Quite honestly there, the pricing and the valuation levels are still pretty robust and maybe not necessarily as reflective as they should be, given some of the factors that are still out there in the macro environment. So we're going to be disciplined and careful but still doing the work.

Operator

Your next question comes from the line of Bryan Blair with Oppenheimer.

Bryan Blair

I'd like to drill down on HST momentum and near-term outlook a bit. We know quarterly orders are going to be volatile. But if we look at the last 4 quarters, high 480 average, that's quite robust. You're obviously below that albeit narrowing the gap in terms of revenue trajectory. Based on current visibility, inclusive of project time line and phasing, is it fair to expect HST to get to that kind of revenue level, the average of trailing orders by the early part of 2027? Or is that visibility not quite there?

Eric Ashleman

Yes, it's a good question. I think maybe I'll step back a little bit and just talk about order flow generally at IDEX and then get quickly to where you are at HST. I mean in all of our segments, still the vast majority of the orders we bring in, I kind of like they've always been. We have quick lead times as we offer rapid replenishment and people don't have to order a lot of things ahead of time. So that's still the case in all 3 segments. It's changed most notably in HST around the 3 areas that we talked about on the slides.

And really, in that bucket, only the data center piece has kind of got this phenomenon of large pieces that come in, in kind of an unpredictable way. We saw that a couple of times here. We've got more than enough backlog there to kind of run that out. I think for the -- from an operating perspective at ground level, we're more focused on the conversations that we're having every day, every week about requirements in the next quarter, things that we're going to probably have to do next year. And I would say data centers in particular, honestly, the order streams as they come in, in large tranches, they're pretty unpredictable. I think a lot of those are calibrated for their supply chains at large. They're often not [ pained ] because of kind of our componentry.

And so look, I think for us, moving up sequentially continue to grow the business, continue to supply against that backlog is the key. And I think like we're well -- we're ahead of schedule in terms of setting up HST overall at kind of a high single-digit rate, which we described as our algorithmic targets here. I think that will continue for a while as we do close that gap, but I think you are right to note that the data center piece, in particular, is going to be a little lumpy, a little unpredictable. But at the moment, we're very assured in terms of what we have and what we need for continued growth.

Bryan Blair

Understood. Very helpful color. And you mentioned WEFTEC and the launch of [indiscernible] for the intelligent water platform. Maybe speak to trends for intelligent water in general, it seems like high single-digit growth has sustained and maybe offer a little bit more on the value prop of [indiscernible]. We saw that in person and met with your team. We were impressed overall.

Eric Ashleman

Yes. Well, a couple of things. When we look at the reportable water group for our business, we always have to remind people, there's a municipal water dimension that's there. There's also a high purity business that's associated with that, that's very, very tied to the semi world. Both are growing well. And the semi world, in particular, is strong. I think that your comments are kind of moving towards the municipal side.

And I'll remind people of the work that we do there. It's essentially dirty water overflow mitigation, storm water runoff things like that. And then as I said in my prepared remarks, our product is essentially analytics. So we provide that visibility into the system when it doesn't perform the way that cities wanted to, we kind of -- we help them isolate it to what's wrong, whether or not they choose to spend capital as a separate decision that we don't really participate in, but we give them the viewpoint to see it. What [ Parispec ] does is it takes the different businesses that we've had for years and here recently acquired and essentially bring them together under one common software platform. It's one of the most difficult jobs for a municipality to do is to do its own rationalization of all those inputs and then use it to drive their own analytic understanding.

It's hard enough with any one data feed, but to do it on their own disparate systems is very, very difficult. So again, this is a specialized area. It doesn't cover everything they do within the water sphere. But in our world, it does, it comprehensively brings it together and gives that sort of diagnostic answer in a simple, easy-to-understand way that's very, very useful for them.

Operator

Your next question comes from the line of Jeff Sprague with Vertical Research.

Jeffrey Sprague

Eric, something you mentioned just kind of piqued my interest here. this idea of kind of tuning the portfolio, I mean it sounds like you're discovering sort of maybe adjacencies, you didn't even know or adjacencies as you work through this process? And maybe it's opening the aperture further on sort of kind of bolt-on opportunities relative to where you play. But do you see a significant increase in your TAM unfolding as you work through this kind of platforming internally and the tuning of the portfolio and just the opening up of these adjacencies?

Eric Ashleman

Yes. Well, it's a great question. It's kind of why we highlighted this particular point because it's a little nuanced and we want to make sure people understand it. these intersections points where you take -- just think of it as an X-Y grid and you have capabilities on the one side, that's the things that we can do technically and then you have spaces on the other, and you're really trying to mine those intersection points.

What this tuning ability gives us is it does absolutely elevate the potential TAM of things to do there. And all the examples that I walked through we've gone back 3 to 5 years. I mean they really weren't things we were thinking about, either because of customer access points or because we were working with current customers and solving different problems with an existing component-based technology we're actually able to make that step. The reason I put culture in there is an important attribute is we're kind of leaning on what we've always done, it's largely still a decentralized place where when leaders see that opportunity, they can go capitalize on it fast without a bunch of bureaucratic overreach from our side.

And so all of those ingredients, I think, are super, super important into the growth path for us as a company and exactly the way that you just referenced, it does give us a lot more opportunities. But also linking it back to the M&A side gives us a lot more things to consider in terms of assets we might want to acquire in to make that better.

Jeffrey Sprague

Great. And then just come back around the life sciences, if we could. So we ought to be done lapping the headwinds here in Q4. Is there anything just on the horizon product cycle rise why were we've got some visibility of just kind of a better growth trajectory as we're looking to '27 or into '28.

Eric Ashleman

I mean, it's hard to answer with any one specific we've got very broad coverage there with kind of all the major suppliers of devices and instrumentation in that world. So all I can say is I kind of look overall at the level of innovation. And so whenever we go to the business as we take a look at what's in the labs, where are we, what part of the process, how close to launch are we. That's been really, really healthy for well over a year.

And so I wouldn't point to any one thing other than to say we feel very good about that space, that sector and the innovation stream that we can see going on in our businesses with each one of the major customers that we can partner with.

Operator

Your next question comes from the line of Joe Giordano with TD Cowen.

Joseph Giordano

We're hearing like a lot more now about the next like kind of wave of AI being in terms of like diagnostics and life science and things like that. It's clearly like impacting the story around some of your customers and the stock price around some of your customers. I'm just curious like when you think about trends like that, and try to marry that with conditions on the ground. Your customers sound better on volumes and like the market getting better. But how do you kind of connect what you're actually seeing on the ground near term kind of visibility with some of these higher level like overarching themes that may have like a pretty material impact on those markets over time?

Eric Ashleman

Certainly, the subject you're talking about, I think, is particularly exciting for this sector. It's going to impact innovation in a whole bunch of ways. I think the probably the one that comes to mind for -- our teams is speed. And so being able to do things and crunch data and interpret results in a way that used to depend on human interpretation that and was paced in that way. Obviously, you can think of that much differently now.

And in that world, in particular, kind of speed of analysis, speed of decision-making, speed of regulatory, all of those things have been big inputs into kind of the current pacing and the historic pacing. So I think probably in that one aspect, the opportunity to move faster is probably the most exciting piece. Now is that a direct one-for-one correspondence to feeling better in the industry today? It's probably in there in an indirect way. But I think, generally, what we're seeing in terms of optimism is just we're further and further away from the pandemic even the institutional pressures were lapping at this point, then they're slightly better than they were. And the innovation that was kind of teed up as we came out of the pandemic is now starting to reach market introduction stages.

So I think all of those things together are the current ingredients, but boy, I'm like probably where you are, I think the potential for AI and what it can do in this space is very exciting.

Joseph Giordano

And just -- and forgive me if you touched on this before in the beginning of the prepared remarks, I had to do on a couple of minutes late. But the data center semiconductor base elements of obviously, pacing growth there. Are you able to parse out like the split of what's driving this year? And then as you think into next year, does that -- does the aggregate really change a whole lot? And does like the composition of that growth change within those 3?

Sean Gillen

Yes. So as you mentioned, and we did touch on it in the prepared remarks, a lot of the growth, particularly in HST, continues to come from those 3 advantage areas, data centers, semiconductor and space and Defense. And in those in aggregate, they're now over 1/3 of the portfolio and really driving a lot of the growth in the HST segment, in particular, overall, probably around kind of year-to-date, 50% type growth year-over-year in those areas.

And I think as you look into next year, a lot of those trends are durable, like we've talked about, one, the trends are durable to, we have the orders backlog that help with the visibility. We will start to get into tougher comps year-over-year as we move into that. But I think all the things that are driving growth there continue to be additive as we look into '27.

Operator

Your next question comes from the line of Nathan Jones with Stifel.

Nathan Jones

Maybe just follow up on that. You talked about 50% growth in the advantaged areas contributing most of HST growth. Maybe we could talk about the other pieces of HST that are maybe not contributing to growth at the moment? And how you're feeling about the prospects for those areas to start contributing to growth in '27, '28?

Sean Gillen

Yes. I think the biggest piece there of kind of the other parts of HST outside of those advantage 3 areas would be life sciences, as we just talked about, which we do still consider an advantaged area and for all the reasons that Eric touched on expect growth to continue to return there.

For us specifically, we're starting to see that other than this one program that's sunsetting. And I think all the characteristics and demand attributes as we look into next year, are positive. So if you think about kind of the HST portfolio overall, that one has been a drag for a few years now, kind of even today. And as you look into next year, it should be additive to the growth. That's kind of the single biggest other piece of HST, about 1/3 of the portfolio is life sciences. You have more than 1/3 from the advantage 3 Life Sciences being another 1/3. And the balance of it starts to be some of the more kind of industrial leaning type products, whether it's in our Sealing Solutions business or in the gas part of performance pneumatics.

Some of those, I think, continue to just perform in line with overall industrial activity, and that will probably be the case as we're looking to next year as well.

Nathan Jones

I guess I asked a question on incremental margins. IDEX has historically been a business that the higher the growth goes, the higher the incremental margins go. As you're saying there's really strong growth in HST and improving growth in FMT, should we expect to see the incremental margins get a little bit better as the growth gets a little bit better?

Sean Gillen

Yes. I think overall, that's fair. And I think in a way that's what you saw in Q3 because you started to see volume growth in the FMT and FSDP portions of the business as well. and flow-through there was quite strong in the quarter. And as we talked about, kind of that high -- for the whole company, that high 30s to 40% flow-through range is still the right ZIP code, and that's with HST in the high 30s. FMT kind of 40% plus or minus, depending on where the volume is coming from and FSDP somewhere in between the two. You will have a little bit of kind of from a consolidated standpoint, a bit of a headwind from the corporate line year-over-year that eats into consolidated flow through. But those are the pieces I think about in terms of overall flow through, which I think Q3 was a good proxy for as well.

Eric Ashleman

And then, Nathan, as you think of those numbers, they are inclusive of probably an environment we're heading into where we are going to put some growth investments on the Board. We've largely now for a few years, kind of, frankly, lived off of 8020 and moving resources left and right largely. But we've now got some sectors of the business that are growing and growing really strong. And we do need to put some talent in there to make sure we can keep it going. But what Sean referenced is inclusive of that work that's still to come.

Operator

Your next question comes from the line of Vlad Bystricky with Citigroup.

Vladimir Bystricky

I appreciate all the color. Maybe just one sort of more detailed question. Just if I think about your comments around inflation and some of the pricing actions you've taken to offset that. Can you quantify how much of a tailwind pricing is to top line in '26 and how you're thinking about that evolving in '27?

Sean Gillen

Yes. I can touch on that. Pricing for '26 is around 2% of overall top line. That's what it was Q3. Q2 had some noise with the EPA tariffs. But if you strip that out, you're around in the 2% ZIP code. I think overall, that continues to be the right place for us to think about pricing overall for the company. It tends to be a little bit heavier in the more established markets like FMT and FSDP, a little bit lighter in the higher growth, higher innovation portions of HST.

But we continue to look to price in excess of cost. The IDEX businesses are set up well. Eric talked about the pricing dynamic across the businesses that we have. I think it's set up well for us to continue to price in excess of cost. We've obviously been in a kind of unusually inflationary environment for the past couple of years, both with tariffs as well as just overall inflation, particularly on some commodities that we see. Who knows what will happen there, but I think we continue to expect that we'll price in excess of cost and keep our margins intact.

Vladimir Bystricky

Got it. That's really helpful, Sean. I appreciate that. And I guess then just stepping back, given the momentum you're seeing in advantaged markets given the order strength you've had and then some of the broadening into industrial. As we start thinking about puts and takes into '27, are there any sort of emerging headwinds or negatives that we should be thinking about that could potentially offset this positive momentum that we're seeing build here through '26?

Eric Ashleman

I mean there's nothing really on the board that's pinging for us in the near term that we're worried about. I mean probably like everyone else as we look at some of the most aggressively growing markets, data center probably being at the top of the list.

We're always keeping an eye on kind of overall aggregate capacity of the system. Remember, we're putting a small component into a pretty complex ecosystem. So far, there's some noise out there, clearly, in pockets, none of it caused by us and none of it really disruptive to us. But looking at that as a governor of ultimate rates of expansion. I think that's something you always have to keep an eye on. Probably we have to do it as well in some of the areas that are growing in those advantaged spaces for us for different inputs. But again, we pride ourselves on -- with our own uptick in capital, we're not going to be the cause of any of that. And again, at present, I don't really see anything that would distort it but those would probably be the items that would be at the top of our list to just keep an eye on as well as the usual things around environmental macroeconomics.

Operator

[Operator Instructions] Your next question comes from the line of Dan DiCicco with Bank of Montreal Capital Markets.

Unknown Analyst

Maybe just a little bit bigger picture, which business or end market has exceeded your expectations the most this year? And then as we look to '27, where do you feel like visibility has improved the most as well?

Eric Ashleman

It's an interesting question. I think our teams within Material Science solutions, I would probably say the work that they're doing there has been particularly impressive. Those -- that's where we've got the 2 large businesses that we acquired are pretty near that universe. There's some newer applications in there that we're just meeting for the first time in the speed that they've moved on those and made progress. Teams at Muon right next to them, the teams at Mott, as I referenced in my comments earlier, I'm particularly impressed with our output there and what's happening.

In terms of the second part of your question, look, I think, again, we're kind of focused in the way that I described in the beginning, where those advantaged markets are sort of leading the way. That's where a lot of our time intention is being spent. We'll keep an eye on those as we go. Again, we're excited about the broadening industrial side of this, too. It's been a while since we've been able to flex some growth muscles and get the leverage levels that we've talked about here, and that's a really important part of IDEX as well. So it's all interesting, fascinating for us and doing very, very well.

Operator

We have reached the end of our Q&A session. I will now turn the call back to Eric Ashleman, Chief Executive Officer, for closing remarks.

Eric Ashleman

Thank you, and thanks for joining the call today, everyone. I have just 4 key messages to sum up our time together.

2026, I think, has really been a validation of our strategic thesis that drove the acquisition strategy over the last 5 years. I mean we are really, really happy with the performance of the businesses we acquired. Number two, we continue to see durability and strength in those advantaged markets we covered today. Our teams are innovating with customers every day. And as we talked about when we reference tunability, we want to extend our reach and impact within those demand streams, I'm confident we will. Very encouraged by the broadening of demand in industrial businesses, as I just talked about. We've seen small steps each quarter, some positive indicators pointing to better days ahead, and those businesses performed so well when they're growing in that way.

And then finally, our teams are executing in a great way. That's expected, of course, but I never take it for granted. I want to thank them again. Thanks for all your time with us today. Look forward to talking about where we're going next in future calls. Have a great day.

Operator

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