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Image source: The Motley Fool. Thursday, July 30, 2026, at 10 a.m. ET Vice President, Corporate Strategies and Investor Relations - Felix Boeschen President and Chief Executive Officer - Jennifer Sherman Chief Financial Officer - Ian Hudson Operator: Greetings. Welcome to the Federal Signal Corporation's second quarter earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Felix Boeschen, Vice President, Corporate Strategies and Investor Relations. Thank you, Felix. You may begin. Felix Boeschen: Good morning. Welcome to Federal Signal's second quarter 2026 conference call. I'm Felix Boeschen, the company's Vice President of Corporate Strategy and Investor Relations. Also with me on the call today is Jennifer Sherman, our President and Chief Executive Officer, and Ian Hudson, our Chief Financial Officer. We will refer to some presentation slides today, as well as to the earnings release, which we issued this morning. The slides can be followed online by going to our website, federalsignal.com, clicking on the Investor Call icon, and signing in to the webcast. We've also posted the slide presentation and the earnings release under the investor tab on our website. Before I turn the call over to Ian, I'd like to remind you that some of our comments made today may contain forward-looking statements that are subject to the safe harbor language found in today's news release and in Federal Signal's filings with the Securities and Exchange Commission. These documents are available on our website. Our presentation also contains some measures that are not in accordance with the U.S. generally accepted accounting principles. In our earnings release and filings, we reconcile these non-GAAP measures to GAAP measures. In addition, we will file our Form 10-Q later today. Ian will start today with more detail on our second quarter financial results. Jennifer will then provide her perspective on our performance, current market conditions, and go over our increased guidance for 2026 before we open the line for any questions. With that, I would now like to turn the call over to Ian. Ian Hudson: Thank you, Felix. Our consolidated second quarter financial results are provided in today's earnings release. In summary, in what is typically a seasonably strong period, our businesses were able to deliver 19% year-over-year net sales growth, 21% operating income improvement, an 18% increase in orders, gross margin expansion, and a 60-basis-point improvement in Adjusted EBITDA margin during the record-setting second quarter. Consolidated net sales for the quarter were $670 million, an increase of $106 million or 19% compared to last year. Organic sales growth for the quarter was $31 million or 6%. Consolidated operating income for the quarter was $118.2 million, up $20.5 million, or 21% compared to last year. Consolidated Adjusted EBITDA for the quarter was $144.4 million, up $26.2 million or 22% compared to last year. That translates to a margin of 21.5% in Q2 this year, up 60 basis points compared to last year. GAAP diluted EPS for the quarter was $1.40 per share, up $0.24 per share or 21% compared to last year. On an adjusted basis, EPS for the quarter was $1.42 per share, an increase of $0.25 per share or 21% from last year. Customer demand remained strong during the quarter, with orders of $637 million, representing an increase of $97 million or 18% compared to last year. Backlog at the end of the quarter was $1 billion, compared to $1.08 billion last year. In terms of our group results, ESG's net sales for the quarter were $578 million, up $97 million or 20% compared to last year. ESG's operating income for the quarter was $113.9 million, up $22 million or 24% compared to last year. ESG's Adjusted EBITDA for the quarter was $138.3 million, up $27.5 million or 25% compared to last year. That translates to an Adjusted EBITDA margin for the quarter of 23.9%, an improvement of 80 basis points compared to last year. ESG reported total orders of $548 million in Q2 this year, an increase of $107 million or 24% compared to last year. SSG's net sales for the quarter were $93 million this year, up $8 million or 10%. SSG's operating income for the quarter was $22.1 million, up $600,000 or 3% compared to last year. SSG's Adjusted EBITDA for the quarter was $23.2 million, up $600,000 or 3%. That translates to an Adjusted EBITDA margin for the quarter of 25.1% compared to 26.9% last year. SSG's orders for the quarter were $89 million compared to $99 million last year. Corporate operating expenses for the quarter were $17.8 million compared to $15.7 million last year, with the increase primarily due to higher post-retirement expenses and increased medical costs. Turning now to the consolidated income statement, where the increase in net sales contributed to a $34.2 million improvement in gross profit. Consolidated gross margin for the quarter was 30.4%, a 40-basis-point increase over last year. As a percentage of our net sales, our selling, engineering, general, and administrative expenses for the quarter were down 10 basis points from Q2 last year. Other items affecting the quarterly results include a $2.1 million increase in amortization expense, a $200,000 increase in acquisition related expenses, and a $2.5 million increase in interest expense. Tax expense for the quarter was $25.3 million compared to $22 million in Q2 last year, with the increase primarily due to the effects of higher pre-tax income levels, partially offset by a $1.1 million increase in excess tax benefits associated with stock-based compensation activity. Our effective tax rate for Q2 this year was 22.7% compared to 23.6% in Q2 last year. At this time, we expect that our full year effective tax rate will be approximately 24%, excluding additional discrete tax benefits. On an overall GAAP basis, we therefore earned $1.40 per share in Q2 this year, compared with $1.16 per share in Q2 last year. To facilitate earnings comparisons, we typically adjust our GAAP earnings per share for unusual items recorded in the current or prior year quarters. In the current and prior year quarters, we made adjustments to GAAP earnings per share to exclude acquisition-related expenses and purchase accounting expense effects. On this basis, our adjusted earnings for the quarter were $1.42 per share, compared with $1.17 per share last year. Looking now at cash flow, we generated $113 million of cash from operations during the quarter, an increase of $53 million or 89% from Q2 last year. That brings the total cash generated from operations in the first half of this year to $214 million, an increase of 122% over the first half of last year. During the quarter, we paid down approximately $97 million of debt, ending the period with $391 million of net debt and availability under our credit facility of $1.04 billion. Our current net debt leverage ratio remains low. With our financial position remaining strong, we have significant flexibility to invest in organic growth initiatives, pursue strategic acquisitions, pay down debt, and return cash to stockholders through dividends and opportunistic share repurchases. On that note, we paid dividends of $9.1 million during the quarter, reflecting a dividend of $0.15 per share, and we recently announced a similar $0.15 per share dividend for the third quarter. That concludes my comments, and I would now like to turn the call over to Jennifer. Jennifer Sherman: Thank you, Ian. We are proud of our second quarter financial results, which included new second-quarter records across net sales, Adjusted EBITDA, adjusted EPS, and orders, thanks to outstanding contributions from both of our groups. These results underscore the resilience and durability of our business model, the momentum behind our growth initiatives, and the unwavering commitment of our teams. Over the last several years, we have continued to diversify our revenue streams and our end market exposure to different funding sources. As a result of these efforts, we have strengthened the core of our business while muting cyclicality and driving growth over a prolonged period. Within our Environmental Solutions Group, we delivered 20% year-over-year net sales growth, a 25% increase in Adjusted EBITDA, and an 80 basis point improvement in Adjusted EBITDA margin. Growth in our aftermarket business, leveraging the power of our platform to drive internal margin initiatives and proactive price-cost management were all meaningful organic contributors. Acquisitions also contributed approximately $75 million of net sales during the quarter, with New Way and Mega driving notable increases in sales of refuse trucks and mineral extraction support equipment. Organic net sales growth was also broad-based across several of our ESG vehicle categories, including vacuum trucks, dump truck bodies, and other specialty equipment. From a capacity perspective, the combination of large-scale capacity expansions that we completed between 2019 and 2022, good access to labor, and continued investments in several productivity-enhancing projects position us well to absorb more volume into our existing footprint. Consistent with prior years, in 2026, we expect approximately half of our annual capital expenditures to be focused on various growth initiatives, with the other half focused on maintenance investments. Shifting to aftermarket. Demand for our aftermarket offerings remained strong, aided by contributions from recent acquisitions. For the quarter, aftermarket revenue increased 24% year-over-year, primarily driven by higher demand for aftermarket parts, higher used equipment sales, and rental income growth. We are experiencing strong rental demand as rental income grew by 16% year-over-year, led by growth in our safe digging and combination sewer cleaners. As a reminder, our aftermarket ecosystem, spanning parts and service, rental, rent-to-own, and used equipment offerings, further unlocks previously underserved customer cohorts for Federal Signal. Our teams are diligently focused on driving more parts revenue across the enterprise. This is a multifaceted approach. First, our Build More Parts initiative, whereby we are vertically integrating certain parts production, remains in early innings. We are investing in manufacturing capacity dedicated to this initiative in the second half of the year. Second, as our addressable install base of vehicles has grown, we are expanding our geographic footprint of aftermarket parts and service locations to better serve our customers and capture more parts opportunities. For perspective, since 2019, we have added approximately 20 service centers, and we see additional footprint expansion opportunities. Third, as we integrate acquisitions, this aftermarket ecosystem becomes a powerful flywheel. As part of these plans, our teams are currently pursuing aftermarket growth opportunities across Trackless, New Way, and Mega. In the aggregate, aftermarket represented approximately 25% of ESG revenue in Q2 this year. Shifting to our Safety and Security Systems Group, where the team delivered another quarter of solid results with 10% top-line growth, a 3% increase in Adjusted EBITDA, and an Adjusted EBITDA margin of 25.1% towards the midpoint of our recently raised target range of 22%-28%. This performance was primarily driven by a combination of volume increases across our public safety and industrial signaling product verticals, proactive price-cost management, and realization of certain cost savings, somewhat offset by mixed headwinds. Lastly, we had another outstanding quarter of cash generation with $113 million of operating cash flow, representing cash conversion of 131% of net income. On an annual basis, we continue to target 100% cash conversion. Before I comment on current market conditions, I would like to provide some additional context around our end market exposure. As referenced earlier, when I first became CEO in 2016, one of our main objectives was to reduce the cyclicality of earnings streams by decreasing our reliance on any single funding mechanism, economic end market, or customer cohort. The result is a substantially more durable revenue profile today compared to 10 years ago, including less reliance on traditional municipal budgets, a significantly larger aftermarket presence, and increased exposure to various niche industrial markets, such as road marking, metal extraction support, hydro excavation, and dump trucks. We have also strategically diversified funding mechanisms within our publicly funded verticals. These funding sources include water taxes, Canadian provincial and local budgets, law enforcement and police budgets, trash collection fees, airports, U.S. state budgets, military, and European local and federal exposure. To provide some perspective on this, while little more than half of our revenue base is tied to some sort of publicly funded mechanism, the largest publicly funded source, U.S. water taxes, impacts less than 15% of our total net sales. Shifting now to current market conditions. On an underlying basis, excluding the impact of third-party Labrie refuse orders received in Q2 last year, our orders this quarter increased by $103 million or 19% year-over-year, with healthy demand across both our Safety and Security Systems Group and our Environmental Solutions Group. Within our Environmental Solutions Group, orders were up 24% year-over-year, including high single-digit organic growth. Within product lines, we experienced strength in organic demand for vacuum trucks, led by strong increases in orders for safe digging trucks, dump truck bodies and trailers, and aftermarket offerings. Lastly, our backlog stood at $1 billion at the end of the first quarter, down approximately $80 million or 8% year-over-year, with $75 million of this reduction associated with the planned decline in third-party Labrie refuse backlog, which was discontinued in the fourth quarter of 2025. At the end of the quarter, our third-party Labrie refuse truck backlog stood at approximately $44 million. As a reminder, net sales of our backlog-intensive products represented approximately 45% of net sales last year. With that said, given the size of our backlog, we continue to enjoy strong forward visibility for our backlog-driven product lines. In fact, while we are making progress, lead times for certain of our products remain elevated compared to our target levels. As I reflect on our performance through the first half of 2026, I am most pleased with the early financial benefits we are starting to realize from the collective power of the growth platform that we have built over the past decade. The power of this platform, spanning several key centers of excellence, including procurement, our Federal Signal operational system, supply chain optimization, aftermarket, dealer development, sales channel alignment, data analytics, and new product development, underpins my confidence in our ability to achieve continued earnings growth in 2027 and beyond. Going forward, it is our intent to further invest in scaling these centers of excellence, which will support both our M&A integration engine and unlock incremental margin expansion opportunities across the enterprise that we have identified. We expect to incur additional expenses in the second half of this year as we scale these centers of excellence. Simply put, as we contemplate the next phase of growth at Federal Signal, this platform is what will allow our teams to pursue more strategic market share and operational improvement initiatives at a faster pace each year, driving an increasingly unique customer value proposition and an increasingly idiosyncratic earnings growth opportunity through various economic conditions. As a reminder, through cycles, we target annual low double-digit top-line growth split roughly evenly between inorganic and organic growth. At the same time, we are committed to growing profitably and have implemented associated EBITDA margin targets for our groups that we've increased several times over the past years. A couple of highlights. Starting with margins, as I just noted, we are excited by a number of initiatives that we believe will drive further margin expansion as we begin to leverage the power of our platform more deliberately. We've identified four categories of expansion opportunities over a multi-year timeframe. First, the continued growth of our aftermarket business, which carries an attractive margin profile. Through cycles, we expect aftermarket revenue to grow slightly faster than the overall company. Second, execution on several operational initiatives. Some of the largest untapped categories we have identified are focused on optimizing our procurement spend across our specialty vehicle verticals and scaling our 80/20 processes as we internalize our Federal Signal operational system across the broader enterprise. Third, driving increased volumes through our expanded footprint while investing in select automation opportunities. Fourth, the successful execution and integration of acquisitions. Over a multi-year timeframe, all four of these categories, aftermarket, operational initiatives, leveraging our capacity, and M&A, will be important contributors to margin expansion. On that note, in early July, we completed the acquisition of Western Technology, a manufacturer of proprietary portable explosion-protected lighting solutions for niche end markets such as industrial processing, petrochemical, or aerospace. We see strong synergy opportunities as Western will expand our industrial signaling product portfolio, allowing our teams to utilize our existing sales channel and manufacturing operations. Going forward, we see further opportunities to grow SSG through strategic M&A. We have also been pleased with the integration progress our teams are making at New Way and Mega. We are still in the early stages of our multi-year integration plans, but so far, both acquisitions have exceeded our internal margin and profit contribution expectations in the first half of 2026. Recall, in September of last year, when we announced the New Way transaction, we outlined $15 million-$20 million of annual synergies to be achieved by the end of 2028, with synergies split roughly even between costs and revenue. At this time, we are pleased to share that we are tracking ahead in the realization of our cost synergy targets, and we continue to identify incremental opportunities. The early successes of both of these integrations is a testament to our best-in-class record of achieving or exceeding our targeted synergies and the vast majority of the 17 acquisitions we have completed during my tenure as CEO. Looking ahead, there's more to come. We are energized by an active M&A pipeline as we continue to evaluate strategic opportunities across both of our operating groups. Turning now to our outlook for the remainder of 2026. With our record-setting second quarter performance, our current backlog, and continued execution against our strategic and operational initiatives, we are raising our full-year adjusted EPS outlook to a new range of $5.12-$5.30 from the prior range of $4.80-$5.05. We are also raising our full-year net sales outlook to a new range of between $2.58 billion and $2.67 billion from the prior range of $2.57 billion-$2.66 billion. Lastly, we are reaffirming our CapEx outlook of between $45 million and $55 million for the year. With that, we are ready to open the line for questions. Operator? Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question is from Steve Barger at KeyBanc Capital Markets. Please proceed with your question. Jennifer Sherman: Good morning, Steve. Steve Barger: Good morning. Yeah, that was a lot. Really appreciate the commentary about diversity of funding mechanisms, just because visibility into that has been a big investor topic for the past month or two. Overall, how would you characterize funding across those different sources and just visibility for the back half and into next year? Jennifer Sherman: Thank you, Steve. As I mentioned in my prepared remarks, we've been very purposeful in terms of diversification of those funding sources, really with the objective of creating a very resilient and durable business model. As we look across that and we say ±55-ish% comes from public revenue. As I talked about in my prepared remarks, the largest portion of that would be water taxes, which is less than 15%. Within that public revenue, there's also Canada, which is an important end market for us. There's also the European market. There's a little piece of the U.S., and military portion of that. There's a little piece of refuse fees in there. There's also, we get a lot of questions about the municipal piece. Probably the way to think about it is the way that we think about how do we categorize our businesses. You think about the other specialty equipment category where our pure play municipal business resides. That other special equipment category is about 25% of our overall business. Within that category, you've got refuse, which is the largest portion in that category. You have our metal extraction business. You've got our road marking and high-pressure water blasting business, and you have our Elgin street sweeper businesses. Those three businesses, each one of them is mid to high single-digit % of our overall net sales. We get a lot of questions about the municipal exposure, and our truly only pure play municipal exposure would be street sweepers. Those budgets have been holding. They're funded primarily through property taxes and sales taxes. When you look at the external data, it continues to grow consistent with GDP type rates. Although our street sweeper orders were down in Q2, there were other parts of that other specialty equipment that were strong. Our metal extraction orders were up, our road marking and jet streams were solid, and our refuse orders were slightly above where we had planned. I think we talked about last September that we thought in 2026 that refuse market would be down. Overall, we feel very good about those diversification of funding sources and then the outlook going forward. The last thing I would say is 45% of our business is backlog driven, and that gives us pretty good visibility. That $1 billion of backlog sets us up for a good second half and a strong beginning to 2027. Steve Barger: Really comprehensive answer. I appreciate that. I guess just to recap, if I look at that in aggregate, the funding mechanisms look secure as you go into the back half and next year. Jennifer Sherman: Yes. Steve Barger: Perfect. Then you talked about investing in aftermarket capacity, which obviously makes sense as that approaches 25% of ESG revenue. What dollar level are you investing toward? As you've grown that business, what's the incremental return on capital for those aftermarket investments? Ian Hudson: Yeah. I think, Steve, we've maintained the CapEx guide of $45 million-$55 million for the year. We're not talking about significant CapEx in terms of these investments that we're making. They're relatively modest investments that we're making to mainly existing facilities, just primarily to drive the Build More Parts initiative. In terms of the increment, I think Jennifer mentioned in her prepared remarks, the margin on the aftermarket business is more attractive. The delta isn't quite as significant as you may see in some other industries, for a couple of reasons. Primarily, we command some pretty good margins on our existing equipment sales as well. It is a slightly more attractive return, and as we go forward, that's one of the things that we think about when we see the opportunity to drive further margin expansion, is just the continued growth of that aftermarket business. The returns are attractive, certainly when you look at the relatively low level of investment in the facility that we're referring to here. Jennifer Sherman: Yeah, just to add a little bit of color to that. I was with the team at their offsite up in Canada last month, the team has identified some geographic expansion opportunities. We will be opening up some new offices. Again, very low CapEx. Number two is in my prepared remarks, I talked a lot about Build More Parts, that's an area we will be investing, we see a lot of growth potential. Again, we really like the durability and resilience of this aftermarket segment. We manufacture work trucks, and they need parts, and they need service. Rental income was up year-over-year. Used equipment sales were up. This continues to be a very important part of the Federal Signal family. Steve Barger: Understood. Thank you for all the detail. Jennifer Sherman: Thank you. Operator: Our next question is from Ross Sparenberg with William Blair. Please proceed with your question. Ross Sparenberg: Hey, good morning, guys. Jennifer Sherman: Good morning, Ross. Ross Sparenberg: Hey. It looks like some strong order growth in the quarter. I believe, organic ESG orders look like they're up around 9%, although you noted that street sweepers were down in the second quarter. When we think about the muni channel overall, can you just give a sense on what the inventory channels look like? Do you think it's kind of balanced? Was there potentially some pre-buy and de-stocking now? Jennifer Sherman: Yeah. Ross Sparenberg: Just any other dynamics you can. Jennifer Sherman: Yeah. We didn't see a lot of pre-buy this quarter, and we haven't built in pre-buys for the rest of the year in terms of our projections. We continue to monitor the EPA regulations, understanding that they're not finalized. If something does change there, it could potentially be upside. With respect to refuse, when we announced the transaction last year, we expected that refuse would be down this year, and that's what we built into our valuation model and the price that we paid. Right now, refuse is, on the order side, is operating slightly ahead of our model. As I mentioned on the call, with respect to integration and some of the cost synergies, we've realized some of those earlier than we anticipated. With respect to inventory in the channel, many of our specialty vehicle categories don't really carry a lot of channel inventory. We feel really good about what we're seeing right now. Again, kind of building what I said earlier, aftermarkets represented about 25% of ESG's revenue this quarter. We saw very strong performance there. They were up 24% year-over-year. Each of those, rentals was up, used equipment was up, and parts was up. Again, as we look at those different end markets and the different pieces, we feel really good, and that's what led to the significant increase in our guidance for the second half of the year. Ross Sparenberg: Okay. No, that's helpful. The expectation then is, the chassis disruption that started to alleviate in 2024, I mean, that's in the rear view. Potentially going into the next year, we'll have smoother comps and just kind of a normal GDP plus type of- Jennifer Sherman: Yeah Ross Sparenberg: activity in the channel? Okay. Then maybe just one- Jennifer Sherman: Based on what we know today, the answer is yes. Ross Sparenberg: Okay. No, that's helpful. Just on the margin side, nice lift in the EPS guide. Some interest there. SG&A is stepping up. Maybe just some of, can you walk us through some of the moving parts there? Higher SG&A in the second half potentially. Maybe, what type of incrementals we should be underwriting. I get the sense that the confidence here is coming from just the progress making on the aftermarket side. Ian Hudson: I think a couple things, Ross. I think obviously the momentum that we're seeing on the aftermarket side of the business, also some of the traction we're seeing on the integration of the acquisitions. Both Mega and New Way are tracking slightly ahead of where we thought they would be. That has some margin upside for the year. I think when we went into the year, we were expecting those acquisitions to be slightly dilutive. I think where we sit today, we actually think that dilution is not going to be there. I think if you look at the guide for the year, that would imply that we're expecting margin improvement on a year-over-year basis. The investments that we refer to, they are in the second half of the year, but not overly material in the sense that when you look at the context of the raise for the rest of the year, that's implied in the guide. Ross Sparenberg: Okay. On the SG&A side, the expectation is that, as a percentage of sales, they should be stepping down year-over-year in the back half? Even with the investment? Ian Hudson: I think more of the upside is probably in the gross margin area, as opposed to SG&A. We're not adding significant costs from an SG&A standpoint. They're really not relatively nominal investments that we're referring to. Most of the uplift, I think, would be on the gross margin front. Jennifer Sherman: Yeah, we are adding some people, though, Ian Hudson: Yeah Jennifer Sherman: to drive some of the longer-term benefits that I identified, I think, with respect to the power of the platform. Ross Sparenberg: All right. Well, nice quarter, guys. Thank you. I'll pass it along. Jennifer Sherman: Thank you, Ross. Operator: Our next question is from Tim Thein with Raymond James. Please proceed with your question. Jennifer Sherman: Good morning, Tim. Tim Thein: Good morning. The question is on aftermarket, and thinking about the initiatives you're putting in place to expand that, and obviously real nice growth in the quarter. I think in the past we've talked about maybe a long-term target of that part of the portfolio getting to 30-ish% of ESG revenues. I recognize that year-to-year there can be fluctuations depending on where those OEM volumes are coming in and how that impacts the overall percentage. As you've now integrated New Way and you think about some of these company specific initiatives, are you still thinking about that as kind of a realistic target and any sort of, I know a timeline is hard to put on it, but is 30% of segment revenue still a kind of achievable target to put out there? Jennifer Sherman: Yeah, I think I have two things to add to that. One is, as I stated in my prepared remarks, we expect aftermarkets to grow faster than the company. My objective is I want to grow both the numerator and the denominator. A couple critical things are going to contribute to the growth of aftermarket. One, it's going to be somewhat dependent on what acquisitions we do. New Way, as we talked about when we purchased the company, we're two full quarters in, but parts are about 11% of their overall revenue. We see some upside as we move forward, and that's an important synergy that the teams are working on. Many of our businesses right now are running at 30% on the parts side. There's no structural reason why it can't be 30%. As I mentioned earlier, a lot of it's going to depend on the M&A and the mix of the businesses that we buy. We are fully committed to growing aftermarkets. Again, what I talk about internally all the time is the durability and resilience of our business model. Aftermarkets is an important part of that. Tim Thein: Got it. Okay. Let me just make sure I got what Ian was going through. The net income guide goes up, I don't know, $17 million, $18 million on a pretty marginal change in revenue. Is it the traction on the growth in aftermarket and some of the M&A integration performing better than expected? Are those kind of the two big drivers? Ian Hudson: Yeah, Tim, there's a lot of pieces as you can probably imagine. If you think about the big ticket items, the growth in the aftermarket business and then the traction on the recent acquisitions, I think Jennifer mentioned that we're tracking ahead of the cost synergies that we originally kind of communicated at the time of the New Way transaction. Those would be kind of the two bigger pieces. Jennifer Sherman: I think some of the operational improvements that our teams are working on. Again, what I think is important to understand here is it's not any one thing. We have a number of initiatives, and we don't need every single one of them to hit. We just need enough of them to hit. As we looked at the second half of the year, and we looked at where we stand, we have a lot of confidence of our teams to execute on those initiatives and set us up for a strong 2027. Tim Thein: Got it. Thank you very much. Operator: Our next question is from Walt Liptak with Seaport Research. Please proceed with your question. Jennifer Sherman: Good morning, Walt. Walt Liptak: Good morning, guys. Hey, great quarter. I'd like to ask one from 50,000 ft. You've been beating your EPS numbers and raising guidance so far this year, and the orders this quarter look really good. When you think about how your year is progressing, is it execution on the Build More Parts initiative that's resulting in the EPS upside, or is it something else? Jennifer Sherman: One of the things about Federal Signal is that we're not over-reliant on any one initiative. As I mentioned earlier, we've got a number of different initiatives. In this quarter, and for the rest of the year, it's strong year-over-year growth in aftermarket. They're up 24%. Strong performance by the acquisitions, strong performance by our mineral extraction group, solid performance by the road marking group, strong performance by the vacuum truck group. SSG had another solid quarter. Our TBEI businesses had a very solid quarter. I go through all that detail to say we've got just broad-based strength, that's really what gave us confidence in terms of the guidance raise for the second half of the year. As we're very focused on 2027 and what do we need to do to continue to drive these many initiatives across Federal Signal in order to continue to build both the resiliency and durability of this business model, the diversification around the end market of the business model, and set us up for not only a strong second half of the year, but a strong 2027. Walt Liptak: Okay, that sounds great. Kind of along those lines, you provided sales and EPS guidance range that's fairly broad. Maybe this is an Ian Hudson question, what's the difference between sort of the high end of the sales and EPS guidance and the low end? What's assumed in the low end? Ian Hudson: I think in the low end, while we talked about we still have $45 million of third-party refuse trucks to deliver. We don't necessarily control the timing of when those come to us, that would probably be something that, if that didn't materialize, that would lead us towards the lower end of the revenue guide. On the flip side, I think, the continued momentum and some of the strategic initiatives would probably take us towards the upper end. Those are probably the variables on the top-line guide. Walt Liptak: Okay, great. Maybe the last one for me, I wanted to ask about, you commented that the New Way business is ahead of expectations, I think, on some of those new orders that you were thinking were going to decline. Why do you think that is? Is it because you're integrating New Way into your dealer channel? What's going on there? Jennifer Sherman: When we did our extensive diligence on this transaction last year, one of the issues we identified is excess inventory in the system, not just of New Way, across the refuse industry. Our expectation is that the refuse industry was going to be down in 2026. When we built our model and our valuation, that's what we reflected. I think, frankly, listening to other OEMs, that's turned out to be accurate. From a revenue standpoint, we're kind of spot on our model. From an order standpoint, we're slightly ahead. We identified that $15 million-$20 million of synergies that we expected to achieve by the end of 2028. On the cost side, we've achieved some of that earlier than we anticipated. We've identified a number of opportunities. We're running ahead of our plan right now. Two quarters. We're only two quarters into this, but I'm really pleased with the kind of strength of our integration team. I would add that on the Mega side, the teams are doing a super job. We were just out at Ground Force earlier this week for our board meeting, and we had a great conversation with that team. Again, it really is a testament to the integration successes that we've had during my tenure as CEO. More to come, very early days, but pleased with our progress. Walt Liptak: Okay, great. Maybe just a final one for me. The acquisition that you announced, can you provide us with more details? What's the name of it? How big are the revenues? Is there going to be accretion? Jennifer Sherman: It's Western Technology. It's very small. It's the first acquisition that SSG did. We're not expecting anything material in 2026. More to come as we move forward, but it's small. Walt Liptak: Okay, great. Thank you. Ian Hudson: Thanks, Walt. Jennifer Sherman: Thank you. Operator: Our next question is from Chris Moore with CJS Securities. Please proceed with your question. Jennifer Sherman: Good morning, Chris. Chris Moore: Good morning, guys. Just a quick one. The 6% organic growth, maybe I missed it, just a rough breakdown on price and volume there. Ian Hudson: Yeah. Price, Chris, was about three and a half of that. The volume and chassis would be the rest. Chris Moore: Got it. I know you've already talked a lot about New Way, it sounds like you're ahead of plan on the cost side. As you said, it's still early in the mix. I know you were talking about 2028 is where you really would see the full benefits and that 40%-45% of accretion in 2028. I think what I'm hearing is 2028 is still the year where you see the full benefits. It's just perhaps the curve to get there is a little bit quicker, a little bit steeper earlier than you anticipated. Is that fair? Ian Hudson: I think that's correct, Chris, if you think about the earlier achievement of some of the cost synergies. I think the revenue synergies are probably more gradual as we get through 2028, as we look to crack one of the initiatives is to the expansion, really, and growth into Canada. That's something that will likely take some time as we build up that channel. The revenue synergies will likely be more gradual through that timeframe. We're slightly ahead on the cost side. Jennifer Sherman: We're very pleased with the progress to date, understanding that we're only two full quarters in. Chris Moore: Got it. Maybe my last one, it just feels like you can't talk to any company these days without at least referencing AI. Are you spending any dollars there? Is there any obvious role for it within your ecosystem? Jennifer Sherman: Absolutely. During this quarter, we actually added an individual to our leadership team who's leading our efforts. We've been working on a number of projects over the last couple of years that Felix has led, I'm going to let him walk you through them quickly. Felix Boeschen: Yeah, Chris, absolutely. I think we're in the earlier innings, but we've identified a number of interesting opportunities. Again, when you think about the power of the platform we've talked about, data analytics is one of those core benefits that we're starting to build out. A little bit early in terms of sizing it. Over time, we think it'll be additive to some of our organic revenue growth initiatives. Chris Moore: Got it. I appreciate it, guys. I will leave it there. Jennifer Sherman: Thank you, Chris. Operator: Our next question is from Mike Shlisky with D.A. Davidson. Please proceed with your question. Jennifer Sherman: Good morning, Mike. Speaker 9: Hi, guys. This is Linda on for Mike. Jennifer Sherman: Hi, Linda. Speaker 9: Hi, Jennifer. Question, I want to follow up on the New Way commentary about the orders. We've heard commentary from the other two waste truck companies the last few days that seem to say different things. Basically, I want to know what's driving the difference between what you're seeing and what some other positive and negative commentary that is elsewhere in the industry. Is it product mix, customer exposure? If you could give me some more color, that would be helpful. Jennifer Sherman: Yeah. I think I need to start to go back to September when we announced the acquisition. We were very clear, based on our research, that we thought that the industry was going to be down overall, the refuse truck industry would be down in 2026, because we thought there was excess inventory in the system as lead time started to reduce. We built our model, we anticipated it, and built our model for the transaction with the assumption that the industry was going to be down in 2026. What I said is, look, our revenue, we're kind of spot on our model, and our orders, which we said we believe the industry would be down, we're slightly ahead of where we thought we were going to be from an order standpoint. I'd be remiss if I didn't give a shout-out to our team who said, "Listen, we think this industry is going to be down, and we built a model around that, and we're tracking right in accordance with that model." We anticipate as we move forward, as we get tractions on our dealer development initiative, our Canadian initiatives, some of our NPD that we're investing in other things, that we'll keep share gain, and we'll continue to grow. Very pleased with where we are, understanding that we're only two quarters in. Speaker 9: Very helpful. Yeah, I also want to follow up on the commentary on the municipal budget situation. You mentioned that there were mixed order activity this quarter. Do you expect the same trends going into the second half and 2027 as well, or do you expect things to change? Jennifer Sherman: Yeah. I guess what I want to point out is of that 55%-ish that comes from public funds, our only pure play U.S. municipal business is street sweepers. As I talked about earlier in my remarks, it's mid to high single digits for overall revenue. As we look at the fundamentals of the funding mechanisms for local municipalities for our products, which would be sales tax and property taxes, they continue to remain steady. We have worked very diligently and been successful in diversification of those public revenue sources. We're exposed to water taxes, we're exposed to refuse collection fees, police budgets, the Canadian, provincial, and federal governments, some of the U.S. government, state governments. It is a really nice mixture of funding sources with our only kind of pure play U.S. municipal piece being street sweepers, which is a relatively small portion of Federal Signal's overall revenues. Speaker 9: Got it. My last question, could you discuss the corporate costs for the quarter? I think they were up a little over $2 million from the prior year, and yeah, I would like to get some more color on that. Ian Hudson: Yeah. You're right, Linda, they were up year-over-year. The biggest drivers, the two main drivers are just higher post-retirement expenses, and then we also saw some increased medical costs on a year-over-year basis. Speaker 9: Got it. Thank you for your time. Jennifer Sherman: Thank you, Linda. Operator: Our next question is from Greg Burns at Sidoti & Company. Please proceed with your question. Jennifer Sherman: Good morning, Greg. Greg Burns: Morning. The decline in the SSG margin, what was the driver there? I guess maybe relative to mix. Ian Hudson: Yeah, it was mostly mix, Greg. It was just certain shipments. We had a larger shipment that went to some customers. There was some on the systems side that were just on a year-over-year basis, it was just slightly dilutive from a margin standpoint, but still the 25% margin, it's right at the midpoint of our recently increased range of 22%-28%. I think the 26.9% comp in Q2 of last year was a record. We still feel very good about SSG's performance in the quarter. The 25%, as I said, is right at the midpoint of that recently increased target range. Greg Burns: Okay. Jennifer Sherman: [Dan]. Greg Burns: Sorry, go ahead. Jennifer Sherman: No, go ahead, please. Greg Burns: I was just going to ask another question around the Western acquisition. I know most of your acquisition activities obviously happened on the ESG side of the business. This is the first on the SSG side. Obviously very small. I just wanted to kind of understand the broader opportunity for SSG to leverage M&A, kind of that platform model that you've used on the ESG model. What is the opportunities there, and how might Western inform how you're looking at the opportunity on that side of the business? Jennifer Sherman: This is a very fragmented industry, and there are a number of opportunities to leverage audible and visual technologies for different end markets. The other area, we are looking at several acquisitions both here in the U.S. and outside the U.S. We also, in addition to that, police is the largest piece of SSG. As we look at upfitting of police cars, there's some ancillary equipment that would be very attractive. Again, it really falls in that same category as ESG, these niche end markets where there's some type of pretty significant motor barrier to entry around certifications. There's operating in hazardous environments. We're pleased by the first acquisition the team has done. We got a number of other ones in the pipeline that we're working on and excited about the outlook on the M&A side for both SSG and ESG. Greg Burns: Great. Thank you. Jennifer Sherman: Thank you. Operator: We have reached the end of the question and answer session. I'd like to turn the floor back over to Jennifer Sherman, President and Chief Executive Officer, for closing comments. Jennifer Sherman: In closing, I would like to note that during the quarter, we published our latest Annual Sustainability Report, which is available on our website. The report highlights our progress against our emission reduction goals, our new targets, and our ongoing community engagement efforts. It is our people that define the unique culture at Federal Signal, and we remain committed to investing in the local communities in which we operate. We would also like to express our thanks to our stockholders, distributors, dealers, and customers for their continued support. Thank you for joining us today, and we'll talk to you soon. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. Before you buy stock in Federal Signal, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Federal Signal wasn’t one of them. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Federal Signal (FSS) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Image source: The Motley Fool. Thursday, July 30, 2026, at 10 a.m. ET Vice President, Corporate Strategies and Investor Relations - Felix Boeschen President and Chief Executive Officer - Jennifer Sherman Chief Financial Officer - Ian Hudson Operator: Greetings. Welcome to the Federal Signal Corporation's second quarter earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Felix Boeschen, Vice President, Corporate Strategies and Investor Relations. Thank you, Felix. You may begin. Felix Boeschen: Good morning. Welcome to Federal Signal's second quarter 2026 conference call. I'm Felix Boeschen, the company's Vice President of Corporate Strategy and Investor Relations. Also with me on the call today is Jennifer Sherman, our President and Chief Executive Officer, and Ian Hudson, our Chief Financial Officer. We will refer to some presentation slides today, as well as to the earnings release, which we issued this morning. The slides can be followed online by going to our website, federalsignal.com, clicking on the Investor Call icon, and signing in to the webcast. We've also posted the slide presentation and the earnings release under the investor tab on our website. Before I turn the call over to Ian, I'd like to remind you that some of our comments made today may contain forward-looking statements that are subject to the safe harbor language found in today's news release and in Federal Signal's filings with the Securities and Exchange Commission. These documents are available on our website. Our presentation also contains some measures that are not in accordance with the U.S. generally accepted accounting principles. In our earnings release and filings, we reconcile these non-GAAP measures to GAAP measures. In addition, we will file our Form 10-Q later today. Ian will start today with more detail on our second quarter financial results. Jennifer will then provide her perspective on our performance, current market conditions, and go over our increased guidance for 2026 before we open the line for any questions. With that, I would now like to turn the call over to Ian. Ian Hudson: Thank you, Felix. Our consolidated second quarter financial results are provided in today's earnings release. In summary, in what is typically a seasonably strong period, our businesses were able to deliver 19% year-over-year net sales growth, 21% operating income improvement, an 18% increase in orders, gross margin expansion, and a 60-basis-point improvement in Adjusted EBITDA margin during the record-setting second quarter. Consolidated net sales for the quarter were $670 million, an increase of $106 million or 19% compared to last year. Organic sales growth for the quarter was $31 million or 6%. Consolidated operating income for the quarter was $118.2 million, up $20.5 million, or 21% compared to last year. Consolidated Adjusted EBITDA for the quarter was $144.4 million, up $26.2 million or 22% compared to last year. That translates to a margin of 21.5% in Q2 this year, up 60 basis points compared to last year. GAAP diluted EPS for the quarter was $1.40 per share, up $0.24 per share or 21% compared to last year. On an adjusted basis, EPS for the quarter was $1.42 per share, an increase of $0.25 per share or 21% from last year. Customer demand remained strong during the quarter, with orders of $637 million, representing an increase of $97 million or 18% compared to last year. Backlog at the end of the quarter was $1 billion, compared to $1.08 billion last year. In terms of our group results, ESG's net sales for the quarter were $578 million, up $97 million or 20% compared to last year. ESG's operating income for the quarter was $113.9 million, up $22 million or 24% compared to last year. ESG's Adjusted EBITDA for the quarter was $138.3 million, up $27.5 million or 25% compared to last year. That translates to an Adjusted EBITDA margin for the quarter of 23.9%, an improvement of 80 basis points compared to last year. ESG reported total orders of $548 million in Q2 this year, an increase of $107 million or 24% compared to last year. SSG's net sales for the quarter were $93 million this year, up $8 million or 10%. SSG's operating income for the quarter was $22.1 million, up $600,000 or 3% compared to last year. SSG's Adjusted EBITDA for the quarter was $23.2 million, up $600,000 or 3%. That translates to an Adjusted EBITDA margin for the quarter of 25.1% compared to 26.9% last year. SSG's orders for the quarter were $89 million compared to $99 million last year. Corporate operating expenses for the quarter were $17.8 million compared to $15.7 million last year, with the increase primarily due to higher post-retirement expenses and increased medical costs. Turning now to the consolidated income statement, where the increase in net sales contributed to a $34.2 million improvement in gross profit. Consolidated gross margin for the quarter was 30.4%, a 40-basis-point increase over last year. As a percentage of our net sales, our selling, engineering, general, and administrative expenses for the quarter were down 10 basis points from Q2 last year. Other items affecting the quarterly results include a $2.1 million increase in amortization expense, a $200,000 increase in acquisition related expenses, and a $2.5 million increase in interest expense. Tax expense for the quarter was $25.3 million compared to $22 million in Q2 last year, with the increase primarily due to the effects of higher pre-tax income levels, partially offset by a $1.1 million increase in excess tax benefits associated with stock-based compensation activity. Our effective tax rate for Q2 this year was 22.7% compared to 23.6% in Q2 last year. At this time, we expect that our full year effective tax rate will be approximately 24%, excluding additional discrete tax benefits. On an overall GAAP basis, we therefore earned $1.40 per share in Q2 this year, compared with $1.16 per share in Q2 last year. To facilitate earnings comparisons, we typically adjust our GAAP earnings per share for unusual items recorded in the current or prior year quarters. In the current and prior year quarters, we made adjustments to GAAP earnings per share to exclude acquisition-related expenses and purchase accounting expense effects. On this basis, our adjusted earnings for the quarter were $1.42 per share, compared with $1.17 per share last year. Looking now at cash flow, we generated $113 million of cash from operations during the quarter, an increase of $53 million or 89% from Q2 last year. That brings the total cash generated from operations in the first half of this year to $214 million, an increase of 122% over the first half of last year. During the quarter, we paid down approximately $97 million of debt, ending the period with $391 million of net debt and availability under our credit facility of $1.04 billion. Our current net debt leverage ratio remains low. With our financial position remaining strong, we have significant flexibility to invest in organic growth initiatives, pursue strategic acquisitions, pay down debt, and return cash to stockholders through dividends and opportunistic share repurchases. On that note, we paid dividends of $9.1 million during the quarter, reflecting a dividend of $0.15 per share, and we recently announced a similar $0.15 per share dividend for the third quarter. That concludes my comments, and I would now like to turn the call over to Jennifer. Jennifer Sherman: Thank you, Ian. We are proud of our second quarter financial results, which included new second-quarter records across net sales, Adjusted EBITDA, adjusted EPS, and orders, thanks to outstanding contributions from both of our groups. These results underscore the resilience and durability of our business model, the momentum behind our growth initiatives, and the unwavering commitment of our teams. Over the last several years, we have continued to diversify our revenue streams and our end market exposure to different funding sources. As a result of these efforts, we have strengthened the core of our business while muting cyclicality and driving growth over a prolonged period. Within our Environmental Solutions Group, we delivered 20% year-over-year net sales growth, a 25% increase in Adjusted EBITDA, and an 80 basis point improvement in Adjusted EBITDA margin. Growth in our aftermarket business, leveraging the power of our platform to drive internal margin initiatives and proactive price-cost management were all meaningful organic contributors. Acquisitions also contributed approximately $75 million of net sales during the quarter, with New Way and Mega driving notable increases in sales of refuse trucks and mineral extraction support equipment. Organic net sales growth was also broad-based across several of our ESG vehicle categories, including vacuum trucks, dump truck bodies, and other specialty equipment. From a capacity perspective, the combination of large-scale capacity expansions that we completed between 2019 and 2022, good access to labor, and continued investments in several productivity-enhancing projects position us well to absorb more volume into our existing footprint. Consistent with prior years, in 2026, we expect approximately half of our annual capital expenditures to be focused on various growth initiatives, with the other half focused on maintenance investments. Shifting to aftermarket. Demand for our aftermarket offerings remained strong, aided by contributions from recent acquisitions. For the quarter, aftermarket revenue increased 24% year-over-year, primarily driven by higher demand for aftermarket parts, higher used equipment sales, and rental income growth. We are experiencing strong rental demand as rental income grew by 16% year-over-year, led by growth in our safe digging and combination sewer cleaners. As a reminder, our aftermarket ecosystem, spanning parts and service, rental, rent-to-own, and used equipment offerings, further unlocks previously underserved customer cohorts for Federal Signal. Our teams are diligently focused on driving more parts revenue across the enterprise. This is a multifaceted approach. First, our Build More Parts initiative, whereby we are vertically integrating certain parts production, remains in early innings. We are investing in manufacturing capacity dedicated to this initiative in the second half of the year. Second, as our addressable install base of vehicles has grown, we are expanding our geographic footprint of aftermarket parts and service locations to better serve our customers and capture more parts opportunities. For perspective, since 2019, we have added approximately 20 service centers, and we see additional footprint expansion opportunities. Third, as we integrate acquisitions, this aftermarket ecosystem becomes a powerful flywheel. As part of these plans, our teams are currently pursuing aftermarket growth opportunities across Trackless, New Way, and Mega. In the aggregate, aftermarket represented approximately 25% of ESG revenue in Q2 this year. Shifting to our Safety and Security Systems Group, where the team delivered another quarter of solid results with 10% top-line growth, a 3% increase in Adjusted EBITDA, and an Adjusted EBITDA margin of 25.1% towards the midpoint of our recently raised target range of 22%-28%. This performance was primarily driven by a combination of volume increases across our public safety and industrial signaling product verticals, proactive price-cost management, and realization of certain cost savings, somewhat offset by mixed headwinds. Lastly, we had another outstanding quarter of cash generation with $113 million of operating cash flow, representing cash conversion of 131% of net income. On an annual basis, we continue to target 100% cash conversion. Before I comment on current market conditions, I would like to provide some additional context around our end market exposure. As referenced earlier, when I first became CEO in 2016, one of our main objectives was to reduce the cyclicality of earnings streams by decreasing our reliance on any single funding mechanism, economic end market, or customer cohort. The result is a substantially more durable revenue profile today compared to 10 years ago, including less reliance on traditional municipal budgets, a significantly larger aftermarket presence, and increased exposure to various niche industrial markets, such as road marking, metal extraction support, hydro excavation, and dump trucks. We have also strategically diversified funding mechanisms within our publicly funded verticals. These funding sources include water taxes, Canadian provincial and local budgets, law enforcement and police budgets, trash collection fees, airports, U.S. state budgets, military, and European local and federal exposure. To provide some perspective on this, while little more than half of our revenue base is tied to some sort of publicly funded mechanism, the largest publicly funded source, U.S. water taxes, impacts less than 15% of our total net sales. Shifting now to current market conditions. On an underlying basis, excluding the impact of third-party Labrie refuse orders received in Q2 last year, our orders this quarter increased by $103 million or 19% year-over-year, with healthy demand across both our Safety and Security Systems Group and our Environmental Solutions Group. Within our Environmental Solutions Group, orders were up 24% year-over-year, including high single-digit organic growth. Within product lines, we experienced strength in organic demand for vacuum trucks, led by strong increases in orders for safe digging trucks, dump truck bodies and trailers, and aftermarket offerings. Lastly, our backlog stood at $1 billion at the end of the first quarter, down approximately $80 million or 8% year-over-year, with $75 million of this reduction associated with the planned decline in third-party Labrie refuse backlog, which was discontinued in the fourth quarter of 2025. At the end of the quarter, our third-party Labrie refuse truck backlog stood at approximately $44 million. As a reminder, net sales of our backlog-intensive products represented approximately 45% of net sales last year. With that said, given the size of our backlog, we continue to enjoy strong forward visibility for our backlog-driven product lines. In fact, while we are making progress, lead times for certain of our products remain elevated compared to our target levels. As I reflect on our performance through the first half of 2026, I am most pleased with the early financial benefits we are starting to realize from the collective power of the growth platform that we have built over the past decade. The power of this platform, spanning several key centers of excellence, including procurement, our Federal Signal operational system, supply chain optimization, aftermarket, dealer development, sales channel alignment, data analytics, and new product development, underpins my confidence in our ability to achieve continued earnings growth in 2027 and beyond. Going forward, it is our intent to further invest in scaling these centers of excellence, which will support both our M&A integration engine and unlock incremental margin expansion opportunities across the enterprise that we have identified. We expect to incur additional expenses in the second half of this year as we scale these centers of excellence. Simply put, as we contemplate the next phase of growth at Federal Signal, this platform is what will allow our teams to pursue more strategic market share and operational improvement initiatives at a faster pace each year, driving an increasingly unique customer value proposition and an increasingly idiosyncratic earnings growth opportunity through various economic conditions. As a reminder, through cycles, we target annual low double-digit top-line growth split roughly evenly between inorganic and organic growth. At the same time, we are committed to growing profitably and have implemented associated EBITDA margin targets for our groups that we've increased several times over the past years. A couple of highlights. Starting with margins, as I just noted, we are excited by a number of initiatives that we believe will drive further margin expansion as we begin to leverage the power of our platform more deliberately. We've identified four categories of expansion opportunities over a multi-year timeframe. First, the continued growth of our aftermarket business, which carries an attractive margin profile. Through cycles, we expect aftermarket revenue to grow slightly faster than the overall company. Second, execution on several operational initiatives. Some of the largest untapped categories we have identified are focused on optimizing our procurement spend across our specialty vehicle verticals and scaling our 80/20 processes as we internalize our Federal Signal operational system across the broader enterprise. Third, driving increased volumes through our expanded footprint while investing in select automation opportunities. Fourth, the successful execution and integration of acquisitions. Over a multi-year timeframe, all four of these categories, aftermarket, operational initiatives, leveraging our capacity, and M&A, will be important contributors to margin expansion. On that note, in early July, we completed the acquisition of Western Technology, a manufacturer of proprietary portable explosion-protected lighting solutions for niche end markets such as industrial processing, petrochemical, or aerospace. We see strong synergy opportunities as Western will expand our industrial signaling product portfolio, allowing our teams to utilize our existing sales channel and manufacturing operations. Going forward, we see further opportunities to grow SSG through strategic M&A. We have also been pleased with the integration progress our teams are making at New Way and Mega. We are still in the early stages of our multi-year integration plans, but so far, both acquisitions have exceeded our internal margin and profit contribution expectations in the first half of 2026. Recall, in September of last year, when we announced the New Way transaction, we outlined $15 million-$20 million of annual synergies to be achieved by the end of 2028, with synergies split roughly even between costs and revenue. At this time, we are pleased to share that we are tracking ahead in the realization of our cost synergy targets, and we continue to identify incremental opportunities. The early successes of both of these integrations is a testament to our best-in-class record of achieving or exceeding our targeted synergies and the vast majority of the 17 acquisitions we have completed during my tenure as CEO. Looking ahead, there's more to come. We are energized by an active M&A pipeline as we continue to evaluate strategic opportunities across both of our operating groups. Turning now to our outlook for the remainder of 2026. With our record-setting second quarter performance, our current backlog, and continued execution against our strategic and operational initiatives, we are raising our full-year adjusted EPS outlook to a new range of $5.12-$5.30 from the prior range of $4.80-$5.05. We are also raising our full-year net sales outlook to a new range of between $2.58 billion and $2.67 billion from the prior range of $2.57 billion-$2.66 billion. Lastly, we are reaffirming our CapEx outlook of between $45 million and $55 million for the year. With that, we are ready to open the line for questions. Operator? Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question is from Steve Barger at KeyBanc Capital Markets. Please proceed with your question. Jennifer Sherman: Good morning, Steve. Steve Barger: Good morning. Yeah, that was a lot. Really appreciate the commentary about diversity of funding mechanisms, just because visibility into that has been a big investor topic for the past month or two. Overall, how would you characterize funding across those different sources and just visibility for the back half and into next year? Jennifer Sherman: Thank you, Steve. As I mentioned in my prepared remarks, we've been very purposeful in terms of diversification of those funding sources, really with the objective of creating a very resilient and durable business model. As we look across that and we say ±55-ish% comes from public revenue. As I talked about in my prepared remarks, the largest portion of that would be water taxes, which is less than 15%. Within that public revenue, there's also Canada, which is an important end market for us. There's also the European market. There's a little piece of the U.S., and military portion of that. There's a little piece of refuse fees in there. There's also, we get a lot of questions about the municipal piece. Probably the way to think about it is the way that we think about how do we categorize our businesses. You think about the other specialty equipment category where our pure play municipal business resides. That other special equipment category is about 25% of our overall business. Within that category, you've got refuse, which is the largest portion in that category. You have our metal extraction business. You've got our road marking and high-pressure water blasting business, and you have our Elgin street sweeper businesses. Those three businesses, each one of them is mid to high single-digit % of our overall net sales. We get a lot of questions about the municipal exposure, and our truly only pure play municipal exposure would be street sweepers. Those budgets have been holding. They're funded primarily through property taxes and sales taxes. When you look at the external data, it continues to grow consistent with GDP type rates. Although our street sweeper orders were down in Q2, there were other parts of that other specialty equipment that were strong. Our metal extraction orders were up, our road marking and jet streams were solid, and our refuse orders were slightly above where we had planned. I think we talked about last September that we thought in 2026 that refuse market would be down. Overall, we feel very good about those diversification of funding sources and then the outlook going forward. The last thing I would say is 45% of our business is backlog driven, and that gives us pretty good visibility. That $1 billion of backlog sets us up for a good second half and a strong beginning to 2027. Steve Barger: Really comprehensive answer. I appreciate that. I guess just to recap, if I look at that in aggregate, the funding mechanisms look secure as you go into the back half and next year. Jennifer Sherman: Yes. Steve Barger: Perfect. Then you talked about investing in aftermarket capacity, which obviously makes sense as that approaches 25% of ESG revenue. What dollar level are you investing toward? As you've grown that business, what's the incremental return on capital for those aftermarket investments? Ian Hudson: Yeah. I think, Steve, we've maintained the CapEx guide of $45 million-$55 million for the year. We're not talking about significant CapEx in terms of these investments that we're making. They're relatively modest investments that we're making to mainly existing facilities, just primarily to drive the Build More Parts initiative. In terms of the increment, I think Jennifer mentioned in her prepared remarks, the margin on the aftermarket business is more attractive. The delta isn't quite as significant as you may see in some other industries, for a couple of reasons. Primarily, we command some pretty good margins on our existing equipment sales as well. It is a slightly more attractive return, and as we go forward, that's one of the things that we think about when we see the opportunity to drive further margin expansion, is just the continued growth of that aftermarket business. The returns are attractive, certainly when you look at the relatively low level of investment in the facility that we're referring to here. Jennifer Sherman: Yeah, just to add a little bit of color to that. I was with the team at their offsite up in Canada last month, the team has identified some geographic expansion opportunities. We will be opening up some new offices. Again, very low CapEx. Number two is in my prepared remarks, I talked a lot about Build More Parts, that's an area we will be investing, we see a lot of growth potential. Again, we really like the durability and resilience of this aftermarket segment. We manufacture work trucks, and they need parts, and they need service. Rental income was up year-over-year. Used equipment sales were up. This continues to be a very important part of the Federal Signal family. Steve Barger: Understood. Thank you for all the detail. Jennifer Sherman: Thank you. Operator: Our next question is from Ross Sparenberg with William Blair. Please proceed with your question. Ross Sparenberg: Hey, good morning, guys. Jennifer Sherman: Good morning, Ross. Ross Sparenberg: Hey. It looks like some strong order growth in the quarter. I believe, organic ESG orders look like they're up around 9%, although you noted that street sweepers were down in the second quarter. When we think about the muni channel overall, can you just give a sense on what the inventory channels look like? Do you think it's kind of balanced? Was there potentially some pre-buy and de-stocking now? Jennifer Sherman: Yeah. Ross Sparenberg: Just any other dynamics you can. Jennifer Sherman: Yeah. We didn't see a lot of pre-buy this quarter, and we haven't built in pre-buys for the rest of the year in terms of our projections. We continue to monitor the EPA regulations, understanding that they're not finalized. If something does change there, it could potentially be upside. With respect to refuse, when we announced the transaction last year, we expected that refuse would be down this year, and that's what we built into our valuation model and the price that we paid. Right now, refuse is, on the order side, is operating slightly ahead of our model. As I mentioned on the call, with respect to integration and some of the cost synergies, we've realized some of those earlier than we anticipated. With respect to inventory in the channel, many of our specialty vehicle categories don't really carry a lot of channel inventory. We feel really good about what we're seeing right now. Again, kind of building what I said earlier, aftermarkets represented about 25% of ESG's revenue this quarter. We saw very strong performance there. They were up 24% year-over-year. Each of those, rentals was up, used equipment was up, and parts was up. Again, as we look at those different end markets and the different pieces, we feel really good, and that's what led to the significant increase in our guidance for the second half of the year. Ross Sparenberg: Okay. No, that's helpful. The expectation then is, the chassis disruption that started to alleviate in 2024, I mean, that's in the rear view. Potentially going into the next year, we'll have smoother comps and just kind of a normal GDP plus type of- Jennifer Sherman: Yeah Ross Sparenberg: activity in the channel? Okay. Then maybe just one- Jennifer Sherman: Based on what we know today, the answer is yes. Ross Sparenberg: Okay. No, that's helpful. Just on the margin side, nice lift in the EPS guide. Some interest there. SG&A is stepping up. Maybe just some of, can you walk us through some of the moving parts there? Higher SG&A in the second half potentially. Maybe, what type of incrementals we should be underwriting. I get the sense that the confidence here is coming from just the progress making on the aftermarket side. Ian Hudson: I think a couple things, Ross. I think obviously the momentum that we're seeing on the aftermarket side of the business, also some of the traction we're seeing on the integration of the acquisitions. Both Mega and New Way are tracking slightly ahead of where we thought they would be. That has some margin upside for the year. I think when we went into the year, we were expecting those acquisitions to be slightly dilutive. I think where we sit today, we actually think that dilution is not going to be there. I think if you look at the guide for the year, that would imply that we're expecting margin improvement on a year-over-year basis. The investments that we refer to, they are in the second half of the year, but not overly material in the sense that when you look at the context of the raise for the rest of the year, that's implied in the guide. Ross Sparenberg: Okay. On the SG&A side, the expectation is that, as a percentage of sales, they should be stepping down year-over-year in the back half? Even with the investment? Ian Hudson: I think more of the upside is probably in the gross margin area, as opposed to SG&A. We're not adding significant costs from an SG&A standpoint. They're really not relatively nominal investments that we're referring to. Most of the uplift, I think, would be on the gross margin front. Jennifer Sherman: Yeah, we are adding some people, though, Ian Hudson: Yeah Jennifer Sherman: to drive some of the longer-term benefits that I identified, I think, with respect to the power of the platform. Ross Sparenberg: All right. Well, nice quarter, guys. Thank you. I'll pass it along. Jennifer Sherman: Thank you, Ross. Operator: Our next question is from Tim Thein with Raymond James. Please proceed with your question. Jennifer Sherman: Good morning, Tim. Tim Thein: Good morning. The question is on aftermarket, and thinking about the initiatives you're putting in place to expand that, and obviously real nice growth in the quarter. I think in the past we've talked about maybe a long-term target of that part of the portfolio getting to 30-ish% of ESG revenues. I recognize that year-to-year there can be fluctuations depending on where those OEM volumes are coming in and how that impacts the overall percentage. As you've now integrated New Way and you think about some of these company specific initiatives, are you still thinking about that as kind of a realistic target and any sort of, I know a timeline is hard to put on it, but is 30% of segment revenue still a kind of achievable target to put out there? Jennifer Sherman: Yeah, I think I have two things to add to that. One is, as I stated in my prepared remarks, we expect aftermarkets to grow faster than the company. My objective is I want to grow both the numerator and the denominator. A couple critical things are going to contribute to the growth of aftermarket. One, it's going to be somewhat dependent on what acquisitions we do. New Way, as we talked about when we purchased the company, we're two full quarters in, but parts are about 11% of their overall revenue. We see some upside as we move forward, and that's an important synergy that the teams are working on. Many of our businesses right now are running at 30% on the parts side. There's no structural reason why it can't be 30%. As I mentioned earlier, a lot of it's going to depend on the M&A and the mix of the businesses that we buy. We are fully committed to growing aftermarkets. Again, what I talk about internally all the time is the durability and resilience of our business model. Aftermarkets is an important part of that. Tim Thein: Got it. Okay. Let me just make sure I got what Ian was going through. The net income guide goes up, I don't know, $17 million, $18 million on a pretty marginal change in revenue. Is it the traction on the growth in aftermarket and some of the M&A integration performing better than expected? Are those kind of the two big drivers? Ian Hudson: Yeah, Tim, there's a lot of pieces as you can probably imagine. If you think about the big ticket items, the growth in the aftermarket business and then the traction on the recent acquisitions, I think Jennifer mentioned that we're tracking ahead of the cost synergies that we originally kind of communicated at the time of the New Way transaction. Those would be kind of the two bigger pieces. Jennifer Sherman: I think some of the operational improvements that our teams are working on. Again, what I think is important to understand here is it's not any one thing. We have a number of initiatives, and we don't need every single one of them to hit. We just need enough of them to hit. As we looked at the second half of the year, and we looked at where we stand, we have a lot of confidence of our teams to execute on those initiatives and set us up for a strong 2027. Tim Thein: Got it. Thank you very much. Operator: Our next question is from Walt Liptak with Seaport Research. Please proceed with your question. Jennifer Sherman: Good morning, Walt. Walt Liptak: Good morning, guys. Hey, great quarter. I'd like to ask one from 50,000 ft. You've been beating your EPS numbers and raising guidance so far this year, and the orders this quarter look really good. When you think about how your year is progressing, is it execution on the Build More Parts initiative that's resulting in the EPS upside, or is it something else? Jennifer Sherman: One of the things about Federal Signal is that we're not over-reliant on any one initiative. As I mentioned earlier, we've got a number of different initiatives. In this quarter, and for the rest of the year, it's strong year-over-year growth in aftermarket. They're up 24%. Strong performance by the acquisitions, strong performance by our mineral extraction group, solid performance by the road marking group, strong performance by the vacuum truck group. SSG had another solid quarter. Our TBEI businesses had a very solid quarter. I go through all that detail to say we've got just broad-based strength, that's really what gave us confidence in terms of the guidance raise for the second half of the year. As we're very focused on 2027 and what do we need to do to continue to drive these many initiatives across Federal Signal in order to continue to build both the resiliency and durability of this business model, the diversification around the end market of the business model, and set us up for not only a strong second half of the year, but a strong 2027. Walt Liptak: Okay, that sounds great. Kind of along those lines, you provided sales and EPS guidance range that's fairly broad. Maybe this is an Ian Hudson question, what's the difference between sort of the high end of the sales and EPS guidance and the low end? What's assumed in the low end? Ian Hudson: I think in the low end, while we talked about we still have $45 million of third-party refuse trucks to deliver. We don't necessarily control the timing of when those come to us, that would probably be something that, if that didn't materialize, that would lead us towards the lower end of the revenue guide. On the flip side, I think, the continued momentum and some of the strategic initiatives would probably take us towards the upper end. Those are probably the variables on the top-line guide. Walt Liptak: Okay, great. Maybe the last one for me, I wanted to ask about, you commented that the New Way business is ahead of expectations, I think, on some of those new orders that you were thinking were going to decline. Why do you think that is? Is it because you're integrating New Way into your dealer channel? What's going on there? Jennifer Sherman: When we did our extensive diligence on this transaction last year, one of the issues we identified is excess inventory in the system, not just of New Way, across the refuse industry. Our expectation is that the refuse industry was going to be down in 2026. When we built our model and our valuation, that's what we reflected. I think, frankly, listening to other OEMs, that's turned out to be accurate. From a revenue standpoint, we're kind of spot on our model. From an order standpoint, we're slightly ahead. We identified that $15 million-$20 million of synergies that we expected to achieve by the end of 2028. On the cost side, we've achieved some of that earlier than we anticipated. We've identified a number of opportunities. We're running ahead of our plan right now. Two quarters. We're only two quarters into this, but I'm really pleased with the kind of strength of our integration team. I would add that on the Mega side, the teams are doing a super job. We were just out at Ground Force earlier this week for our board meeting, and we had a great conversation with that team. Again, it really is a testament to the integration successes that we've had during my tenure as CEO. More to come, very early days, but pleased with our progress. Walt Liptak: Okay, great. Maybe just a final one for me. The acquisition that you announced, can you provide us with more details? What's the name of it? How big are the revenues? Is there going to be accretion? Jennifer Sherman: It's Western Technology. It's very small. It's the first acquisition that SSG did. We're not expecting anything material in 2026. More to come as we move forward, but it's small. Walt Liptak: Okay, great. Thank you. Ian Hudson: Thanks, Walt. Jennifer Sherman: Thank you. Operator: Our next question is from Chris Moore with CJS Securities. Please proceed with your question. Jennifer Sherman: Good morning, Chris. Chris Moore: Good morning, guys. Just a quick one. The 6% organic growth, maybe I missed it, just a rough breakdown on price and volume there. Ian Hudson: Yeah. Price, Chris, was about three and a half of that. The volume and chassis would be the rest. Chris Moore: Got it. I know you've already talked a lot about New Way, it sounds like you're ahead of plan on the cost side. As you said, it's still early in the mix. I know you were talking about 2028 is where you really would see the full benefits and that 40%-45% of accretion in 2028. I think what I'm hearing is 2028 is still the year where you see the full benefits. It's just perhaps the curve to get there is a little bit quicker, a little bit steeper earlier than you anticipated. Is that fair? Ian Hudson: I think that's correct, Chris, if you think about the earlier achievement of some of the cost synergies. I think the revenue synergies are probably more gradual as we get through 2028, as we look to crack one of the initiatives is to the expansion, really, and growth into Canada. That's something that will likely take some time as we build up that channel. The revenue synergies will likely be more gradual through that timeframe. We're slightly ahead on the cost side. Jennifer Sherman: We're very pleased with the progress to date, understanding that we're only two full quarters in. Chris Moore: Got it. Maybe my last one, it just feels like you can't talk to any company these days without at least referencing AI. Are you spending any dollars there? Is there any obvious role for it within your ecosystem? Jennifer Sherman: Absolutely. During this quarter, we actually added an individual to our leadership team who's leading our efforts. We've been working on a number of projects over the last couple of years that Felix has led, I'm going to let him walk you through them quickly. Felix Boeschen: Yeah, Chris, absolutely. I think we're in the earlier innings, but we've identified a number of interesting opportunities. Again, when you think about the power of the platform we've talked about, data analytics is one of those core benefits that we're starting to build out. A little bit early in terms of sizing it. Over time, we think it'll be additive to some of our organic revenue growth initiatives. Chris Moore: Got it. I appreciate it, guys. I will leave it there. Jennifer Sherman: Thank you, Chris. Operator: Our next question is from Mike Shlisky with D.A. Davidson. Please proceed with your question. Jennifer Sherman: Good morning, Mike. Speaker 9: Hi, guys. This is Linda on for Mike. Jennifer Sherman: Hi, Linda. Speaker 9: Hi, Jennifer. Question, I want to follow up on the New Way commentary about the orders. We've heard commentary from the other two waste truck companies the last few days that seem to say different things. Basically, I want to know what's driving the difference between what you're seeing and what some other positive and negative commentary that is elsewhere in the industry. Is it product mix, customer exposure? If you could give me some more color, that would be helpful. Jennifer Sherman: Yeah. I think I need to start to go back to September when we announced the acquisition. We were very clear, based on our research, that we thought that the industry was going to be down overall, the refuse truck industry would be down in 2026, because we thought there was excess inventory in the system as lead time started to reduce. We built our model, we anticipated it, and built our model for the transaction with the assumption that the industry was going to be down in 2026. What I said is, look, our revenue, we're kind of spot on our model, and our orders, which we said we believe the industry would be down, we're slightly ahead of where we thought we were going to be from an order standpoint. I'd be remiss if I didn't give a shout-out to our team who said, "Listen, we think this industry is going to be down, and we built a model around that, and we're tracking right in accordance with that model." We anticipate as we move forward, as we get tractions on our dealer development initiative, our Canadian initiatives, some of our NPD that we're investing in other things, that we'll keep share gain, and we'll continue to grow. Very pleased with where we are, understanding that we're only two quarters in. Speaker 9: Very helpful. Yeah, I also want to follow up on the commentary on the municipal budget situation. You mentioned that there were mixed order activity this quarter. Do you expect the same trends going into the second half and 2027 as well, or do you expect things to change? Jennifer Sherman: Yeah. I guess what I want to point out is of that 55%-ish that comes from public funds, our only pure play U.S. municipal business is street sweepers. As I talked about earlier in my remarks, it's mid to high single digits for overall revenue. As we look at the fundamentals of the funding mechanisms for local municipalities for our products, which would be sales tax and property taxes, they continue to remain steady. We have worked very diligently and been successful in diversification of those public revenue sources. We're exposed to water taxes, we're exposed to refuse collection fees, police budgets, the Canadian, provincial, and federal governments, some of the U.S. government, state governments. It is a really nice mixture of funding sources with our only kind of pure play U.S. municipal piece being street sweepers, which is a relatively small portion of Federal Signal's overall revenues. Speaker 9: Got it. My last question, could you discuss the corporate costs for the quarter? I think they were up a little over $2 million from the prior year, and yeah, I would like to get some more color on that. Ian Hudson: Yeah. You're right, Linda, they were up year-over-year. The biggest drivers, the two main drivers are just higher post-retirement expenses, and then we also saw some increased medical costs on a year-over-year basis. Speaker 9: Got it. Thank you for your time. Jennifer Sherman: Thank you, Linda. Operator: Our next question is from Greg Burns at Sidoti & Company. Please proceed with your question. Jennifer Sherman: Good morning, Greg. Greg Burns: Morning. The decline in the SSG margin, what was the driver there? I guess maybe relative to mix. Ian Hudson: Yeah, it was mostly mix, Greg. It was just certain shipments. We had a larger shipment that went to some customers. There was some on the systems side that were just on a year-over-year basis, it was just slightly dilutive from a margin standpoint, but still the 25% margin, it's right at the midpoint of our recently increased range of 22%-28%. I think the 26.9% comp in Q2 of last year was a record. We still feel very good about SSG's performance in the quarter. The 25%, as I said, is right at the midpoint of that recently increased target range. Greg Burns: Okay. Jennifer Sherman: [Dan]. Greg Burns: Sorry, go ahead. Jennifer Sherman: No, go ahead, please. Greg Burns: I was just going to ask another question around the Western acquisition. I know most of your acquisition activities obviously happened on the ESG side of the business. This is the first on the SSG side. Obviously very small. I just wanted to kind of understand the broader opportunity for SSG to leverage M&A, kind of that platform model that you've used on the ESG model. What is the opportunities there, and how might Western inform how you're looking at the opportunity on that side of the business? Jennifer Sherman: This is a very fragmented industry, and there are a number of opportunities to leverage audible and visual technologies for different end markets. The other area, we are looking at several acquisitions both here in the U.S. and outside the U.S. We also, in addition to that, police is the largest piece of SSG. As we look at upfitting of police cars, there's some ancillary equipment that would be very attractive. Again, it really falls in that same category as ESG, these niche end markets where there's some type of pretty significant motor barrier to entry around certifications. There's operating in hazardous environments. We're pleased by the first acquisition the team has done. We got a number of other ones in the pipeline that we're working on and excited about the outlook on the M&A side for both SSG and ESG. Greg Burns: Great. Thank you. Jennifer Sherman: Thank you. Operator: We have reached the end of the question and answer session. I'd like to turn the floor back over to Jennifer Sherman, President and Chief Executive Officer, for closing comments. Jennifer Sherman: In closing, I would like to note that during the quarter, we published our latest Annual Sustainability Report, which is available on our website. The report highlights our progress against our emission reduction goals, our new targets, and our ongoing community engagement efforts. It is our people that define the unique culture at Federal Signal, and we remain committed to investing in the local communities in which we operate. We would also like to express our thanks to our stockholders, distributors, dealers, and customers for their continued support. Thank you for joining us today, and we'll talk to you soon. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. Before you buy stock in Federal Signal, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Federal Signal wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $397,081!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,166,221!* Now, it’s worth noting Stock Advisor’s total average return is 889% — a market-crushing outperformance compared to 203% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of July 30, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Federal Signal (FSS) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Interested in Federal Signal Corporation? Here are five stocks we like better. Federal Signal delivered record second-quarter results: Sales rose 19% to $670 million, adjusted EPS increased 21% to $1.42, and adjusted EBITDA margin expanded to 21.5%. Orders grew 18% to $637 million, while operating cash flow surged 89% to $113 million. Environmental Solutions drove performance, with sales up 20%, adjusted EBITDA up 25%, and orders up 24%, supported by broad organic demand, acquisitions, and strong aftermarket and rental revenue. Safety and Security sales increased 10%, though margins declined because of unfavorable product mix. The company raised its 2026 outlook, increasing adjusted EPS guidance to $5.12–$5.30 from $4.80–$5.05 and sales guidance to $2.58–$2.67 billion. Management cited aftermarket momentum, acquisition integration, and operational improvements, while warning of additional second-half investment expenses. 3 Reasons Oshkosh Stock is Headed to New Heights Federal Signal (NYSE:FSS) reported record second-quarter results for 2026, with higher sales, earnings, orders and cash flow, as growth in its Environmental Solutions Group and Safety and Security Systems Group supported an increase in its full-year adjusted earnings outlook. Second-quarter net sales rose 19% year over year to $670 million, including 6% organic growth, according to Chief Financial Officer Ian Hudson. Operating income increased 21% to $118.2 million, while adjusted EBITDA rose 22% to $144.4 million. Adjusted EBITDA margin expanded 60 basis points to 21.5%. → Why SK hynix Could Be the Best AI Chip Stock to Buy Now 3 Security Stocks Benefiting From The Growing Public-Safety Trend GAAP diluted earnings per share increased 21% to $1.40, while adjusted EPS rose 21% to $1.42. Quarterly orders increased 18% to $637 million, and the company ended the period with backlog of $1 billion, compared with $1.08 billion a year earlier. The Environmental Solutions Group, or ESG, generated $578 million in second-quarter sales, up 20% from a year earlier. Segment operating income climbed 24% to $113.9 million, while adjusted EBITDA increased 25% to $138.3 million. ESG adjusted EBITDA margin improved 80 basis points to 23.9%. → Microsoft Just Flipped the AI Spending Narrative Overnight ESG orders rose 24% to $548 million. Jennifer Sherman, Federal Signal’s president and chief executive officer, said organic demand was broad-based across vehicle categories including vacuum trucks, dump truck bodies and specialty equipment. Acquisitions contributed about $75 million in quarterly sales, with New Way and Mega driving increases in refuse truck and mineral-extraction support-equipment sales. Aftermarket revenue increased 24% year over year and accounted for approximately 25% of ESG revenue during the quarter. Sherman said the increase reflected higher demand for parts, greater used-equipment sales and rental-income growth. Rental income rose 16%, led by safe-digging equipment and combination sewer cleaners. → Carrier Earnings Could Send the Stock to a New All-Time High The company is pursuing a “Build More Parts” initiative involving additional vertical integration of certain parts production. It also plans to expand parts and service locations geographically. Sherman said Federal Signal has added about 20 service centers since 2019 and sees further expansion opportunities. Hudson said the investments are relatively modest and are primarily being made within existing facilities. Safety and Security Systems Group, or SSG, sales increased 10% to $93 million. Operating income and adjusted EBITDA each increased 3% to $22.1 million and $23.2 million, respectively. The segment’s adjusted EBITDA margin declined to 25.1% from 26.9% a year earlier. Hudson attributed the margin decline primarily to product mix, including larger customer shipments that were less favorable on a year-over-year margin basis. He said the 25.1% margin remained near the midpoint of the company’s recently raised 22% to 28% target range for the segment. SSG orders were $89 million, compared with $99 million in the prior-year quarter. Sherman said the segment’s sales growth was supported by volume increases in public-safety and industrial-signaling products, price-cost management and cost savings. In early July, Federal Signal completed the acquisition of Western Technology, a manufacturer of portable explosion-protected lighting for industrial processing, petrochemical and aerospace applications. Sherman described the acquisition as small and said it is not expected to have a material effect on 2026 results. The company sees opportunities to use its existing sales channels and manufacturing operations to support the business. Federal Signal generated $113 million of operating cash flow in the second quarter, up 89% from a year earlier. First-half operating cash flow totaled $214 million, an increase of 122%. The company repaid approximately $97 million of debt during the quarter and ended with $391 million of net debt and $1.04 billion available under its credit facility. Hudson said the company paid $9.1 million in dividends during the quarter, reflecting a quarterly dividend of $0.15 per share, and recently announced another $0.15 per-share dividend for the third quarter. Sherman said Federal Signal’s business has become less dependent on individual customer groups, funding mechanisms and end markets. While slightly more than half of revenue is tied to publicly funded sources, she said U.S. water taxes—the company’s largest public funding source—represent less than 15% of total sales. The company’s only pure-play U.S. municipal exposure is street sweepers, which Sherman described as a mid- to high-single-digit percentage of total sales. She said street-sweeper orders declined in the second quarter, though orders for metal-extraction equipment, road-marking and high-pressure water-blasting products were solid, while refuse orders ran slightly ahead of the company’s expectations. Federal Signal expects the refuse market to decline in 2026 because of excess inventory in the industry, but said New Way’s revenue is tracking in line with its acquisition model and its orders are slightly ahead of plan. The company said it had approximately $44 million of third-party Labrie refuse-truck backlog at quarter-end. The planned reduction in that discontinued business accounted for about $75 million of the year-over-year backlog decline, according to Sherman. Federal Signal raised its 2026 adjusted EPS outlook to a range of $5.12 to $5.30, from a prior range of $4.80 to $5.05. It also increased its net sales forecast to $2.58 billion to $2.67 billion, from $2.57 billion to $2.66 billion. The company reaffirmed its full-year capital-expenditure outlook of $45 million to $55 million. Hudson said the higher earnings outlook reflects momentum in the aftermarket business, integration progress at New Way and Mega, and operational initiatives. Federal Signal expects to incur additional expenses in the second half as it expands capabilities in areas including procurement, supply-chain optimization, aftermarket operations, data analytics and new-product development. Federal Signal Corporation (NYSE: FSS), headquartered in Oak Brook, Illinois, is a diversified industrial company that designs, manufactures and markets a broad range of products and services for municipal, commercial and industrial customers worldwide. Founded in 1901 in Chicago, the company has grown through a combination of organic investment and strategic acquisitions to become a leading provider of environmental management and safety and security solutions. Federal Signal operates through two primary business segments. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Federal Signal Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for July 2026.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Management attributes record results to a decade-long strategy of diversifying revenue streams to mute cyclicality, reducing reliance on any single funding source or customer cohort. Performance was driven by broad-based organic growth across vacuum trucks and specialty equipment, complemented by the successful integration of the New Way and Mega acquisitions. The Environmental Solutions Group (ESG) benefited from proactive price-cost management and the 'Build More Parts' initiative, which focuses on vertical integration of parts production. Strategic diversification has resulted in a durable revenue profile where publicly funded mechanisms are spread across water taxes, refuse fees, and international budgets, with U.S. water taxes representing less than 15% of total sales. The company is scaling its 'centers of excellence' in procurement and supply chain to unlock incremental margin expansion and accelerate the integration of future acquisitions. Operational improvements and 80/20 processes are being internalized across the enterprise to optimize procurement spend and leverage existing manufacturing footprints. Full-year adjusted EPS guidance was raised to $5.12-$5.30, reflecting strong first-half momentum and confidence in the execution of strategic initiatives. Management targets annual low double-digit top-line growth through economic cycles, split roughly evenly between organic initiatives and inorganic M&A. The company expects the aftermarket business to grow faster than the overall company, serving as a primary driver for multi-year margin expansion. Guidance assumes continued realization of cost synergies from recent acquisitions, with New Way tracking ahead of its original $15 million-$20 million annual synergy target. Visibility for 2027 is supported by a $1 billion backlog, though management notes that lead times for certain product lines remain elevated above target levels. The acquisition of Western Technology marks a strategic entry into niche explosion-protected lighting, providing a template for future M&A within the Safety and Security Systems Group. A planned decline in third-party Labrie refuse backlog (discontinued in late 2025) accounted for $75 million of the year-over-year backlog reduction. Corporate expenses increased due to higher post-retirement expenses and medical costs, and management expects to incur additional expenses in the second half of the year as it scales its centers of excellence. Management flagged potential upside to future orders if pending EPA regulations trigger a pre-buy cycle, though no such impact is currently included in the 2026 outlook. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management clarified that only about 25% of the business is in the 'specialty equipment' category where municipal exposure resides, and only street sweepers are a 'pure play' municipal product. Funding sources like property and sales taxes remain steady, and the $1 billion backlog provides strong visibility into early 2027. Management confirmed a long-term goal of reaching 30% aftermarket revenue for ESG, noting that many business units are already at that level. Incremental returns on aftermarket investments are high due to low capital expenditure requirements for geographic expansion and parts production. Despite industry-wide headwinds and excess inventory in refuse, New Way orders are tracking ahead of the company's internal valuation model. Cost synergies are being realized faster than anticipated, while revenue synergies (such as Canadian market expansion) will be more gradual through 2028. The deal represents an effort to apply the ESG 'platform' model to the Safety and Security Systems Group by targeting niche markets with high barriers to entry. Management indicated an active pipeline for further SSG acquisitions both domestically and internationally.

Federal Signal (FSS) came out with quarterly earnings of $1.42 per share, beating the Zacks Consensus Estimate of $1.28 per share. This compares to earnings of $1.17 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +10.94%. A quarter ago, it was expected that this company that makes products ranging from street sweepers to toll booth technology for government, industrial and commercial customers would post earnings of $0.89 per share when it actually produced earnings of $1.18, delivering a surprise of +32.58%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Federal Signal, which belongs to the Zacks Automotive - Domestic industry, posted revenues of $670.2 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 0.09%. This compares to year-ago revenues of $564.6 million. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Federal Signal shares have added about 3% since the beginning of the year versus the S&P 500's gain of 6.9%. While Federal Signal has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Federal Signal was favorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #2 (Buy) for the stock. So, the shares are expected to outperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $1.26 on $661.55 million in revenues for the coming quarter and $4.94 on $2.63 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Automotive - Domestic is currently in the top 38% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, Blue Bird (BLBD), has yet to report results for the quarter ended June 2026. The results are expected to be released on August 5. This school bus maker is expected to post quarterly earnings of $1.22 per share in its upcoming report, which represents a year-over-year change of +2.5%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Blue Bird's revenues are expected to be $498.7 million, up 25.3% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Federal Signal Corporation (FSS) : Free Stock Analysis Report Blue Bird Corporation (BLBD) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

This article first appeared on GuruFocus. Release Date: July 30, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Record second-quarter net sales of $670 million, up 19% year-over-year, driven by strong organic growth and acquisitions. Adjusted EBITDA margin improved 60 basis points to 21.5%, with ESG segment margin up 80 basis points to 23.9%. Orders increased 18% to $637 million, with high single-digit organic growth in ESG, led by vacuum trucks and aftermarket. Aftermarket revenue grew 24% year-over-year, with strong rental income and parts demand, now 25% of ESG revenue. Operating cash flow surged 89% to $113 million, with cash conversion of 131% of net income, supporting debt reduction and investments. SSG segment adjusted EBITDA margin declined to 25.1% from 26.9% last year due to mix headwinds from certain shipments. Backlog decreased 8% year-over-year to $1 billion, partly due to planned decline in third-party Labrie refuse truck backlog. Corporate operating expenses rose to $17.8 million from $15.7 million, driven by higher post-retirement and medical costs. Interest expense increased by $2.5 million year-over-year, impacting net income growth. Street sweeper orders were down in Q2, reflecting some softness in pure-play municipal demand despite overall strength. Here are the key highlights from the Federal Signal Corp (NYSE:FSS) Q2 2026 earnings call, presented as summarized Q&A pairs. Warning! GuruFocus has detected 6 Warning Sign with HXL. Is FSS fairly valued? Test your thesis with our free DCF calculator. Q: Can you characterize the health and visibility of your various public funding sources, especially given investor concerns about municipal budgets?A: (Jennifer Sherman, President and CEO) We have been very purposeful in diversifying our funding sources to create a resilient business model. While about 55% of our revenue comes from public sources, the largest single pieceUS water taxesis less than 15% of total net sales. Our only pure-play US municipal business is street sweepers, which is a mid-to-high single-digit percentage of revenue and is funded by stable property and sales taxes. We also have exposure to Canadian budgets, European markets, refuse fees, and police budgets. Overall, we feel very good about the diversification and the outlook, especially with a $1 billion backlog providing strong forward visibility. Q: What drove the strong organic order growth in the Environmental Solutions Group (ESG), and are you seeing any pre-buy activity or inventory destocking in the channel?A: (Jennifer Sherman, President and CEO) We did not see a lot of pre-buy activity this quarter. Our refuse business is operating slightly ahead of our internal model, which assumed the industry would be down in 2026. Many of our specialty vehicle categories don't carry a lot of channel inventory, so we feel good about the current state. The strong performance was broad-based, with strength in vacuum trucks (especially safe digging), dump truck bodies, and aftermarket offerings, which were up 24% year-over-year. Q: What are the key drivers behind the raised EPS and sales guidance for the full year 2026?A: (Ian Hudson, CFO) The confidence comes from the momentum we are seeing across several areas. The aftermarket business is growing strongly, and our recent acquisitions (New Way and Mega) are tracking ahead of our internal margin and profit expectations. We are also seeing traction on operational improvements. It's not any one thing, but a number of initiatives that give us confidence in our teams' ability to execute and set us up for a strong 2027. Q: Can you provide an update on the integration of the New Way acquisition, particularly regarding the $15-20 million synergy target?A: (Jennifer Sherman, President and CEO) We are very pleased with the progress. We are tracking ahead of our plan on the realization of cost synergies, which we originally expected to achieve by the end of 2028. The revenue synergies, such as expanding into Canada, will likely be more gradual. From a revenue standpoint, we are spot on our model, which assumed the refuse market would be down in 2026. From an order standpoint, we are slightly ahead of that plan. Q: What is the long-term target for the aftermarket business as a percentage of ESG revenue, and what are you doing to grow it?A: (Jennifer Sherman, President and CEO) We are fully committed to growing the aftermarket, which represented about 25% of ESG revenue in Q2. While the percentage will depend on M&A mix, many of our businesses are already running at 30% on that side, so there is no structural reason it can't reach that level. We are investing in our "Build More Parts" initiative, expanding our geographic footprint of service centers, and seeing strong growth in rentals and used equipment sales. The aftermarket is a key part of our strategy for durability and resilience. Q: What drove the slight decline in the Safety and Security Systems Group (SSG) margin to 25.1% from 26.9% last year?A: (Ian Hudson, CFO) The decline was primarily due to mix. We had some larger shipments to certain customers that were slightly dilutive on a year-over-year basis. However, the 25.1% margin is right at the midpoint of our recently increased target range of 22% to 28%. The 26.9% comp from Q2 last year was a record, so we still feel very good about SSG's performance. Q: What is the opportunity for M&A within the SSG segment, given that most of your recent deals have been in ESG?A: (Jennifer Sherman, President and CEO) The industry is very fragmented, and we see a number of opportunities to leverage audible and visual technologies for different end markets. We are looking at several acquisitions in the US and outside the US. The police outfitting business, the largest piece of SSG, also presents opportunities for adjacent equipment. We are pleased with our first small acquisition in SSG (Western Technology) and have a number of other deals in the pipeline. Q: Can you provide a rough breakdown of the 6% organic sales growth between price and volume?A: (Ian Hudson, CFO) Price accounted for about 3.5% of that organic growth, with the remainder coming from volume and chassis. Q: What is the difference between the high and low end of your raised sales and EPS guidance ranges?A: (Ian Hudson, CFO) On the low end, we still have about $45 million of third-party Labrie refuse trucks to deliver, and we don't fully control the timing of those. If that doesn't materialize, it would lead us toward the lower end. On the high end, continued momentum from our strategic initiatives would push us toward the upper end. Q: Are you investing in AI, and what role do you see it playing in your business?A: (Felix Bosan, VP of Corporate Strategy and IR) We are in the early innings, but we have identified a number of interesting opportunities. We recently added a leader to our team to spearhead these efforts. Data analytics is a core part of our "power of the platform" strategy, and we believe AI will be additive to our organic revenue growth initiatives over time. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

DOWNERS GROVE, Ill., July 30, 2026 /PRNewswire/ -- Federal Signal Corporation (NYSE: FSS) (the "Company"), a leader in environmental and safety solutions, today reported financial results for the second quarter ended June 30, 2026. Second Quarter Highlights Net sales of $670 million, up $106 million, or 19%, from last year Operating income of $118.2 million, up $20.5 million, or 21%, from last year GAAP Diluted EPS of $1.40, up $0.24, or 21%, from last year Adjusted EPS of $1.42, up $0.25, or 21%, from last year Orders of $637 million, up $97 million, or 18%, from last year Operating cash flow of $113 million, up $53 million, or 89%, from last year Raises 2026 net sales outlook to a new range of $2.58 billion to $2.67 billion, from the prior range of $2.57 billion to $2.66 billion Raises 2026 adjusted EPS* outlook to a new range of $5.12 to $5.30, from the prior range of $4.80 to $5.05 Consolidated net sales for the second quarter were $670 million, an increase of $106 million, or 19%, compared to the prior-year quarter. Net income for the second quarter was $86.1 million, or $1.40 per diluted share, compared to $71.4 million, or $1.16 per diluted share, in the prior-year quarter. The Company also reported adjusted net income for the second quarter of $87.5 million, or $1.42 per diluted share, compared to $71.9 million, or $1.17 per diluted share, in the prior-year quarter. The Company is reporting adjusted results to facilitate comparisons of underlying performance on a year-over-year basis. A reconciliation of these and other non-GAAP measures is provided at the conclusion of this news release. Double-Digit Year-over-Year Net Sales and Operating Income Growth and 18% Increase in Orders in Record-Setting Second Quarter "In what is typically a seasonally-strong period, our businesses were able to deliver 19% year-over-year net sales growth, 21% operating income improvement, an 18% increase in orders, gross margin expansion, and a 60-basis point increase in adjusted EBITDA margin during a record-setting second quarter," commented Jennifer L. Sherman, President and Chief Executive Officer. "These results underscore the resilience and durability of our business model, the momentum behind our growth initiatives, and the unwavering commitment of our teams. Within our Environmental Solutions Group, orders were up 24% year-over-year, including high-single-digit organic growth, while net sales and adjusted EBITDA increased by 20% and 25%, respectively, with contributions from recent acquisitions, higher sales of our aftermarket offerings, and proactive management of price/cost dynamics representing meaningful year-over-year growth drivers. Our Safety and Security Systems Group also delivered impressive results, with 10% top-line growth and an adjusted EBITDA margin of approximately 25%." In the Environmental Solutions Group, net sales for the second quarter were $578 million, up $97 million, or 20%, compared to the prior-year quarter. In the Safety and Security Systems Group, net sales were $93 million, up $8 million, or 10%, compared to the prior-year quarter. Consolidated operating income for the second quarter was $118.2 million, up $20.5 million, or 21%, compared to the prior-year quarter. Consolidated operating margin for the second quarter was 17.6%, up from 17.3% in the prior-year quarter. Consolidated adjusted earnings before interest, tax, depreciation and amortization ("adjusted EBITDA") for the second quarter was $144.4 million, up $26.2 million, or 22%, compared to the prior-year quarter, and consolidated adjusted EBITDA margin was 21.5%, up from 20.9% in the prior-year quarter. In the Environmental Solutions Group, adjusted EBITDA for the second quarter was $138.3 million, up $27.5 million, or 25%, compared to the prior-year quarter, and its adjusted EBITDA margin was 23.9%, up from 23.1% last year. In the Safety and Security Systems Group, adjusted EBITDA for the second quarter was $23.2 million, up $0.6 million, or 3%, compared to the prior-year quarter, and its adjusted EBITDA margin was 25.1%, compared to 26.9% last year. Consolidated orders for the second quarter were $637 million, an increase of $97 million, or 18%, compared to the prior-year quarter. Consolidated backlog at June 30, 2026 was $1.00 billion, compared to $1.08 billion in the prior-year quarter. Increased Operating Cash Flow Provides Flexibility to Fund M&A, Organic Growth Opportunities, and Cash Returns to Stockholders Net cash provided by operating activities during the second quarter was $113 million, an increase of $53 million, or 89%, from the prior-year quarter. At June 30, 2026, total outstanding debt was $454 million, total cash and cash equivalents were $63 million, and the Company had $1.04 billion of availability for borrowings under its credit facility. "Our operating cash flow generation during the quarter was outstanding, enabling us to pay down approximately $97 million of debt during the quarter," said Sherman. "With the increased cash generation and available capacity under our credit facility, we have significant financial flexibility to invest in organic growth initiatives, pursue additional strategic acquisitions, pay down debt, and provide returns to stockholders through dividends and opportunistic stock repurchases." The Company funded dividends of $9.1 million during the second quarter, reflecting a dividend of $0.15 per share, and recently announced a similar $0.15 per share dividend that will be payable in the third quarter of 2026. Outlook "Demand for our products and our aftermarket offerings remains strong overall, with our second quarter orders up 18% year-over-year," noted Sherman. "With our second quarter performance, our current backlog, and continued execution against our strategic initiatives, we are raising our full-year adjusted EPS* outlook to a new range of $5.12 to $5.30, from the prior range of $4.80 to $5.05. We are also increasing our full-year net sales outlook to a new range of between $2.58 billion and $2.67 billion, from the prior range of between $2.57 billion and $2.66 billion." CONFERENCE CALL Federal Signal will host its second quarter conference call on Thursday, July 30, 2026 at 10:00 a.m. Eastern Time. The call will last approximately one hour. The call may be accessed over the internet through Federal Signal's website at www.federalsignal.com or by dialing phone number 1-877-704-4453 and entering the pin number 13761759. A replay will be available on Federal Signal's website shortly after the call. About Federal Signal Federal Signal Corporation (NYSE: FSS) builds and delivers equipment of unmatched quality that moves material, cleans infrastructure, and protects the communities where we work and live. Founded in 1901, Federal Signal is a leading global designer, manufacturer and supplier of products and total solutions that serve municipal, governmental, industrial, and commercial customers. Headquartered in Downers Grove, Ill., with manufacturing facilities worldwide, the Company operates two groups: Environmental Solutions and Safety and Security Systems. For more information on Federal Signal, visit: www.federalsignal.com. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995 This release contains unaudited financial information and various forward-looking statements as of the date hereof and we undertake no obligation to update these forward-looking statements regardless of new developments or otherwise. Statements in this release that are not historical are forward-looking statements. Forward looking statements should not be relied upon as a predictor of actual results. Such statements are subject to various risks and uncertainties that could cause actual results to vary materially from those stated. Such risks and uncertainties include but are not limited to: economic and political uncertainty, risks and adverse economic effects associated with geopolitical conflicts including tariffs and other trade conflicts, legal and regulatory developments, foreign currency exchange rate changes, inflationary pressures, product and price competition, supply chain disruptions, availability and pricing of raw materials, interest rate changes, risks associated with acquisitions such as integration of operations and achieving anticipated revenue and cost benefits, work stoppages, increases in pension funding requirements, cybersecurity risks, increased legal expenses and litigation results, and other risks and uncertainties described in filings with the Securities and Exchange Commission. * Adjusted earnings per share ("EPS") is a non-GAAP measure, which includes certain adjustments to reported GAAP net income and diluted EPS. In the three and six months ended June 30, 2026 and 2025, we made adjustments to exclude the impact of acquisition and integration-related expenses, net, purchase accounting effects, and certain special income tax items, where applicable. In prior years, we have also made adjustments to exclude the impact of pension-related charges, debt settlement charges, and certain other unusual or non-recurring items. Should any similar items occur in the remainder of 2026, we would expect to exclude them from the determination of adjusted EPS. However, because of the underlying uncertainty in quantifying amounts which may not yet be known, a reconciliation of our Adjusted EPS outlook to the most applicable GAAP measure is excluded based on the unreasonable efforts exception in Item 10(e)(1)(i)(B). Corporate Expenses Corporate operating expenses were $17.8 million and $15.7 million for the three months ended June 30, 2026 and 2025, respectively. Corporate operating expenses were $30.8 million and $25.5 million for the six months ended June 30, 2026 and 2025, respectively. SEC REGULATION G NON-GAAP RECONCILIATION The financial measures presented below are unaudited and are not in accordance with U.S. generally accepted accounting principles ("GAAP"). The non-GAAP financial information presented herein should be considered supplemental to, and not a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company has provided this supplemental information to investors, analysts, and other interested parties to enable them to perform additional analyses of operating results, to illustrate the results of operations giving effect to the non-GAAP adjustments shown in the reconciliations below, and to provide an additional measure of performance which management considers in operating the business. Adjusted Net Income and Earnings Per Share ("EPS"): The Company believes that modifying its 2026 and 2025 net income and diluted EPS provides additional measures to assist it in comparing its performance on a consistent basis for purposes of business decision making by removing the impact of certain items that management believes are not representative of its underlying performance and to improve the comparability of results across reporting periods. Adjusted net income and Adjusted EPS are both non-GAAP measures. During the three and six months ended June 30, 2026 and 2025 adjustments were made to reported GAAP net income and diluted EPS to exclude the impact of acquisition and integration-related expenses, net, purchase accounting effects, and certain special income tax items, where applicable. Adjusted EBITDA and Adjusted EBITDA Margin: The Company uses adjusted EBITDA and the ratio of adjusted EBITDA to net sales ("adjusted EBITDA margin"), at both the consolidated and segment level, as additional measures to assist in comparing its performance on a consistent basis for purposes of business decision making by removing the impact of certain items that management believes are not representative of its underlying performance and to improve the comparability of results across reporting periods. We believe that investors use versions of these metrics in a similar manner. For these reasons, the Company believes that adjusted EBITDA and adjusted EBITDA margin, at both the consolidated and segment level, are meaningful metrics to investors in evaluating the Company's underlying financial performance. Consolidated adjusted EBITDA is a non-GAAP measure that represents the total of net income, interest expense, net, acquisition and integration-related expenses, net, purchase accounting effects, other expense, net, income tax expense, and depreciation and amortization expense, as applicable. Consolidated adjusted EBITDA margin is a non-GAAP measure that represents the total of net income, interest expense, net, acquisition and integration-related expenses, net, purchase accounting effects, other expense, net, income tax expense, and depreciation and amortization expense, as applicable, divided by net sales for the applicable period(s). Segment adjusted EBITDA is a non-GAAP measure that represents the total of segment operating income, acquisition and integration-related expenses, net, purchase accounting effects, and depreciation and amortization expense, as applicable. Segment adjusted EBITDA margin is a non-GAAP measure that represents the total of segment operating income, acquisition and integration-related expenses, net, purchase accounting effects, and depreciation and amortization expense, as applicable, divided by segment net sales for the applicable period(s). Segment operating income includes all revenues, costs, and expenses directly related to the segment involved. In determining segment operating income, neither corporate nor interest expenses are included. Segment depreciation and amortization expense relates to those assets, both tangible and intangible, that are utilized by the respective segment. Other companies may use different methods to calculate adjusted EBITDA and adjusted EBITDA margin. Consolidated The following table summarizes the Company's consolidated adjusted EBITDA and adjusted EBITDA margin and reconciles net income to consolidated adjusted EBITDA for the three and six months ended June 30, 2026 and 2025: Environmental Solutions Group The following table summarizes the Environmental Solutions Group's adjusted EBITDA and adjusted EBITDA margin and reconciles operating income to adjusted EBITDA for the three and six months ended June 30, 2026 and 2025: Safety and Security Systems Group The following table summarizes the Safety and Security Systems Group's adjusted EBITDA and adjusted EBITDA margin and reconciles operating income to adjusted EBITDA for the three and six months ended June 30, 2026 and 2025: View original content:https://www.prnewswire.com/news-releases/federal-signal-reports-record-second-quarter-results-including-19-net-sales-growth-21-operating-income-improvement-strong-cash-generation-and-18-increase-in-orders-raises-full-year-outlook-302838962.html

Ford Motor Company (F) came out with quarterly earnings of $0.42 per share, beating the Zacks Consensus Estimate of $0.33 per share. This compares to earnings of $0.37 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +27.27%. A quarter ago, it was expected that this company would post earnings of $0.2 per share when it actually produced earnings of $0.66, delivering a surprise of +230%. Over the last four quarters, the company has surpassed consensus EPS estimates three times. Ford Motor, which belongs to the Zacks Automotive - Domestic industry, posted revenues of $44.89 billion for the quarter ended June 2026, missing the Zacks Consensus Estimate by 1.81%. This compares to year-ago revenues of $46.94 billion. The company has topped consensus revenue estimates three times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Ford Motor shares have added about 11.9% since the beginning of the year versus the S&P 500's gain of 8.3%. While Ford Motor has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Ford Motor was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.33 on $45.74 billion in revenues for the coming quarter and $1.62 on $176.15 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Automotive - Domestic is currently in the top 33% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. One other stock from the same industry, Federal Signal (FSS), is yet to report results for the quarter ended June 2026. The results are expected to be released on July 30. This company that makes products ranging from street sweepers to toll booth technology for government, industrial and commercial customers is expected to post quarterly earnings of $1.28 per share in its upcoming report, which represents a year-over-year change of +9.4%. The consensus EPS estimate for the quarter has been revised 0.1% higher over the last 30 days to the current level. Federal Signal's revenues are expected to be $669.62 million, up 18.6% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Ford Motor Company (F) : Free Stock Analysis Report Federal Signal Corporation (FSS) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Lucid Group (LCID) is expected to deliver a year-over-year decline in earnings on higher revenues when it reports results for the quarter ended June 2026. This widely-known consensus outlook gives a good sense of the company's earnings picture, but how the actual results compare to these estimates is a powerful factor that could impact its near-term stock price. The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on August 4. On the other hand, if they miss, the stock may move lower. While management's discussion of business conditions on the earnings call will mostly determine the sustainability of the immediate price change and future earnings expectations, it's worth having a handicapping insight into the odds of a positive EPS surprise. This an electric vehicle automaker is expected to post quarterly loss of $3.12 per share in its upcoming report, which represents a year-over-year change of -11.4%. Revenues are expected to be $323.31 million, up 24.6% from the year-ago quarter. The consensus EPS estimate for the quarter has been revised 11.83% lower over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period. Investors should keep in mind that the direction of estimate revisions by each of the covering analysts may not always get reflected in the aggregate change. Price, Consensus and EPS Surprise Estimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out. Our proprietary surprise prediction model -- the Zacks Earnings ESP (Expected Surprise Prediction) -- has this insight at its core. The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier. Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only. A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP. Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell). For Lucid Group, the Most Accurate Estimate is the same as the Zacks Consensus Estimate, suggesting that there are no recent analyst views which differ from what have been considered to derive the consensus estimate. This has resulted in an Earnings ESP of 0%. On the other hand, the stock currently carries a Zacks Rank of #4. So, this combination makes it difficult to conclusively predict that Lucid Group will beat the consensus EPS estimate. While calculating estimates for a company's future earnings, analysts often consider to what extent it has been able to match past consensus estimates. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number. For the last reported quarter, it was expected that Lucid Group would post a loss of$2.72 per share when it actually produced a loss of -$3.46, delivering a surprise of -27.21%. The company has not been able to beat consensus EPS estimates in any of the last four quarters. An earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss. That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it's worth checking a company's Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported. Lucid Group doesn't appear a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release. Another stock from the Zacks Automotive - Domestic industry, Federal Signal (FSS), is soon expected to post earnings of $1.28 per share for the quarter ended June 2026. This estimate indicates a year-over-year change of +9.4%. Revenues for the quarter are expected to be $669.62 million, up 18.6% from the year-ago quarter. Over the last 30 days, the consensus EPS estimate for Federal Signal has been revised 0.1% up to the current level. Nevertheless, the company now has an Earnings ESP of +0.55%, reflecting a higher Most Accurate Estimate. When combined with a Zacks Rank of #2 (Buy), this Earnings ESP indicates that Federal Signal will most likely beat the consensus EPS estimate. The company beat consensus EPS estimates in each of the trailing four quarters. Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Lucid Group, Inc. (LCID) : Free Stock Analysis Report Federal Signal Corporation (FSS) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research