Engineered products manufacturer ESCO (NYSE: ESE) met Wall Street’s revenue expectations in Q4 CY2025, with sales up 17.3% year on year to $289.7 million. The company’s full-year revenue guidance of $1.31 billion at the midpoint came in 1.5% above analysts’ estimates. Its non-GAAP profit of $1.64 per share was 24.2% above analysts’ consensus estimates.

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Bryan Sayler, Chief Executive Officer and President, commented, “Our fiscal year got off to an outstanding start as we delivered over $550 million in orders, 35 percent revenue growth, 320 basis points of Adjusted EBITDA margin expansion, and a 73 percent increase in Adjusted EPS compared to the prior year. We continue to see favorable end-market conditions, which is reflected in the excellent orders and sales performance. Organic orders increased by 39 percent as all three businesses continue to see a positive environment for growth.

Company Overview

A developer of the communication systems used in the Batmobile of “The Dark Knight,” ESCO (NYSE: ESE) is a provider of engineered components for the aerospace, defense, and utility sectors.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Luckily, ESCO’s sales grew at an impressive 10.8% compounded annual growth rate over the last five years. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. ESCO’s annualized revenue growth of 11.5% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong.

We can dig further into the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. ESCO’s backlog reached $1.40 billion in the latest quarter and averaged 41.7% year-on-year growth over the last two years. Because this number is better than its revenue growth, we can see the company accumulated more orders than it could fulfill and deferred revenue to the future. This could imply elevated demand for ESCO’s products and services but raises concerns about capacity constraints.

This quarter, ESCO’s year-on-year revenue growth was 17.3%, and its $289.7 million of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 10.5% over the next 12 months, similar to its two-year rate. This projection is healthy and indicates the market sees success for its products and services.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

ESCO has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 14.2%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, ESCO’s operating margin rose by 4.8 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, ESCO generated an operating margin profit margin of 13.2%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

ESCO’s EPS grew at an astounding 19% compounded annual growth rate over the last five years, higher than its 10.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into ESCO’s earnings to better understand the drivers of its performance. As we mentioned earlier, ESCO’s operating margin was flat this quarter but expanded by 4.8 percentage points over the last five years. On top of that, its share count shrank by 1.1%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For ESCO, its two-year annual EPS growth of 36.3% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q4, ESCO reported adjusted EPS of $1.64, up from $1.07 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects ESCO’s full-year EPS of $6.91 to grow 14.1%.

Key Takeaways from ESCO’s Q4 Results

We were impressed by how significantly ESCO blew past analysts’ EBITDA expectations this quarter. We were also glad its full-year EPS guidance trumped Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock remained flat at $238.37 immediately after reporting.

ESCO put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).