Forgent Power Solutions Inc F3Q Wrap and Model Update

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Forgent Power Solutions Inc F3Q Wrap and Model Update

ly) in our view. Margins continued to be

pressured by under-absorbed labor, fixed overhead and one-time startup costs, Quarterly Forecasts (FYE Jun)

while price cost including new Section 232 tariffs are overall neutral. 4Q margins Adj. EPS ($)

are expected to expand 750bps y/y and 310bps q/q to 25.5%, driven by volumes 2025A 2026E 2027E

Q1 0.08 0.13A

but also helped by mix, with normalized run-rate heading into 2027 more in the Q2 0.07 0.12A

24-25% range. FCF turned positive this quarter, with $205mm capacity expansion Q3 0.08 0.18A

plan expected to be meaningfully complete by the end of the fiscal year with Q4 0.06 0.24

FY 0.29 0.67 1.25

opportunity to continue to improve the working capital drag, on track to drive FCF

inflection once current capex cycle concludes. We continue to see above-average The authors wish to thank Chandreyee

growth and earnings revisions at Forgent underpinned by a robust datacenter/grid Sengupta, of the J.P. Morgan Global

demand backdrop and raise our PT to $56 ($40 prior) and reiterate our OW rating.

Research Center, for contributions to this

• Estimate changes. We update our model following 3Q results and ’26 report.

guidance. Our ’26/’27/’28 adj EBITDA estimates move to $315mm/$516mm/

$784mm ($305mm/$467mm/$693mm prior). For ’26/’27/’28, we estimate

organic sales growth of +85%/51%/43% (vs +73%/43%/38% prior), with

margins at 22.7%/24.5%/26.1% (vs 23.4%/25.1%/27% before). Our estimates

imply a 2026-2028 revenue CAGR of ~45% and incremental EBITDA margins

of 27% in ’27 and 29.5% (a touch below 30%) in ’28. We model FCF of -

$31mm/$338mm/$548mm (-$30mm/$314mm/$492 prior) for ’26/’27’28. In

terms of our approach, we forecast ’27/’28 revenues based on the book ship

analysis below.