Core Viewpoint - Federal Signal (FSS) has been outperforming its peers in the Auto-Tires-Trucks sector this year, with a year-to-date return of 14.9% compared to the sector average of 2.6% [4]. Company Performance - Federal Signal is currently ranked 2 (Buy) in the Zacks Rank system, indicating a positive outlook based on earnings estimates and revisions [3]. - Over the past 90 days, the Zacks Consensus Estimate for FSS's full-year earnings has increased by 2.7%, reflecting improved analyst sentiment [3]. - The stock has returned 14.9% year-to-date, significantly outperforming the average return of 2.6% for the Auto-Tires-Trucks sector [4]. Sector Comparison - Federal Signal is one of 99 stocks in the Auto-Tires-Trucks sector, which ranks 8 in the Zacks Sector Rank [2]. - OPENLANE (KAR) is another stock in the sector that has outperformed, with a year-to-date return of 23.4% [4]. - Federal Signal belongs to the Automotive - Domestic industry, which includes 14 stocks and is currently ranked 94 in the Zacks Industry Rank [5].

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Financial Performance - Net sales for Q3 2025 increased by $80.8 million, or 17%, compared to Q3 2024, driven by higher sales volumes and pricing actions[153]. - Operating income for Q3 2025 rose by $18.1 million, or 24%, with a consolidated operating margin of 16.9%, up from 16.0% in the prior-year quarter[155]. - Net income for Q3 2025 increased by $14.2 million compared to Q3 2024, despite a $3.7 million rise in income tax expense[159]. - For the nine months ended September 30, 2025, net sales increased by $193.9 million, or 14%, with the Environmental Solutions Group contributing $172.4 million of this increase[154]. - Gross profit for the nine months ended September 30, 2025 increased by $61.5 million, or 15%, with a gross profit margin of 29.2%, up from 28.8% in the prior-year period[170]. - Operating income for the nine months ended September 30, 2025 increased by $46.1 million, or 22%, with a consolidated operating margin of 16.3%, compared to 15.2% in the prior-year period[174]. - Net income for the nine months ended September 30, 2025 increased by $19.5 million, largely due to higher pre-tax income levels, despite a $25.4 million increase in income tax expense[180]. Sales and Orders - The Environmental Solutions Group reported a net sales increase of $67.3 million, or 17%, with significant contributions from road-marking equipment ($16.2 million) and sewer cleaners ($7.0 million)[153]. - Total orders for Q3 2025 were $467 million, an increase of $41 million, or 10%, compared to Q3 2024, with the Safety and Security Systems Group seeing a 31% increase in orders[160]. - The Safety and Security Systems Group saw a net sales increase of $21.5 million, or 9%, primarily from public safety equipment sales[154]. - Total orders for the nine months ended September 30, 2025 increased by $115.7 million, or 10%, with U.S. orders rising significantly[188]. - Total orders for the nine months ended September 30, 2025 increased by $57.2 million, or 25%, with U.S. orders up by $32.9 million[199]. Costs and Expenses - Cost of sales for the nine months ended September 30, 2025 increased by $132.4 million, or 13%, primarily due to higher sales volumes and costs from recent acquisitions[168]. - SEG&A expenses for the nine months ended September 30, 2025 increased by $12.9 million, or 7%, but as a percentage of net sales, they decreased to 11.9% from 12.6%[172]. - Cost of sales for the nine months ended September 30, 2025 increased by $122.9 million, or 14%, with a gross profit margin of 26.5%, up from 26.2% in the prior-year period[190]. Cash Flow and Investments - Net cash provided by operating activities was $157.5 million for the nine months ended September 30, 2025, compared to $140.7 million in the prior-year period[210]. - The company used $101.3 million for investing activities, including an initial payment of $82.1 million to acquire Hog[211]. - As of September 30, 2025, cash and cash equivalents totaled $54.4 million, down from $91.1 million as of December 31, 2024[209]. Financial Position and Resources - The consolidated backlog at September 30, 2025, was $992 million, down from $1.03 billion at the same time in 2024[162]. - The Company was in compliance with all financial covenants under the 2022 Credit Agreement as of September 30, 2025[214]. - Capital expenditures for 2025 are anticipated to be in the range of $40 million to $50 million[214]. - The Company believes its financial resources, including cash flow from operations and borrowing capacity, will be adequate to meet operating and capital needs[215]. - There have been no material changes in the Company's contractual obligations and off-balance sheet arrangements during the nine months ended September 30, 2025[216]. - There have been no significant changes in the Company's exposure to market risk during the nine months ended September 30, 2025[218].

Core Insights - The company reported strong financial results for Q3, with consolidated net sales of $555 million, reflecting a 17% year-over-year increase [3] - Adjusted EBITDA for the quarter was $116.2 million, up 25% compared to last year, indicating robust operational performance [3] - The company raised its full-year adjusted EPS outlook to a range of $4.09 to $4.17, up from the previous range of $3.92 to $4.10, driven by healthy demand and strong order intake [30][31] Financial Performance - ESG's net sales for the quarter were $466 million, a 17% increase year-over-year [1] - Operating income for ESG was $85.3 million, up 19% from the previous year [1] - SSG's net sales reached $90 million, an 18% increase compared to last year [5] - Consolidated operating income was $94 million, reflecting a 24% increase year-over-year [3] Order Intake and Backlog - Total orders for ESG were $371 million, a 5% increase year-over-year [1] - Order intake for the company was $467 million, a 10% increase compared to last year, marking the highest third-quarter order intake on record [2][20] - Backlog at the end of the quarter stood at $992 million, down 4% compared to Q3 last year [2] Margins and Earnings - The adjusted EBITDA margin for ESG was 22.5%, up 60 basis points year-over-year [1] - GAAP diluted EPS for the quarter was $1.11 per share, a 28% increase from the previous year [2] - Adjusted EPS was $1.14 per share, reflecting a 30% increase year-over-year [2] Strategic Initiatives and Growth Outlook - The company is focused on multiyear growth initiatives, including investments in productivity-enhancing projects and capacity expansions [15][25] - The acquisition of Hog Technologies is expected to contribute between $60 million and $65 million in net sales in 2025, up from previous estimates [24] - The company plans to continue its "Build More Parts" initiative to vertically integrate parts production, aiming for increased recurring revenue streams [28] Market Conditions and Demand - Demand for products and services remains strong, with particular strength in publicly funded safety and security products [21] - The company expects orders within the Environmental Solutions Group to increase in Q4, consistent with seasonal patterns [21] - The transition from third-party refuse trucks to New Way is anticipated to impact backlog dynamics in the coming quarters [35]

Financial Data and Key Metrics Changes - Consolidated net sales for Q3 were $555 million, an increase of $81 million or 17% year over year [5] - Organic net sales growth for the quarter was $51 million or 11% [5] - Consolidated operating income for the quarter was $94 million, up $18.1 million or 24% compared to last year [5] - GAAP diluted EPS for the quarter was $1.11 per share, up $0.24 or 28% from last year [6] - Adjusted EPS for the quarter was $1.14 per share, up $0.26 or 30% from last year [6] - Consolidated adjusted EBITDA for the quarter was $116.2 million, up $23.2 million or 25% compared to last year, with a margin of 20.9% [5][6] Business Line Data and Key Metrics Changes - Environmental Solutions Group (ESG) net sales were $466 million, an increase of $67 million or 17% year over year [6] - ESG's operating income was $85.3 million, up $13.8 million or 19% [6] - ESG's adjusted EBITDA was $104.9 million, up $17.7 million or 20% with a margin of 22.5% [7] - Safety and Security Systems Group (SSG) net sales were $90 million, up $14 million or 18% [7] - SSG's operating income was $21.9 million, up $5.1 million or 30% [7] - SSG's adjusted EBITDA was $22.9 million, up $5.1 million or 29% with a margin of 25.6% [7] Market Data and Key Metrics Changes - Order intake for the quarter was $467 million, an increase of $41 million or 10% year over year [6] - Backlog at the end of the quarter stood at $992 million, down 4% compared to Q3 last year [6] - SSG orders increased 31% year over year, driven by demand for public safety equipment and warning systems [20] Company Strategy and Development Direction - The company is focused on building more trucks across its specialty vehicle businesses and improving throughput at its ESG facilities [13] - Investment in productivity-enhancing projects and automation initiatives is planned to improve efficiency [14] - The company aims for a balanced contribution between organic and inorganic growth, with a focus on strategic acquisitions [21][26] - The acquisition of New Way is expected to close in Q4, pending regulatory approval, which will enhance growth opportunities [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving another record year in 2026, driven by strategic initiatives and backlog visibility [49] - Demand for products and services remains strong, with expectations for increased orders in Q4 [19] - The company anticipates that the transition from third-party refuse trucks to New Way will impact backlog and margins positively over time [32][34] Other Important Information - The company generated $61 million of cash from operations during the quarter, bringing year-to-date cash generation to $158 million, an increase of 12% [10] - A new five-year $1.5 billion credit facility was executed, providing greater financial flexibility for growth initiatives and acquisitions [11] - The company paid dividends of $8.5 million during the quarter, reflecting a dividend of $0.14 per share [11] Q&A Session Summary Question: What was the M&A contribution from HOG Technologies and Standard Equipment Company at ESG in the quarter? - HOG Technologies contributed approximately $20 million, and Standard Equipment Company contributed about $10 million [31] Question: Can you help us frame the backlog contribution from the refuse trucks and expectations for margin lift going forward? - The backlog reduction was primarily driven by the decline of third-party refuse backlog, which is expected to continue as the transition to New Way occurs [32][34] Question: What feedback are you hearing from the dealer channel regarding the New Way acquisition? - Feedback has been overwhelmingly positive, with excitement about welcoming new dealers to the Federal Signal family [37] Question: Have you seen any changes to funding or delays with orders due to the federal government shutdown? - No meaningful disruption is expected from the federal government shutdown, and strong SSG orders were reported in Q3 [43] Question: How do you view the pricing environment following the recent merger of another large waste truck company? - The company believes it is well positioned with its ASL product line and the strength of its municipal channel, despite the merger [46] Question: Can you discuss the pace of margin expansion going forward, especially with the New Way acquisition? - New Way is expected to be margin dilutive in 2026, but long-term margin targets remain intact [54]

Core Insights - Federal Signal (FSS) reported quarterly earnings of $1.14 per share, exceeding the Zacks Consensus Estimate of $1.07 per share, and up from $0.88 per share a year ago [1] - The company achieved a revenue of $555 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 1.59%, compared to $474.2 million in the same quarter last year [3] - Federal Signal's stock has increased approximately 40.5% year-to-date, outperforming the S&P 500's gain of 17.2% [4] Earnings Performance - The earnings surprise for the recent quarter was +6.54%, following a previous surprise of +10.38% when actual earnings were $1.17 per share against an expectation of $1.06 [2] - Over the last four quarters, Federal Signal has consistently surpassed consensus EPS estimates [2] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $1.03 on revenues of $536.06 million, and for the current fiscal year, it is $4.02 on revenues of $2.11 billion [8] - The estimate revisions trend for Federal Signal was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [7] Industry Context - Federal Signal operates within the Zacks Diversified Operations industry, which is currently ranked in the top 30% of over 250 Zacks industries [9] - The performance of Federal Signal's stock may be influenced by the overall outlook for the industry, as top-ranked industries tend to outperform lower-ranked ones significantly [9]

Financial Performance Highlights - Net sales reached $555 million, a 17% increase, with organic growth contributing $51 million or 11%[6] - Adjusted EBITDA increased by 25% to $116.2 million, resulting in an adjusted EBITDA margin of 20.9% compared to 19.6%[6] - GAAP diluted EPS rose by 28% to $1.11, while adjusted EPS increased by 30% to $1.14[6] - Orders increased by 10% to $467 million, leading to a backlog of $992 million[6] Segment Performance - Environmental Solutions Group (ESG) net sales increased by 17% with adjusted EBITDA up by 20%[8, 18] - ESG aftermarket revenues increased 14% year-over-year, representing 26% of ESG net sales in Q3[18] - Safety and Security Systems Group (SSG) net sales increased by 18% with adjusted EBITDA up by 29%[8, 18] - SSG order intake increased 31% year-over-year to $96 million[19] Strategic Initiatives and Outlook - The company is raising its full-year net sales outlook to a new range of $2.10 billion to $2.14 billion, representing a year-over-year growth of 13% - 15%[24, 25] - The company is raising its full-year adjusted EPS outlook to a new range of $4.09 to $4.17, representing ~24% year-over-year growth at the midpoint[24, 27] - The company anticipates capital expenditures of $40 million to $50 million in 2025[14, 27]

Core Insights - Federal Signal Corporation reported a consolidated net sales of $555 million for Q3 2025, marking a 17% increase year-over-year, with net income rising to $68.1 million or $1.11 per diluted share, compared to $53.9 million or $0.87 per diluted share in the same quarter last year [3][4][9]. Financial Performance - The company achieved a consolidated operating income of $94.0 million, up 24% from the prior year, with an operating margin of 16.9%, an increase from 16.0% [6][9]. - Adjusted EBITDA for Q3 was $116.2 million, reflecting a 25% increase year-over-year, with an adjusted EBITDA margin of 20.9%, up from 19.6% [7][9]. - The Environmental Solutions Group reported net sales of $466 million, a 17% increase, while the Safety and Security Systems Group saw net sales of $90 million, an 18% increase [5][9]. Orders and Backlog - Consolidated orders for the third quarter were $467 million, a 10% increase compared to the prior year, with a backlog of $992 million as of September 30, 2025 [9][10]. Outlook and Guidance - The company raised its 2025 adjusted EPS outlook to a range of $4.09 to $4.17, up from the previous range of $3.92 to $4.10, and increased its net sales outlook to between $2.10 billion and $2.14 billion [9][15]. Acquisition and Financial Flexibility - Federal Signal announced the acquisition of Scranton Manufacturing Company for an initial consideration of $396 million, with additional payments for manufacturing facilities [12]. - The company secured a new five-year credit facility of $1.5 billion, enhancing its financial flexibility to fund growth opportunities [10][13][14].