DXPE Q3 Deep Dive: Revenue Growth and Margin Pressures Shape Mixed Quarter

Core Insights - DXP Enterprises reported Q3 CY2025 revenue of $513.7 million, exceeding analyst expectations by 3% with an 8.6% year-on-year growth [1][6] - Non-GAAP profit per share was $1.34, which was 14.4% below analysts' consensus estimates of $1.57 [1][6] - The market reacted negatively to the profit shortfall despite strong sales growth [3] Revenue and Profit Performance - Revenue of $513.7 million compared to analyst estimates of $498.8 million, marking an 8.6% year-on-year growth [6] - Adjusted EPS of $1.34 fell short of expectations of $1.57, representing a 14.4% miss [6] - Adjusted EBITDA was $56.5 million, beating estimates of $54.7 million, with an 11% margin [6] Segment Performance - Service Centers segment showed consistent year-over-year growth, driven by demand in air compressors, metalworking, and safety services [7] - Innovative Pumping Solutions saw increased sales, with the DXP Water platform now representing a majority of segment sales, improving overall margins [7] - Supply Chain Services faced a decline due to reduced spending in oil and gas and chemical sectors, with expectations for recovery in early 2026 [7] Management Outlook - Management anticipates continued top-line momentum supported by a healthy acquisition pipeline and expansion in water and wastewater projects [4] - CFO indicated that 11% EBITDA margins are sustainable for now, but cautioned about seasonal softness and elevated SG&A expenses in the upcoming quarter [4] - The company is focusing on balancing growth investments with operational efficiency as it enters the next year [4] Cost and Expense Analysis - Rising operating expenses were attributed to merit raises, increased insurance premiums, technology investments, and professional fees from acquisition activities [8] - Some elevated costs, such as insurance and claims, are expected to persist but are deemed necessary for long-term growth [8]