Specialist engineering firm Spirax (SPX) reaffirmed its FY26 guidance after logging strong organic growth year to date. The group designs, makes and sells steam and fluid monitoring and control equipment, primarily for the food, pharma and petrochemical industries.
Above-market growth
For the first four months of 2026, Spirax registered mid single digit organic revenue growth across the group. Meanwhile, global industrial production grew just 1.4% in Q1, and the forecast for the full year is only a 1.9% increase.
Steam Thermal Soultions grew ahead of the market thanks to ‘sustained strength’ in MRO (maintenance, repair and overhaul). The firm also noted a recovery in large project demand, along with a recovery in orders from China and Korea.
Electric Thermal Solutions delivered double-digit growth across all divisions, with strong growth in the semiconductor manufacturing sector. Lastly, Watson-Marlow Fluid Technology saw ‘robust’ demand from industrial and pharmaceutical customers.
Despite the weak general backdrop, the company expects to maintain mid single digit organic revenue growth for the full year. It also expects its operating margin to increase on an organic basis, with the usual second-half improvement driven by seasonal factors.
Spirax is a classic ‘quality growth’ company with durable competitive advantages, hence its ability to increase market share. Although its organic revenue outlook is cautious, a modest improvement in margins should translate into high single digit EPS growth.
Based on current forecasts, earnings probably won’t surpass their 2022 high until the end of FY28. However, the valuation has come down from the stratospheric levels of a few years ago to a more normal 22 times.
Warren Buffett would say it’s better to buy a wonderful company at a good price than a good company at a wonderful price. Spirax ticks the box for us in terms of quality, growth and a durable ‘moat’, and the price seems fair if not wonderful.
Read the press release here:
https://www.spiraxgroup.com/en/investors
