Shares of Twin Disc, Incorporated (TWIN Quick QuoteTWIN - Free Report) have gained 3% since the company reported its earnings for the quarter ended Sept. 26, 2025. This compares to the S&P 500 index’s 0.5% decline over the same time frame. Over the past month, the stock has gained 12.6% compared with the S&P 500’s 1.6% growth.

Twin Disc incurred a net loss attributable to Twin Disc of 4 cents per share for the first quarter of fiscal 2026, narrower than the net loss of 20 cents per share in the year-ago period. 

Net sales of $80 million represented a 9.7% increase from $72.9 million in the same quarter a year ago. This growth was primarily driven by the acquisition of Kobelt and strong contributions from the Marine and Propulsion Systems segment. On an organic basis, which excludes the effects of acquisitions and currency, sales increased by 1.1%. 

Gross profit rose to $22.9 million, up 18.7% from the prior year, and gross margin expanded by 220 basis points to 28.7%, aided by higher volumes and operational improvements. The company incurred a net loss attributable to Twin Disc of $0.5 million, narrower than the net loss of $2.8 million in the year-ago period. 

EBITDA increased sharply to $4.7 million, up 172.3% from the same period last year.

Twin Disc, Incorporated Price, Consensus and EPS Surprise

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Business Segment Performance

The Marine and Propulsion Systems segment delivered sales of $48.2 million, a 14.6% year-over-year increase. This performance was supported by record new-unit bookings and growing demand for autonomous-vessel applications. The company noted strong activity across workboats, government contracts, and Veth’s ELITE thruster products. Aftermarket sales remained healthy, benefiting from sustained utilization of both military and commercial marine fleets.

Land-Based Transmissions posted modest growth, with sales increasing 1.6% to $17.6 million. While shipments to China were impacted by tariff-related uncertainties and a slowing pace of new builds, North American oil and gas demand showed positive signs as the industry’s rebuild cycle progressed. The company also continued to fulfill orders for ARFF transmissions and began production on a $2.3 million E-Frac system unit order, while seeing increased interest in next-generation solutions.

The Industrial segment recorded a 13.2% increase in sales, rising to $10.4 million. This growth was attributed to a sequential recovery in demand and customer activity, as well as a favorable product mix with greater emphasis on higher-content solutions.

Backlog and Balance Sheet

Twin Disc reported a robust six-month backlog of $163.3 million as of quarter-end, up from $150.5 million in the preceding quarter and supported by ongoing strength in propulsion and defense applications. Inventory as a percentage of the six-month backlog improved to 96.9%, down from 101% sequentially

From a liquidity standpoint, total debt rose 46.7% year over year to $43.7 million, while cash fell 14.8% to $14.2 million. Net debt increased to $29.5 million, largely attributed to financing the Kobelt acquisition

Management Commentary

President and CEO John H. Batten highlighted the quarter as a solid start to the fiscal year, emphasizing both top-line growth and improved margins. He underscored the strength of Twin Disc’s diversified market presence and disciplined operations. Defense orders continued to accelerate, driving an 8.5% sequential increase in the six-month backlog, which reached $163.3 million. Batten also called attention to wins in autonomous-vessel applications and stable demand across key product lines, particularly in the Marine segment.

CFO Jeffrey S. Knutson noted that the company’s year-over-year improvement in EBITDA was supported by higher sales and improved margins, even as operating expenses increased. He emphasized its ongoing efforts to manage inventory levels, maintain balance sheet flexibility and invest in growth initiatives aimed at long-term value creation.

Factors Influencing Results

Gross margin expansion was a key highlight of the quarter, increasing by 220 basis points year over year to 28.7%. This improvement was driven by the benefits of incremental volume and successful margin-enhancement initiatives, such as streamlined operations and cost management.

Additionally, a significant reduction in currency-related losses contributed to the narrower net loss. The company also absorbed a 6.2% increase in marketing, engineering and administrative expenses, which totaled $20.7 million. This increase reflected the integration of Kobelt, higher professional fees, and inflationary pressure on wages and benefits.

Currency translation had a smaller negative impact this quarter compared to the prior year, while tariff-related challenges — particularly in China — remained a concern. Management indicated that tariffs could affect 1 to 3 percent of cost of goods sold in the next quarter, but expects the impact to recede to around 1 percent in the second half of fiscal 2026.

Other Developments

During the quarter, Twin Disc continued to integrate its acquisition of Kobelt, a provider of marine steering and propulsion control systems. The acquisition has expanded Twin Disc’s market presence in hybrid and electric applications and contributed positively to sales growth. Management indicated that the transaction was a strategic fit, enhancing both technological capabilities and geographic reach.