PHINIA (NYSE: PHIN) reported Q3 2026 net sales of $912 million, up 0.4% from $908 million a year earlier, while diluted GAAP EPS rose to $1.80 from $0.33. Adjusted EBITDA increased by $2 million to $135 million and its margin improved 20 basis points to 14.8%, but operating cash flow declined to $87 million. Aftermarket Solutions growth offset lower Power Systems sales, and the company raised several full-year 2026 guidance ranges.
Core Financial Results
For the quarter ended September 30, reported sales increased by $4 million, but were flat year over year after excluding a $4 million favorable currency impact. Tariff-related customer recovery mechanisms complicated the comparison: Q3 2025 included recovery-related sales, while Q3 2026 included reductions tied to refunds owed to customers. Excluding this volatility, PHINIA said core business sales increased by $21 million.
Adjusted EBITDA benefited from higher Americas volume and favorable timing related to tariff recoveries. Those gains were partly offset by higher research and development spending and the absence of favorable customer pricing actions recorded in 2025.
| Metric | Q3 2026 | Q3 2025 | Year-Over-Year Change |
|---|---|---|---|
| Net sales | $912 million | $908 million | +0.4% |
| Gross profit / margin | $204 million / 22.4% | $200 million / 22.0% | Approx. +2%; margin +40 bps |
| Operating income | $84 million | $34 million | Approx. +147% |
| Net earnings | $67 million | $13 million | Approx. +415% |
| Diluted GAAP EPS | $1.80 | $0.33 | Approx. +445% |
| Adjusted diluted EPS | $1.83 | $1.59 | Approx. +15% |
| Adjusted EBITDA / margin | $135 million / 14.8% | $133 million / 14.6% | Approx. +2%; margin +20 bps |
| Operating cash flow | $87 million | $119 million | Approx. -27% |
| Adjusted free cash flow | $73 million | $104 million | Approx. -30% |
Adjusted EPS, adjusted EBITDA, and adjusted free cash flow are non-GAAP measures and should be considered alongside the corresponding GAAP results.
Business and Segment Performance
Power Systems sales declined 1.8% to $561 million from $571 million. PHINIA attributed the decrease mainly to the non-recurrence of favorable customer pricing actions from the prior year and the timing of tariff recovery mechanisms.
Aftermarket Solutions sales increased 4.2% to $351 million from $337 million, driven by higher sales in the Americas. Tariff recovery timing partially offset that growth. The segment’s $14 million increase was enough to offset the $10 million decline in Power Systems at the consolidated level.
PHINIA also reported new program awards involving methanol engines in China, compressed natural gas injectors in India, and a range-extender application in North America. Its aftermarket business added a North American remanufacturing customer and expanded braking, steering, suspension, diesel, electronics, and engine-management business in several international markets. The company did not quantify the expected revenue from these awards.
Lower Other Operating Expense Drove the GAAP Profit Jump
PHINIA’s GAAP profit growth was substantially larger than the change in adjusted operating performance. Operating income increased by $50 million and net earnings rose by $54 million, while adjusted EBITDA increased by only $2 million.
The largest visible factor in that gap was other operating expense, net, which declined to $4 million from $57 million. The income tax provision also fell to $3 million from $6 million despite higher pretax earnings. These items heavily influenced the GAAP EPS comparison, while adjusted EPS increased at a more moderate rate from $1.59 to $1.83.
A lower diluted share count also supported per-share results. Weighted average diluted shares declined to 37.1 million from 39.6 million following the company’s repurchase activity.
Cash Flow and Balance Sheet
Cash generation moved in the opposite direction from GAAP earnings. Operating cash flow fell by $32 million to $87 million, primarily because of withholding tax payments related to cash repatriation and unfavorable working capital. PHINIA said the working-capital pressure mainly reflected higher receivables and the timing of customer collections. Receivables reached $902 million at quarter-end, compared with $804 million at December 31, 2025.
Adjusted free cash flow declined by $31 million to $73 million. PHINIA returned $76 million to shareholders during the quarter, consisting of $65 million in share repurchases and $11 million in dividends, equal to 104% of quarterly adjusted free cash flow.
At September 30, the company held $436 million in cash and had $377 million available under its revolving credit facility, providing total liquidity of $813 million. Total debt was $1.093 billion, net debt was $657 million, and net leverage was 1.3 times. Net debt increased by $46 million from the end of 2025 despite the higher cash balance.
Full-Year 2026 Guidance
PHINIA raised or maintained the upper ends of its major full-year ranges while increasing several lower bounds. The revised outlook, issued on October 29, includes the expected fourth-quarter contribution from the stoba Group acquisition, which closed on October 1, 2026.
All dollar amounts in the following table are in millions.
| Metric | Revised FY2026 Guidance | Prior Guidance | Change |
|---|---|---|---|
| Net sales | $3,625-$3,675 | $3,565-$3,665 | Low end +$60; high end +$10 |
| Net earnings | $160-$182 | $155-$180 | Low end +$5; high end +$2 |
| Adjusted EBITDA | $500-$520 | $485-$515 | Low end +$15; high end +$5 |
| Adjusted EBITDA margin | 13.7%-14.1% | 13.5%-14.1% | Low end +20 bps; high end unchanged |
| Adjusted free cash flow | $220-$250 | $210-$250 | Low end +$10; high end unchanged |
| Adjusted tax rate | 28%-30% | 30%-33% | Range lowered |
The net sales range was narrowed as well as raised, while the adjusted EBITDA revision implies better profitability expectations at both ends of the range. Because the outlook includes stoba’s expected contribution, execution and integration during the fourth quarter are part of the updated targets.
Risks Investors Should Watch
- Tariff-related volatility: Customer recovery and refund timing affected both reported sales and adjusted EBITDA, making underlying period-to-period comparisons less straightforward.
- Cash conversion: Operating cash flow and adjusted free cash flow declined despite higher earnings, with repatriation taxes and receivable collection timing creating pressure.
- Power Systems pricing and demand: Segment sales declined as favorable prior-year pricing actions did not recur. Higher R&D and customer-relationship investments could also limit margin expansion if volume and pricing do not offset them.
- Capital allocation and leverage: Quarterly capital returns exceeded adjusted free cash flow, while net debt increased from year-end. Repetition of that pattern could reduce financial flexibility.
- Acquisition contribution: Revised guidance includes an expected fourth-quarter benefit from stoba, so achieving the outlook partly depends on the acquired business contributing as planned.
Summary
PHINIA produced essentially flat reported sales in Q3 2026, with Aftermarket Solutions growth offsetting a decline in Power Systems. Adjusted EBITDA and margins improved modestly, while the much larger increase in GAAP earnings primarily reflected sharply lower other operating expense. The revised full-year outlook points to higher expected sales and adjusted EBITDA, but tariff-related volatility, weaker cash conversion, rising net debt, and the contribution from the newly acquired stoba business remain the main items to monitor.
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