Episode Details

Helios Technologies (HLIO) Q2 2026 — Helios filed Q2 2026 results on Form 8-K after the close on Monday August 10, so Tuesday August 11 was the reaction session. Shares closed USD81.52 Monday, OPENED USD82.01, ran to USD84.59 (+3.77 pct), then closed USD81.06, -0.56 pct, on 2.48x volume. Helios Technologies makes hydraulic cartridge valves and electronic controls for off-highway, industrial and marine equipment. Q2 2026 net sales were USD231.9M, +9.1 pct reported but +16 pct pro forma at constant currency, with adjusted diluted EPS of USD0.88 against a USD0.80 bar. THE CALL: HOLD (3/5, MEDIUM - A REAL TURN, ALREADY PAID FOR) — base-case value ~$69.72 vs ~$79.43 today. KEY METRICS: - CALL: HOLD, 3/5. Fair value USD69.72 vs the USD79.43 close, -12.2 pct. Bear USD53.09 / base USD70.12 / bull USD88.97, weighted 30/45/25. EV/EBITDA on 2027 sales of USD917M, USD943M, USD970M at 20, 21, 22 pct margins on 11.0x, 13.0x, 15.0x, less USD263.5M net debt, over 32.95M shares. - THE PRINT: Net sales USD231.9M (+9.1 pct) vs USD230.7M expected. Adjusted diluted EPS USD0.88 vs a USD0.80 bar, +49.2 pct YoY. Reported EPS USD0.66 vs USD0.34. Basis PROVEN: USD0.80 in March plus USD0.88 sums to the filed USD1.68 half. Gross margin 34.6 pct, +282bp. - THE ANGLE: Electronics gross margin went 29.3 pct to 34.6 pct, +530bp. Hydraulics is also 34.6 pct, so a 370bp segment gap closed to zero. Electronics supplied USD8.6M of the USD12.7M gross profit gain - 68 pct on 37 pct of sales - and half the USD10.6M operating income gain. - NINE PCT UNDERSTATES IT: Custom Fluidpower, sold September 27 2025, still sits in the prior-year base at USD15.0M. Strip it and the currency and the company's own reconciliation says +16 pct. Separately USD5.5M of tariff refunds cut cost of sales USD5.3M but only USD1.2M reached gross profit. - DELEVERAGING: Net debt USD383.2M to USD263.5M, leverage 2.6x to 1.4x. Repayment did 0.82 turns (69 pct), EBITDA growth 0.38. Trailing adjusted EBITDA USD145.1M to USD183.1M. Interest expense USD7.0M to USD4.7M, -32.9 pct. - CASH AND RETURNS: H1 operating cash flow USD65.8M less USD19.6M of capex and software leaves USD46.2M of free cash flow, 83 pct of adjusted net income. Trailing free cash flow USD103.6M, a 3.96 pct yield. Dividend raised 33 pct to USD0.12, the 118th straight, yielding 0.60 pct. - GUIDE AND CAVEATS: FY sales guide USD880-900M and adjusted EPS USD3.05-3.25, from USD840-870M and USD2.75-3.00 - a 9.6 pct midpoint lift and a record year. But goodwill and intangibles are USD841.8M, 89 pct of equity, and the shares carry 25.2x the guided midpoint. - STREET: J.P. Morgan Overweight USD110.00 (Aug 12 2026, from USD100), Stifel Buy USD95.00 (Aug 12 2026, Nathan Jones), KeyBanc Overweight USD95.00 (Jul 13 2026), Baird Outperform USD85.00 (May 13 2026). Average USD96.25, +21.2 pct. Tally 7 buy / 6 hold / 0 sell. What to watch: UP: two more quarters of Electronics gross margin near 34.6 pct, making the convergence structural; a turn in Asia Pacific hydraulics, down 8 pct all year. DOWN: the USD1.2M tariff refund inside gross profit not repeating; the off-highway cycle rolling over. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.