DALLAS, TX -- August, 10 2026 -- Park-Ohio Holdings Corp. (NASDAQ: PKOH): Stonegate Capital Partners Updates Coverage on Park-Ohio Holdings Corp. (NASDAQ: PKOH). PKOH’s 2Q26 marked a clearer inflection in the portfolio, as wider demand and better Engineered Products execution shifted the growth mix toward higher margin, more durable businesses. Importantly, management raised FY26 guidance while retaining SSP’s expected ~$0.50/share loss, suggesting the core portfolio is improving faster than consolidated results imply. Gross margin reached its highest level since 2013, operating income increased 22% y/y, and operating cash flow improved $23M. In our view, PKOH is entering a multi-step margin and portfolio-quality improvement cycle, with Engineered Products absorption, company-specific productivity initiatives, 2H cash conversion, and the SSP review the primary variables through year-end.
2Q26 Quarterly results - PKOH reported revenue, adj EBITDA, and adj EPS of $440.1M, $38.8M, and $0.93, respectively. This compares to our/consensus estimates of $422.3M/$427.3M, $36.6M/$35.4M, and $0.80/$0.81, respectively. Revenue increased 10% y/y and 5% q/q across all three segments, while adjusted EPS increased 24% y/y. Gross margin expanded 90 bps to 17.9% on higher-volume flow-through and profit-enhancement initiatives. SG&A increased to 12.1% of sales from 11.7%, partially offsetting operating leverage, driven by inflation, higher personnel costs, and support for increased sales levels. Operating cash flow improved to $9.2M from a $13.7M use, while CapEx totaled $11.0M. By our calculation, unchanged FY26 FCF guidance implies a material 2H cash-conversion step-up, supported by higher earnings and working-capital reduction.
Segments - Supply Technologies revenue increased 12% to $209.3M, with operating margin up 10 bps to 8.8%. Semiconductor, electrical, and AI data center revenue rose 29%, while aerospace & defense increased 10%. North American distribution center is scheduled for 3Q; margin benefits begin in 2027. Assembly Components revenue rose 7% to $101.4M on 2025 launches and automotive demand; operating income of $5.3M declined y/y but improved sequentially, while automation, rubber-mixing capacity, and new-program volume should support margins.
Engineered Products was the clearest change as revenue rose 10% to $129.4M, while operating margin expanded 190 bps to 7.0% on aftermarket growth and better forged/machined performance. Backlog reached $252M (+29% y/y; +23% from year-end), while YTD bookings rose 19% to $153M. Management expects improvement beyond any single order and targets long-term EBIT margins above 10%.
SSP Strategic Review - The process is expected to conclude toward year-end. FY26 guidance includes approximately $15M of revenue and a ~$0.50/share loss from SSP, including $0.09/share in 2Q. While nothing is complete, a favorable outcome could improve earnings and simplify the portfolio.
Guidance - Management raised FY26 sales guidance to $1.700B-$1.730B, adjusted EPS to $3.10-$3.30, and EBITDA margin to 8.5%-9.0%, while maintaining FCF guidance of $20M-$30M. The increase reflects stronger demand visibility and operating performance.
Valuation - We use both a DCF and EV/EBITDA comp analysis to guide our valuation. Our DCF analysis produces a valuation range of $45.17 to $58.01 with a mid-point of $51.01. Our EV/EBITDA valuation results in a range of $48.76 to $59.63 with a mid-point of $54.19. Using a simple average this arrives at a 2027E valuation range of $46.96 to $58.82 with a price target at the mid-point of $52.60.
