Money

Thermon’s Backlog Rises on LNG Growth

Article Summary

Thermon Group (THR) has released its fiscal 2025 Q4 results, showcasing a 5% year-over-year revenue increase to $134.1 million and a record annual free cash flow of $53 million. The company’s backlog surged by 29%, driven by strategic expansions in high-growth markets like LNG and diversified end markets. Despite tariff-related headwinds expected in fiscal 2026, Thermon has implemented rigorous mitigation strategies, including price increases and supply chain reconfigurations. Management remains cautiously optimistic, with revenue guidance for fiscal 2026 set at $495 million to $535 million, emphasizing aggressive capital allocation in M&A, share repurchases, and organic growth investments.

What This Means for You

Core Implication & Immediate Relevance:

For investors and industry stakeholders, Thermon’s robust backlog growth and strategic acquisitions in the LNG sector signal a strong competitive position in high-growth markets. The company’s proactive approach to mitigating tariff impacts ensures financial resilience, making it a potential standout in the industrial process heating sector.

Actionable Advice / Next Steps:

Monitor Thermon’s quarterly performance closely, particularly its backlog metrics and LNG-related project wins. Consider the company’s strategic acquisitions, like Vapor Power and Fati, as indicators of long-term growth potential. Investors should also evaluate the effectiveness of its tariff mitigation strategies in maintaining margins.

Potential Impact & Considerations:

The lifting of the U.S. moratorium on LNG export projects presents significant opportunities for Thermon, but macroeconomic and trade policy risks remain a concern. The company’s investment in ERP systems and supply chain reconfigurations could enhance operational efficiency, but their impact on margins in the short term needs careful assessment.

Future Outlook / Call to Awareness:

Thermon’s focus on high-growth markets like LNG and its aggressive capital allocation strategies position it well for sustained growth. However, stakeholders should remain vigilant about macroeconomic uncertainties and the potential long-term effects of tariff adjustments on the industrial sector.

Original Post

Thermon Group (THR -0.89%) delivered its fiscal 2025 fourth-quarter results on May 22, reporting 5% year-over-year revenue growth to $134.1 million, an adjusted EBITDA margin of 22.7%, and record annual free cash flow of $53 million. Management at the industrial process heating specialist highlighted a 29% year-over-year backlog increase as of March 31 (the quarter’s end), strategic expansion into high-growth markets, and outlined the tariff headwinds it expects for fiscal 2026, as well as its plans for rigorous mitigation efforts.Backlog Acceleration and Diversification Drive Competitive ResilienceAs of fiscal 2025’s end, the company’s backlog was up by 29% year over year, with organic backlog up by 20%. It’s benefiting from gains in the liquid natural gas (LNG) segment and from its exposure to diversified end markets. The backlogs point to sustained order strength despite a 37% annual decrease in revenue from large capital projects. Its book-to-bill ratio has remained above 1.0 for four consecutive quarters, supported by rebounding oil and natural gas activity and strategic wins in the LNG business after the U.S. moratorium on permits for new LNG export projects was lifted in January.”As a result, our backlog as of March 31 increased 29% from last year, with the organic backlog up 20%, driven by momentum in diversified verticals coupled with a rebound in certain oil and gas markets.”– Bruce Thames, CEOLNG and Strategic M&A Expand Addressable MarketThe lifting of the U.S. moratorium on permits for new LNG export projects catalyzed increased project bidding, and Thermon secured five major awards. The January 2024 acquisition of Vapor Power contributed to a 25% sales pipeline expansion. Later, in fiscal 2025, it acquired heating solutions specialist Fati, and demand from Thermon’s legacy customers has approximately doubled Fati’s backlog. Thermon management sees $80 million in potential opportunities for its offerings in the LNG space.”We built a strong portfolio of products targeting the LNG market, have secured five major awards, and are well-positioned to capitalize on numerous other opportunities in our pipeline. … The addition of Vapor Power has expanded our addressable market, increasing our sales pipeline by 25%, even though the business represents just 11% of total revenue today.”– Bruce Thames, CEOThermon’s proactive portfolio and M&A strategies are solidifying its competitive position in high-growth, high-barrier industries, directly supporting multiyear organic expansion and recurring revenue base shifts.Tariff Headwinds Quantified and Countermeasures DeployedManagement’s guidance factors in an expected annualized gross tariff headwind of $16 million to $20 million, with the net impact after mitigation estimated at $4 million to $6 million, primarily affecting its first-half margins. Management has raised prices, reconfigured supply chains, and enacted production shifts in its effort to offset the cost inflation caused by those new import taxes. Its planned $5 million investment in its Enterprise Resource Planning (ERP) system will be excluded from adjusted EBITDA and EPS, as well as from the guidance figures.”Based upon these assumptions, we’re expecting an annualized impact of roughly $16 [million] to $20 million on a gross basis prior to mitigating actions, which are already underway. … We believe on a net impact, it’s somewhere in the $4 [million] to $6 million range within the current fiscal year.”– Bruce Thames, CEOLooking AheadManagement’s guidance for fiscal 2026 is for $495 million to $535 million in revenue (3.5% growth at midpoint) and adjusted EBITDA of $104 million to $114 million, with a brief margin dip expected in the first half due to tariff lag, but with margins recovering as the company’s pricing actions take effect in the second half. Management is neutral to cautious on its demand expectations, given the elevated levels of macroeconomic and trade policy risks, but is reinforcing aggressive capital allocation priorities in M&A, share repurchases, and organic growth investments.

This article was created using Large Language Models (LLMs) based on The Motley Fool’s insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Thermon Group. The Motley Fool has a disclosure policy.

People Also Ask About

Question 1: What is Thermon Group’s primary market focus? Thermon specializes in industrial process heating solutions, with significant growth in the LNG sector and diversified end markets.

Question 2: How has Thermon mitigated tariff-related impacts? The company has implemented price increases, reconfigured supply chains, and shifted production to offset tariff-induced cost inflation.

Question 3: What is the significance of Thermon’s backlog growth? A 29% increase in backlog indicates strong future revenue potential, driven by LNG projects and diversified market opportunities.

Question 4: What are Thermon’s growth strategies for fiscal 2026? Thermon plans to focus on M&A, share repurchases, and organic growth investments, particularly in the LNG and high-growth markets.

Expert Opinion

Thermon’s strategic focus on LNG and diversified markets, combined with its strong backlog growth, positions it as a resilient player in the industrial process heating sector. However, its ability to navigate tariff headwinds and macroeconomic uncertainties will be critical to sustaining long-term growth.

Key Terms

  • Thermon Group fiscal 2025 Q4 results
  • LNG market growth opportunities
  • tariff mitigation strategies
  • industrial process heating solutions
  • M&A and organic expansion
  • backlog and book-to-bill ratio
  • enterprise resource planning (ERP) investment



ORIGINAL SOURCE:

Source link

Search the Web