TAT Technologies reported a strong third quarter, with revenue rising 20.2% year over year to $55.6 million from $46.2 million. Net income increased to $7.7 million from $4.8 million, while diluted earnings per share climbed to $0.58 from $0.37.
Profitability improved faster than sales. Gross profit reached $17.2 million, up 48.2%, and gross margin expanded to a record 30.9% from 20.8% a year earlier. Operating income rose to $9 million, representing 16.3% of revenue, compared with 11.4% in the prior-year quarter.
Adjusted EBITDA increased 60.9% to a record $10.9 million, equal to a 19.6% margin. Management attributed the improvement to revenue growth, a more favorable mix, stronger contributions from APUs and heat exchangers, trading and distribution activity, and continued operating-efficiency gains.
The APU business was the main growth driver, with revenue up 34.4% during the quarter. TAT said the increase reflected new contracts, better supply-chain flow and improved execution. Heat exchanger revenue rose 7.3%, while trading, leasing and distribution revenue increased 85.5% from a low base. Landing gear remained under pressure because of parts shortages.
For the first nine months of the year, revenue reached $149.6 million, an increase of 13.8% from the same period last year. The company ended the quarter with $42.6 million in net cash and a debt-to-last-12-months EBITDA ratio of 0.32 times.
Management said demand remained strong across the company’s core markets, particularly APU and aftermarket services. It pointed to maintenance spending by six major U.S. airlines, which increased 3% year over year in the third quarter to approximately $3.3 billion, as an indication that carriers continue to prioritize fleet reliability despite higher fuel costs.
TAT also cited delayed aircraft deliveries and an aging fleet as factors supporting maintenance demand. The company said its APU business had returned to a full operating pace and that customer intake remained high.
Management expects momentum to continue in the fourth quarter and into 2027, supported by customer demand, a healthy backlog, long-term agreements and improving supply-chain conditions. APU and heat exchangers are expected to remain the main growth platforms, while trading, leasing and distribution should continue contributing, although results in that segment may vary depending on the timing of large transactions.
The company said its expanded relationship with Honeywell should create further opportunities in distribution and maintenance, repair and overhaul services. TAT also expects to begin paying income taxes in 2027 after using its remaining tax-loss carryforwards in Israel and the United States. It estimated a future corporate tax rate of 15% to 19%, which could reduce net income compared with the current tax-benefit environment.
The backlog declined to $577 million from $615 million, mainly because $34 million of landing gear contracts were removed. Management also highlighted continued risks from parts shortages, quarterly fluctuations in trading activity and the company’s increased exposure to APU and aftermarket demand.
Following the results, TAT Technologies shares rose 6.75% to $10,750 from a previous close of $10,070. The supplied information did not include formal revenue or earnings forecasts, preventing a direct comparison with analyst estimates.
Sources: Investing.com News.