Knowles (KN) Barclays 43rd Annual Industrial Select Conference summary

Macroeconomic and industry outlook

• Orders accelerated into 2026, supported by lower interest rates and a strong backlog position, providing confidence for the year ahead.

• Last year was disrupted by tariff uncertainty, causing delays in CapEx and muddying the economic environment, but these issues have largely subsided.

• Growth is expected across all operating segments, with particular strength in clean energy and climate/sustainability.

• Retail refrigeration and clean energy segments are positioned for multi-year upcycles due to deferred CapEx and market shifts.

• Data center exposure is growing but remains a small part of the overall business, with stable pricing in niche markets.

Segment performance and portfolio strategy

• Clean energy and climate/sustainability are expected to drive the most significant top-line and profit growth, aided by M&A and restructuring.

• Retail refrigeration is rebounding after tariff-related CapEx deferrals, with new CO2 systems contributing over $300 million in recent revenue.

• Vehicle aftermarket remains challenged in Europe but is not expected to be a major headwind this year.

• Pumps and Process maintains high margins above 30%, with growth focused on mix rather than margin expansion.

• Divestments have streamlined the portfolio, focusing on higher growth and margin areas, with most structural changes now complete.

Cost, pricing, and margin dynamics

• Price increases have been moderate, with unit volume expected to drive revenue growth for the first time in three years.

• Incremental margins are expected to be lower than last year due to more balanced growth across the portfolio, but total portfolio margin will rise.

• Restructuring and M&A synergies continue to provide cost savings, with 50% of current year benefits from prior M&A.

• Capital allocation remains disciplined, with a focus on value creation and maintaining a strong liquidity position.

• Buybacks are considered if M&A multiples remain high, with capital return always an option.