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1. Company Snapshot

1.a. Company Description

Federal Signal Corporation, together with its subsidiaries, designs, manufactures, and supplies a suite of products and integrated solutions for municipal, governmental, industrial, and commercial customers in the United States, Canada, Europe, and internationally.It operates through Environmental Solutions Group, and Safety and Security Systems Group.The Environmental Solutions Group segment offers a range of street sweepers, safe-digging trucks ,sewer cleaners, industrial vacuum loaders, vacuum, and hydro-excavation trucks; road-marking, line-removal and waterblasting equipment, dump truck bodies, trailers, and metal extraction support equipment under the Elgin, Vactor, Guzzler, TRUVAC, Westech, Jetstream, Mark Rite Lines, Ox Bodies, Crysteel, J-Craft, Duraclass, Rugby, Travis, OSW, NTE, WTB, Ground Force, Bucks, and Switch-N-Go brand names.


It also offers refuse and recycling collection vehicles, camera systems, ice resurfacing equipment, and snow-removal equipment, as well as safety, and security systems.In addition, this segment engages in the sale of parts, service and repair, equipment rental, and training activities.The Safety and Security Systems Group segment provides systems and products for community alerting, emergency vehicles, first responder interoperable communications, and industrial communications.


Its products include vehicle lightbars and sirens, industrial signaling equipment, public warning systems, general alarm systems, and public address systems.This segment sells its products under the Federal Signal, Federal Signal VAMA, and Victor brand names.The company sells its products through wholesaler, distributor, independent manufacturer representative, original equipment manufacturer, and direct sales force, as well as independent foreign distributor.


Federal Signal Corporation was founded in 1901 and is headquartered in Oak Brook, Illinois.

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1.b. Last Insights on FSS

Federal Signal Corporation's recent performance has been impacted by mixed signals. Despite robust Q3 sales growth of 17% and margin gains, softer order growth and a shrinking backlog relative to sales have tempered near-term enthusiasm. The company's acquisition of Scranton Manufacturing is expected to add meaningful EBITDA and EPS synergies by 2028. However, this positive development has been overshadowed by concerns over slowing order growth. Additionally, the company's upgraded Zacks Rank #2 (Buy) suggests growing optimism about its earnings prospects (Source: Zacks).

1.c. Company Highlights

2. Federal Signal's Q3 2025 Earnings: A Strong Performance

Federal Signal reported a robust third quarter with 17% year-over-year net sales growth, reaching $555 million, and a 130 basis point increase in adjusted EBITDA margin. The company's adjusted EPS came in at $1.14, beating estimates of $1.07. The strong financial performance was driven by the Environmental Solutions Group, which delivered 17% year-over-year net sales growth, and the Safety and Security Systems Group, which reported 18% top-line growth. As Jennifer Sherman, the company's President and Chief Executive Officer, stated, "the company reported another strong quarter of results, with third quarter records across consolidated net sales, adjusted EPS, and adjusted EBITDA margin."

Publication Date: Nov -03

📋 Highlights
  • Strong Financial Performance:: 17% YoY net sales growth ($555M), 130 bps adjusted EBITDA margin expansion, and 20% adjusted EBITDA increase in Environmental Solutions Group.
  • Operational Cash Flow & Debt Reduction:: Generated $61M cash from operations (YTD $158M), reduced net debt by $55M, ending with $159M net debt and $570M credit facility availability.
  • Strategic Growth Initiatives:: Hog Technologies to contribute $60–$65M net sales in 2025; "Build More Parts" initiative driving double-digit sales growth, expanding into refuse parts markets.
  • Outlook Raised:: Full-year adjusted EPS guidance raised to $4.09–$4.17; net sales outlook increased to $2.1B–$2.14B, excluding New Way acquisition impact.

Segment Performance

The Environmental Solutions Group and Safety and Security Systems Group both delivered strong performances, with adjusted EBITDA increasing by 20% and 29%, respectively. The company's backlog declined by 4% on a year-over-year basis, but is expected to increase in the fourth quarter, driven by strength in demand for public safety equipment and warning systems. The Safety and Security Systems Group is expected to see a 31% year-over-year increase in orders.

Guidance and Outlook

Federal Signal raised its full-year adjusted EPS outlook to $4.09 to $4.17 and increased its full-year net sales outlook to $2.1 billion to $2.14 billion. The company expects demand for its products and aftermarket offerings to remain high in the fourth quarter and beyond. The pending acquisition of New Way is expected to contribute to the company's growth, but will result in an 85% year-over-year backlog reduction.

Valuation

With a P/E Ratio of 30.38 and an EV/EBITDA of 19.48, the market is pricing in a certain level of growth. Analysts estimate next year's revenue growth at 12.4%. The company's ROIC of 14.83% and ROE of 18.97% indicate a strong ability to generate returns on capital and equity. The Net Debt / EBITDA ratio of 0.5 suggests a healthy balance sheet.

Growth Initiatives

Federal Signal is investing in several growth initiatives, including the build more parts initiative, which is expected to drive another double-digit percentage increase in net sales this year. The company is also expecting to expand this initiative across its other specialty vehicle categories and believes its entrance into the refuse space will present an additional untapped parts market opportunity.

3. NewsRoom

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CW Advisors LLC Invests $6.43 Million in Federal Signal Corporation $FSS

Dec -06

Source: defenseworld.net

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GM or FSS: Which Is the Better Value Stock Right Now?

Dec -03

Source: zacks.com

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Advantage Alpha Capital Partners LP Sells 32,302 Shares of Federal Signal Corporation $FSS

Nov -28

Source: defenseworld.net

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Buy These 5 Low-Leverage Stocks as Market Moves Up

Nov -26

Source: zacks.com

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Federal Signal Completes Acquisition of New Way Trucks; Raises Full-Year 2025 Outlook

Nov -26

Source: prnewswire.com

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Is Federal Signal (FSS) Stock Outpacing Its Auto-Tires-Trucks Peers This Year?

Nov -21

Source: zacks.com

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Federal Signal Corporation $FSS Shares Sold by Aviva PLC

Nov -14

Source: defenseworld.net

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CIB vs. FSS: Which Stock Is the Better Value Option?

Nov -10

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.50%)

6. Segments

Environmental Solutions

Expected Growth: 4.5%

Growing concerns over environmental hazards, increasing government regulations, and rising demand for eco-friendly solutions drive the growth of Environmental Solutions from Federal Signal Corporation, ensuring public safety and ecological balance.

Safety and Security Systems

Expected Growth: 4.5%

Growing demand for public safety and security solutions, increasing adoption of emergency response systems, and advancements in communication networks drive the growth of Federal Signal Corporation's Safety and Security Systems segment.

7. Detailed Products

Emergency Vehicle Lighting

Federal Signal Corporation provides a range of emergency vehicle lighting solutions, including lightbars, beacons, and strobe lights, designed for emergency responders, tow trucks, and other vehicles that require high-visibility lighting.

Sirens and Speakers

Federal Signal Corporation offers a variety of sirens and speakers designed for emergency vehicles, including electronic sirens, mechanical sirens, and speaker systems, to provide clear and loud audio warnings.

Public Safety Systems

Federal Signal Corporation provides public safety systems, including emergency management systems, mass notification systems, and emergency communication systems, designed to enhance public safety and emergency response.

Industrial Signaling

Federal Signal Corporation offers industrial signaling solutions, including alarm systems, warning systems, and notification systems, designed for industrial applications, such as manufacturing, oil and gas, and mining.

Environmental Solutions

Federal Signal Corporation provides environmental solutions, including water and wastewater treatment systems, designed to help municipalities and industries manage water resources and reduce environmental impact.

8. Federal Signal Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Federal Signal Corporation's products are specialized and customized, making substitutes less likely. However, the company's reliance on a few large customers increases the threat of substitutes.

Bargaining Power Of Customers

Federal Signal Corporation's customers are large and have significant bargaining power due to their size and purchasing power. This gives them the ability to negotiate prices and terms.

Bargaining Power Of Suppliers

Federal Signal Corporation has a diverse supplier base, which reduces the bargaining power of individual suppliers. The company's size and purchasing power also give it an advantage in negotiations.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the industry, including significant capital requirements and regulatory hurdles.

Intensity Of Rivalry

The industry is moderately competitive, with a few large players competing for market share. However, the company's specialized products and strong customer relationships help to mitigate the intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 23.34%
Debt Cost 9.06%
Equity Weight 76.66%
Equity Cost 9.06%
WACC 9.06%
Leverage 30.44%

11. Quality Control: Federal Signal Corporation passed 7 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Federal Signal

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

110.84$

Current Price

110.84$

Potential

-0.00%

Expected Cash-Flows