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1. Company Snapshot

1.a. Company Description

Twin Disc, Incorporated designs, manufactures, and sells marine and heavy duty off-highway power transmission equipment worldwide.It operates through two segments, Manufacturing and Distribution.The company's products include marine transmissions, azimuth drives, surface drives, propellers, and boat management systems, as well as power-shift transmissions, hydraulic torque converters, power take-offs, industrial clutches, and controls systems.


It also provides non-twin disc manufactured products.The company sells its products through a direct sales force and distributor network to customers primarily in the pleasure craft, commercial, and military marine markets, as well as in the energy and natural resources, government, and industrial markets.Twin Disc, Incorporated was founded in 1918 and is headquartered in Racine, Wisconsin.

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1.b. Last Insights on TWIN

Twin Disc, Incorporated faces negative drivers, including a reduction in institutional ownership. AMH Equity Ltd decreased its stake by 28.9% in Q3, selling 133,910 shares. The company's upcoming Q2 FY26 earnings release on Feb 4, 2026, may also impact investor sentiment. Additionally, the approved quarterly cash dividend of $0.04 per share may not be sufficient to attract investors. The company's long-term growth prospects, however, are supported by improving end-markets, including luxury marine, autonomous vehicles, and frac rebuilds. Margin improvement remains crucial.

1.c. Company Highlights

2. Twin Disc's Q1 FY2026 Earnings: Strong Momentum and Margin Expansion

Twin Disc, Inc.'s fiscal 2026 first quarter results demonstrated robust financial performance, with sales growing 9.7% year-over-year to $80 million, driven primarily by the marine and industrial product groups, and supported by the addition of Kobelt. On an organic basis, revenue increased approximately 1.1%. Gross margin expanded by 220 basis points to 28.7%, reflecting the benefits of incremental volume, successful margin improvement initiatives, and improved mix in the marine propulsion product groups. The company reported EBITDA of $4.7 million, representing a 172% increase versus the prior year. However, the actual EPS came out at -$0.04, relative to estimates at $0.02.

Publication Date: Nov -23

📋 Highlights
  • Revenue Growth:: Sales surged 9.7% YoY to $80 million, driven by marine/industrial groups and Kobelt's addition, with organic growth of 1.1%.
  • Gross Margin Expansion:: Gross margin rose 220 bps to 28.7%, fueled by volume growth, pricing, and improved marine propulsion mix.
  • EBITDA Surge:: EBITDA jumped 172% YoY to $4.7 million, reflecting margin gains and operational improvements.
  • Backlog Strength:: Backlog hit $163.3 million, up 13% YoY and 9% sequentially, with defense projects growing 45% YoY.
  • Margin and Cash Flow Targets:: Aims for 11% EBITDA margin in fiscal 2026 (15% long-term) and 60% free cash flow/EBITDA conversion post-Q1 drag.

Operational Highlights and Backlog

The company's backlog is $163.3 million, up 13% year-over-year and 9% sequentially, providing solid visibility for the balance of fiscal 2026. Defense momentum remains exceptionally strong, with orders accelerating during the quarter and defense-related projects representing a growing share of total backlog, up 45% year-over-year. According to the management, "Veth's improvement was due to new suppliers coming online, allowing them to go back to pre-COVID pricing, and the team's efforts on lean principles."

Guidance and Targets

The company targets an 11% EBITDA margin for the year, with a long-term goal of 15%. Free cash flow was impacted by a difficult Q1, but the company aims to achieve 60% free cash flow as a percent of EBITDA. The goal is to recover from the Q1 drag and get close to breakeven in Q2. Investments, including CapEx, and managing inventory will be crucial in achieving these targets.

Valuation and Outlook

With a P/S Ratio of 0.62 and EV/EBITDA of 12.63, the stock appears to be reasonably valued. Analysts estimate next year's revenue growth at 12.6%. While the current ROE is -1.23%, the company's efforts to drive profitability and operational discipline in its thruster business are expected to yield positive results. The Net Debt / EBITDA ratio is 1.71, indicating a manageable debt level. Overall, Twin Disc's strong momentum, margin expansion, and solid backlog position it well for the remainder of fiscal 2026.

3. NewsRoom

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Twin Disc Q2 Earnings Call Highlights

Feb -06

Source: defenseworld.net

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Twin Disc, Incorporated (TWIN) Q2 2026 Earnings Call Transcript

Feb -04

Source: seekingalpha.com

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Twin Disc Approves a Quarterly Cash Dividend

Jan -29

Source: globenewswire.com

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Twin Disc Announces Details of Fiscal 2026 Second Quarter Earnings Release, Webcast, and Conference Call

Jan -21

Source: globenewswire.com

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Twin Disc, Incorporated $TWIN is AMH Equity Ltd’s 3rd Largest Position

Jan -18

Source: defenseworld.net

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Twin Disc: Improving End-Markets, But Long-Term Margin Improvement Is Key

Jan -08

Source: seekingalpha.com

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Twin Disc (NASDAQ:TWIN) Shares Cross Above 200 Day Moving Average – What’s Next?

Dec -30

Source: defenseworld.net

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Critical Comparison: Twin Disc (NASDAQ:TWIN) and 3Dx Industries (OTCMKTS:DDDX)

Dec -28

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (1.95%)

6. Segments

Manufacturing

Expected Growth: 1.8%

Twin Disc's 1.8% growth in manufacturing is driven by increasing demand for its marine and oil & gas transmission systems, coupled with its strategic expansion into emerging markets. Additionally, the company's focus on innovation and product diversification, as well as its cost-saving initiatives, have contributed to its growth momentum.

Distribution

Expected Growth: 2.2%

Twin Disc, Incorporated's 2.2% growth is driven by increasing demand for marine propulsion systems, expansion in the oil and gas sector, and growing adoption of hybrid and electric propulsion solutions. Additionally, the company's strategic acquisitions and investments in research and development have contributed to its growth momentum.

7. Detailed Products

Marine Transmissions

Twin Disc's marine transmissions are designed for high-performance and durability, providing smooth and reliable power transmission for a wide range of marine vessels.

Azimuth Thrusters

Twin Disc's azimuth thrusters are electric or hydraulic propulsion systems that provide 360-degree rotation, offering improved maneuverability and station-keeping capabilities.

Propulsion Controls

Twin Disc's propulsion controls are designed to optimize vessel performance, providing advanced control systems for propulsion, steering, and thruster systems.

Gears and Accessories

Twin Disc's gears and accessories include a range of products such as gearboxes, shafts, and couplings, designed to provide reliable and efficient power transmission.

Hydraulic Systems

Twin Disc's hydraulic systems are designed for heavy-duty applications, providing high-pressure hydraulic power for propulsion, steering, and other systems.

8. Twin Disc, Incorporated's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Twin Disc, Incorporated is moderate due to the availability of alternative products and services in the marine and oil and gas industries.

Bargaining Power Of Customers

The bargaining power of customers is low due to the specialized nature of Twin Disc's products and the lack of alternative suppliers.

Bargaining Power Of Suppliers

The bargaining power of suppliers is moderate due to the presence of multiple suppliers for raw materials and components, but the company's dependence on a few key suppliers.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry, including the need for significant capital investment and specialized expertise.

Intensity Of Rivalry

The intensity of rivalry is high due to the competitive nature of the marine and oil and gas industries, with multiple players competing for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 16.87%
Debt Cost 7.86%
Equity Weight 83.13%
Equity Cost 7.86%
WACC 7.86%
Leverage 20.29%

11. Quality Control: Twin Disc, Incorporated passed 5 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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Value: 8.6

Growth: 6.8

Quality: 7.1

Yield: 0.0

Momentum: 3.0

Volatility: 7.3

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A-Score: 5.0/10

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Growth: 7.9

Quality: 5.6

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Value: 1.9

Growth: 3.9

Quality: 5.1

Yield: 2.0

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Volatility: 6.3

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A-Score: 4.3/10

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Quality: 2.6

Yield: 5.0

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Twin Disc

A-Score: 4.0/10

Value: 3.9

Growth: 4.8

Quality: 3.5

Yield: 1.0

Momentum: 8.0

Volatility: 3.0

1-Year Total Return ->

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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

17.42$

Current Price

17.42$

Potential

-0.00%

Expected Cash-Flows