Columbus McKinnon (CMCO) Q2 2026: $352M Backlog Fuels Guidance Hike Amid Tariff Drag
Columbus McKinnon’s record $352 million backlog and robust U.S. short-cycle rebound drove an upward revision to full-year sales guidance, even as tariffs and project timing weighed on margins and orders. Management’s disciplined approach to tariff mitigation and integration planning for the pending Keto Crosby acquisition signals a strategic pivot toward scale and synergy realization. Investors should watch for operational execution in Q3’s seasonally slow period and the timeline for regulatory completion of the transformative acquisition.
Summary
- Backlog Conversion Accelerates: Pull-forward of project shipments and an 11% backlog increase signal strong execution and demand visibility.
- Tariff Headwinds Persist: Margin pressure and muted EPS flow-through highlight ongoing tariff costs and mix challenges.
- Keto Crosby Integration Readiness: Regulatory and operational planning on track, positioning CMCO for $2B+ post-close scale.
Performance Analysis
Columbus McKinnon delivered 8% year-over-year sales growth to $261 million, representing the second highest quarterly sales in its history, with broad-based platform gains and notable U.S. and EMEA volume increases. Short-cycle sales rose 7%, fueled by a rebound in U.S. channel activity and stabilization after prior trade-related disruptions. Project-related sales grew 8% as the company accelerated backlog conversion, particularly within the precision conveyance and rail businesses.
Despite higher top-line and a $15.4 million gross profit increase, adjusted gross margin contracted 100 basis points year-over-year, reflecting the $10 million annual tariff headwind and an unfavorable sales mix. Operating leverage benefited from volume and early tariff mitigation, but EPS flow-through was limited by acquisition costs, business realignment, and incentive comp normalization. Free cash flow improved to $15.1 million, aided by working capital discipline, even as $2.5 million in deal costs were absorbed. Orders of $254 million declined 3% due to tough project comps and sluggish EMEA/APAC conversion rates, partially offset by 11% U.S. order growth.
- Volume-Driven Margin Expansion: Sequential margin improvement was driven by higher absorption and initial tariff mitigation, though year-over-year pressure persists.
- Sales Mix and Tariffs Weigh: Lower margin crane solutions and ongoing tariff costs offset gains from higher-margin automation and linear motion ramp-up.
- Backlog Pull-Forward Impacts Cadence: Accelerated Q2 shipments will dampen Q3 volume, with management signaling typical seasonal softness ahead.
Overall, the quarter reflects a business in transition—balancing near-term tariff and mix headwinds with operational momentum, a robust opportunity funnel, and scale aspirations through M&A.
Executive Commentary
"Our team delivered results in the second quarter that were ahead of expectations as we capitalized on record backlog and saw stabilization in U.S. short cycle order activity. We also made meaningful progress on our operational improvement, tariff mitigation, and integration preparedness initiatives."
David Wilson, President and Chief Executive Officer
"We drove sales growth across all platforms, led by our lifting and linear motion platforms. We saw pricing accelerate in the quarter and expect previously announced price increases to ramp over the next few quarters as we continue to work through our backlog."
Greg Restowitz, Chief Financial Officer
Strategic Positioning
1. Tariff Mitigation and Cost Recovery
Tariffs remain a $10 million annual headwind, but management’s multi-pronged mitigation—price increases, supply chain adjustments, and code rebalancing—are beginning to translate into improved absorption and sequential margin gains. Full tariff cost neutrality is now targeted by fiscal 2026 year-end, with margin neutrality expected in fiscal 2027. The company is executing pricing actions through backlog and expects further benefit as these roll through in coming quarters.
2. Backlog Strength and Demand Visibility
Backlog reached $352 million, up 11% year-over-year, reflecting healthy pipelines in core and growth verticals such as aerospace, energy, and battery production. However, accelerated backlog conversion in Q2 will reduce Q3 shipment volume, highlighting the importance of sustained order intake and project conversion—especially in EMEA/APAC, where macro headwinds are slowing decision-making.
3. Keto Crosby Acquisition Integration
The pending Keto Crosby acquisition, expected to close by fiscal year-end, is a strategic inflection point. An executive-led integration management office and board subcommittee are in place, with detailed planning focused on synergy capture and business continuity. Fully committed financing is secured, and management is leveraging the regulatory delay to ensure day-one readiness and rapid post-close deleveraging. The combined entity will exceed $2 billion in sales, targeting top-tier industrial margins and cash flow strength.
4. Commercial and Operational Initiatives
CMCO continues to invest in automation, linear motion, and operational improvement, ramping production at the Mexico facility and advancing digital and customer experience initiatives. These actions are intended to support margin expansion and share gains, particularly as U.S. megatrends—reshoring, automation, labor scarcity—drive incremental demand across key verticals.
Key Considerations
This quarter’s results underscore CMCO’s ability to offset macro and tariff volatility with disciplined execution, but highlight the importance of backlog management and integration readiness as the company pivots toward a larger, more complex operating model post-acquisition.
Key Considerations:
- Tariff Impact Management: Success in achieving cost neutrality by fiscal 2026 is crucial for restoring margin profile and competitive positioning.
- Order Conversion Timing: EMEA and APAC project delays and slower conversion rates could pressure future backlog and revenue cadence.
- Integration Execution Risk: The scale and complexity of Keto Crosby integration require flawless planning and execution to avoid business disruption and realize targeted synergies.
- Seasonal Volatility: Q3 is expected to be soft due to fewer workdays and prior shipment pull-forward, amplifying the need for strong operational discipline.
- Cash Flow and Leverage Trajectory: Strong working capital management and free cash flow are supporting acquisition financing, but post-close leverage will remain a key watchpoint.
Risks
Persistent tariff headwinds, project conversion delays in EMEA/APAC, and the operational complexity of integrating Keto Crosby present material risks to margin recovery and growth. Seasonal softness and unpredictable macro conditions could further challenge near-term execution, while competitive pricing actions may limit the pace of recovery.
Forward Outlook
For Q3, Columbus McKinnon guided to:
- Seasonally lower sales and margins due to fewer workdays and backlog pull-forward
- Continued tariff cost pressure with mitigation benefits ramping through the year
For full-year 2026, management raised net sales growth guidance to low-to-mid single digits (from flat-to-slightly up) and reaffirmed adjusted EPS guidance of flat-to-slightly up year-over-year.
- Tariff impact expected to total approximately $10 million for the year
- Guidance excludes Keto Crosby acquisition impact
Management emphasized focus on operational execution, cost control, and commercial initiatives, with integration planning and financing for Keto Crosby progressing toward a targeted close by fiscal year-end.
- Margin neutrality from tariffs expected in fiscal 2027
- Strong cash flow generation and disciplined capital allocation remain priorities
Takeaways
Columbus McKinnon’s Q2 demonstrates disciplined execution and a robust demand pipeline, but also exposes the ongoing challenges of tariff headwinds and project conversion timing.
- Operational Resilience: Strong backlog and U.S. demand offset near-term margin pressure, but execution in Q3 and through integration will be critical.
- Strategic Inflection: Keto Crosby acquisition positions CMCO for scale and synergy, but integration execution is now the defining risk and opportunity.
- Watch for Margin and Order Trends: Investors should monitor tariff mitigation progress, project order conversion in EMEA/APAC, and the pace of synergy realization post-acquisition.
Conclusion
CMCO’s Q2 2026 results reflect a company at a strategic crossroads—balancing robust demand and backlog strength with persistent margin and integration risks. The path to margin recovery and $2B+ scale hinges on successful tariff mitigation, backlog replenishment, and post-close execution.
Industry Read-Through
CMCO’s quarter highlights the broader industrial sector’s struggle with tariff volatility, project timing, and the operational complexity of large-scale integrations. Competitors facing similar tariff and supply chain pressures are likely pursuing parallel mitigation strategies, including price increases and supply chain restructuring. Strong U.S. demand and backlog management are tailwinds for automation and industrial equipment peers, but EMEA/APAC project delays and macro uncertainty remain sector-wide risks. Post-acquisition integration and synergy capture will be a key differentiator among industrial consolidators in the coming cycle.