Charged Alpha Stock Encyclopedia

InterDigital, Inc. (IDCC) Q2 2026 — Reported before the open July 30, 2026 (quarter ended June 30). Revenue $260.2M crushed the company's own $139-143M outlook — but FELL 13.4% from $300.6M. Net income $116.4M vs $180.6M; GAAP EPS $3.40 vs $5.35; non-GAAP EPS $4.62 vs $6.52. Adj. EBITDA $184.1M (71%) vs $236.7M (79%). Opex +27.1%. ARR hit a record $625.7M (+13.1%); catch-up was $103.7M, 40% of the print. FY26 guidance raised $85M to $775-845M. The stock jumped 16.2% and closed the week at $304.83.

The framing nobody applied: the outlook explicitly EXCLUDES new agreements, so beating it 5x is not growing. All the upside was one item — $110.0M of first-ever Streaming and Cloud revenue from a June Amazon agreement whose final terms are STILL to be set by binding arbitration.

THE CALL: AVOID (3/5, A RECORD RUN RATE, PRICED AS IF THE CATCH-UP RECURS) — base-case value ~$200.0 vs ~$304.83 today.

KEY METRICS:

- CALL: AVOID 3/5 — fair value ~$200 vs $304.83 (-34%). Normalised owner earnings ~$300M/yr (guided FY26 adj. EBITDA $499M less $61M stock comp, less ~$62M capex and capitalised patents, taxed ~18%), cross-checked against a 3-yr average FCF of ~$280M. DCF at 8% five yrs then 4%, 2% terminal, 10.5% = $4,891M EV + $723M net cash / 30.6M shares = $183; plus Lenovo optionality, ~$200.

- THE SHARE COUNT SCREENS GET WRONG: basic shares are 25.831M ($7.87B cap), but 6.0M warrants struck at $105.43 are deep in the money at $304.83, so the real diluted count is 30.6M. True market value $9.33B, EV $8.60B — 29x owner earnings. REVERSE DCF: that needs ~15% growth for ten years; management targets 10%+. Of nine scenario cells, exactly ONE clears the price.

- THE RECONCILIATION: $260.2M = $156.5M recurring + $103.7M catch-up (40%). Smartphone ARR is $491M = $122.75M/qtr against $122.7M reported, so smartphone was ALL recurring. Streaming ARR is $60M = $15.0M/qtr against $110.0M booked, so ~$95M (86%) of the Amazon line was catch-up — and the 10-Q confirms it: contracted revenue for 2027-2030 each rose EXACTLY $60.0M QoQ.

- THE RAISE IS STILL A DECLINE: the FY26 midpoint of $810M is below 2025's actual $834M and 2024's $869M; guided non-GAAP EPS of $11.83 is 22.7% under the $15.31 delivered in 2025. Q3 guidance of $154-158M sits almost exactly on this quarter's $156.5M of recurring revenue — the run rate when nothing settles.

- THE TABLE NOBODY READS: contracted royalties total $2.11B — 2027 $572.6M, 2028 $476.8M, 2029 $416.8M, 2030 $280.6M. It DECLINES 51% to 2030 against a $1B+ ARR target, so 72% is unsigned; and management's bridge takes Smartphone ARR (78% of the base) from $491M to ~$500M, 0.4%/yr. Bull counterweight: a year ago that table showed $425.3M for 2026 vs $810M now guided, a ~1.9x conversion. Street: Buy, $450 (+47.6%) — we ALIGN on the business and DIFFER on price.

What to watch: Bullish: the Lenovo arbitration is heard in Q4 2026, licence retroactive to Jan 1 2024 (the comparable Samsung award was $1.05B over 8 years); a second Streaming licence — Disney is under two UPC injunctions across 11 countries; or an Amazon arbitration above the $60M/yr booked. Bearish: Samsung's ICC challenge succeeding; a Chinese global rate-setting ruling out of TCL's Shenzhen suits; or the Oct 29 print showing a clean $156M quarter with opex near $120M.

Also on YouTube: @ChargedAlpha

DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.

Qorvo, Inc. (QRVO) Q1 FY2027 — Reported after the close July 28, 2026 (fiscal Q1 2027, quarter ended June 27; Qorvo's FY ends in early April). Revenue $784.8M (-4.2%) beat the ~$758M consensus. GAAP gross margin 51.1% vs 40.5% — up 1,060bps, a fifth straight quarter of expansion. GAAP operating income $96.8M vs $30.1M (+221.6%) on 4.2% LESS revenue. Non-GAAP diluted EPS $1.64 vs ~$1.10 expected and $0.92 a year ago (+78%); GAAP EPS $0.96 vs $0.27. Segments: HPA $206.3M (+50.2%) at a 33.9% margin vs 15.7%; CSG $101.9M (-7.5%) but swung to a $3.0M profit; ACG $476.6M (-16.6%) with operating income UP 10.8% and margin 22.8% vs 17.1%. FY2027 guidance raised to non-GAAP EPS above $7.00. Because of the pending Skyworks merger, Qorvo has discontinued conference calls and forward guidance entirely. The stock fell 2.46% in the reaction session to $89.50 and closed the week at $90.57.

The thing almost nobody puts next to this quarter: Qorvo is being acquired. Each share converts into 0.960 Skyworks shares plus $32.50 in cash. At $90.57, $32.50 (35.9%) is cash and $59.79 (66.0%) is Skyworks stock. Strip the cash and the market is charging you $60.49 a share for Skyworks — we published a Skyworks fair value of $47 on July 31 (AVOID, 4/5), and even crediting the full $500M of announced synergies we only reach about $52. On October 27, 2025, the day before the deal, QRVO closed at $92.13. Nine months later, after both shareholder votes passed, it is $90.57. The 14.3% premium evaporated because two thirds of it was Skyworks stock, and Skyworks fell 17.9%.

THE CALL: AVOID (3/5, YOU ARE NOT BUYING QORVO, YOU ARE PRE-BUYING SKYWORKS) — base-case value ~$76.0 vs ~$90.57 today.

KEY METRICS:

- CALL: AVOID 3/5 — fair value ~$76 vs $90.57 (-16%). Build the combined company: Skyworks standalone at our published $47 x 151.4M shares = $7.12B, plus Qorvo standalone at $57 x 89.4M = $5.09B, plus $3.19B for the PV of $500M of synergies (taxed 15%, 10x, 3 yrs out), less $2.90B of cash paid to QRVO holders and $0.25B of deal costs = $12.25B / 237.2M shares = ~$52. A QRVO share receives 0.960 x $52 + $32.50 = $82. Probability-weight 88/12 against a $57 break value and discount five months = ~$76.

- REVERSE DCF: at $90.57 you pay $32.50 of cash plus 0.960 Skyworks shares. Strip the cash and the market values your Skyworks leg at ($90.57-$32.50)/0.960 = $60.49 — 16% above our best case for Skyworks and 29% above our standalone. What the scenario matrix shows: moving from a 70% to a 98% chance of closing changes fair value by ~$6; moving from our Skyworks value to its market price changes it by $17. This is not a merger-arb call. It is a Skyworks call.

- THE PRINT: revenue $784,795K (-4.2%) beat ~$758M. Cost of goods sold fell from $487.0M to $383.8M, DOWN 21.2% on a 4% revenue decline — that single line is the quarter. GAAP gross margin 51.1% vs 40.5%; non-GAAP 52.8% vs 44.0%. GAAP operating income $96.8M (12.3%) vs $30.1M (3.7%). Non-GAAP operating income $177.6M (22.6%) vs $108.2M (13.2%). GAAP EPS $0.96 vs $0.27; non-GAAP $1.64 vs $0.92. GAAP tax rate 14.6%.

- THE BUYBACK DID NOT DO IT — the finding that overturned our own thesis: Qorvo repurchased ZERO shares this quarter (vs $49.9M a year ago) because the merger agreement blocks it. Diluted shares fell 4.7% to 89.36M on LAST year's buying. Non-GAAP net income rose 69.6% while non-GAAP EPS rose 78.3%, so the share count contributed about $0.077 of the $0.72 increase — roughly 11%. Eighty-nine percent was operating improvement.

- THE MIX SHIFT — the under-covered story: ACG revenue fell $94.7M (-16.6%) but its operating income ROSE 10.8% to $108.6M and its margin went 17.1% to 22.8%, because Qorvo deliberately exited mass-market Android. HPA rose 50.2% to $206.3M with margin 33.9% vs 15.7% and operating income +224.2%; $57.9M of the $69.0M increase came from defense/aerospace and infrastructure (DOCSIS 4.0, base stations). CSG swung from a $7.5M loss to a $3.0M profit. HPA is now 26.3% of revenue vs 16.8%.

- CHINA HALVED: revenue by customer HQ — China $77.0M vs $155.9M, DOWN 50.6%, now 9.8% of revenue vs 19.0%. United States $509.0M (+19.7%), now 64.9% vs 51.9%. Taiwan $92.5M (-4.5%), Other Asia $81.2M (-33.6%), Europe $25.0M (+35.7%). The irony: the deal's fate sits with China's SAMR, now in its final review phase, over a market that is under a tenth of Qorvo.

- THE CASH WENT THE OTHER WAY: operating cash flow $139.5M vs $182.9M (-23.8%); capex $24.1M vs $37.5M (-35.7%); free cash flow $115.3M vs $145.4M, DOWN 20.7% — while operating income rose 221.6%. The gap is working capital: receivables gave back $2.9M vs $58.2M, and inventories consumed $39.0M vs releasing $4.7M. Inventories $592.5M vs $553.7M at March (+7.0%) into a 14-week September quarter.

- GAAP TO NON-GAAP: $96.8M of GAAP operating income plus $34.4M stock comp, $8.8M intangible amortisation, $11.5M restructuring, $14.9M merger costs and $11.3M settlements = $177.6M. Below the line, LESS $8.9M of investment gains and LESS $11.2M of tax to reach $146.6M of non-GAAP net income — the non-GAAP number is taxed harder than GAAP, which is unusually honest. Amortisation is running off ($8.8M vs $21.5M).

- BALANCE SHEET AND RESTRUCTURING: cash $1,328.9M against $1,549.1M of notes = net debt $220.2M. Working capital $1,749.0M. Goodwill $2.35B of $5.94B of assets; tangible book ~$1.01B ($11.33/share). The 2026 programme (North Carolina fab closed and sold, SAW production moving to Texas, CSG consolidated) has cost $12.4M contract termination + $48.4M severance + $1.8M impairment less a $7.9M gain on the plant sale, and the 10-Q says no further material charges. R&D -3.8%, M&S -14.2%, G&A -18.9%.

- THE DEAL: announced October 27, 2025 — 0.960 SWKS shares + $32.50 cash, ~$22B combined, 37%/63% pro forma, $500M+ of annual cost synergies in 24-36 months, Phil Brace CEO. Both shareholder bases approved February 11, 2026. China SAMR is in its final phase; the FTC issued a Second Request; termination fee $298.7M each way; Skyworks has a $3.05B Goldman bridge and is exchanging the 2029/2031 notes. Deal value was $105.31 at announcement (a 14.3% premium to $92.13) and $92.29 on Friday.

- STREET: Hold — 12 buy, 28 hold, 2 sell across 42 analysts. Average target $94.00, median $96, range $66-$120 — only +3.8% above the close. TD Cowen raised to $95 from $80 (Hold) after the print. Note the consensus sits within 2% of the $92.29 deal value: the Street has stopped valuing Qorvo and is marking it to the merger consideration. We ALIGN on the business and DIFFER on price, and are more CAUTIOUS at ~$76.

- THE ASYMMETRY — why this is a 3 and not a 5: the $32.50 cash leg is real protection. If Skyworks falls to our $47, SWKS holders lose 24.5% and QRVO holders lose 14.3%. If Skyworks rallies to $80, SWKS holders make 28.5% and QRVO holders make 20.7%. You capture ~73% of the upside for ~58% of the downside. If you must own one of the two, own QRVO. And if Skyworks is simply worth its $62.28 price, QRVO at $90.57 is fair and we are wrong.

What to watch: Bullish: unconditional China SAMR clearance plus a Skyworks September quarter that stops the free-cash-flow bleed; or QRVO below $78. Bearish: a SAMR remedy demand or an FTC challenge to the Second Request — a break puts Qorvo on its own numbers at roughly $57, with an overshoot below that; or inventories building past $592.5M while revenue keeps falling.

Also on YouTube: @ChargedAlpha

DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.

Quanta Services, Inc. (PWR) Q2 2026 — Reported July 30, 2026 pre-open. Revenue $9.557B (+41.1%) vs ~$8.61B expected — an 11% beat. Adjusted diluted EPS $4.24 vs $3.31 expected and $2.48 a year ago (+71%); GAAP EPS $2.96 vs $1.52. Adjusted EBITDA $1,066.5M (+59.5%), an 11.2% margin. Both segments expanded margin: Electric $7.84B (+43.6%) at 11.5% vs 10.1%, Underground $1.72B (+30.7%) at 9.1% vs 6.9%. Record Q2 free cash flow $886M vs $170M. Firm orders (RPO) $33.55B, +75.1%; total backlog $53.44B. Full-year guidance raised across every line — adjusted EPS to $16.45-16.95 from $13.55-14.25. The stock fell 14.2% into the print, then rose 17.26% on it to $657.98, closing the week at $667.36.

The thing nobody put next to this quarter: Quanta's own Investor Day, four months earlier. On March 31, 2026 it targeted 7-10% ORGANIC revenue growth implying $44-49B of revenue by 2030, and adjusted EPS of $21.60-$26.75 by 2030. This quarter guided 2026 revenue to $39.3-39.7B and adjusted EPS to $16.45-16.95. The five-year plan was largely covered in one year. Those targets will be raised, but from here they imply a ~4% revenue CAGR and 6.6-12.5% EPS growth, while the stock trades at 40x this year and 25.9x EV/adjusted EBITDA.

THE CALL: TRIM (3/5, A GREAT COMPANY THAT OUTGREW ITS OWN PLAN) — base-case value ~$500.0 vs ~$667.36 today.

KEY METRICS:

- CALL: TRIM 3/5 — fair value ~$500 vs $667.36 (-25%). DCF at 9.5% on 152.4M diluted shares less $5.70B net debt + minorities: BEAR $294 (FCF +10% then +6%), BASE $509 (+17% then +11%, 3% terminal), BULL $700 (+22% then +14%). Weighted 25/50/25 = $503. Cross-check on management's OWN 2030 EPS target: $24.18 at 25x discounted back 4 years = $420; $26.75 at 28x = $521.

- REVERSE DCF: at $667.36 the EV is $107.4B — 2.72x guided revenue, 25.9x guided adjusted EBITDA, 40x guided adjusted EPS. At 9.5% that price asks Quanta to compound free cash flow at 17.7% a year for TEN straight years, against management's own 7-10% organic plan. To earn 9.5% you need 2030 adjusted EPS of roughly $34-$44 — 20-27% a year for four years.

- THE QUARTER: revenue $9,556,997K (+41.1%). Operating income $694.8M, a 7.3% margin vs 5.5%. Net income to common $451.4M (+96.9%). GAAP diluted EPS $2.96 vs $1.52. Adjusted diluted EPS $4.24 vs $2.48. Adjusted EBITDA $1,066.5M, an 11.2% margin vs 9.9%. Effective tax rate a normal 25.5%. Diluted shares 152.4M.

- BACKLOG QUALITY — the under-covered number: remaining performance obligations (FIRM fixed-price orders) went $19.16B to $33.55B, UP 75.1%. Estimated MSA orders went $16.68B to $19.89B, up only 19.2% — and DOWN 1.6% from December. ALL of the backlog growth is the firm half. 12-month backlog $32.31B (+61.2%); a year ago that measure was $20.05B and the next four quarters produced $32.78B, 1.64x.

- THE RAISE WAS MOSTLY ORGANIC — the strongest bull point: FY26 revenue guidance rose $4.55B at the midpoint and adjusted EPS 20%, while the four new acquisitions (Phalcon, Enerfab, Percheron, PSD; ~$1.24B upfront) are expected to add only $1.2-1.4B of revenue. Roughly three quarters of the raise is execution, not deals.

- EARNINGS QUALITY: adjusted EPS is 43.2% above GAAP. Bridge: $1.03 intangible amortization, $0.42 stock comp, less $0.45 tax. Amortization $157.0M (+38.7%) grows with revenue — the recurring cost of the acquisition model. But no tax trick: 25.5% rate, and GAAP EPS still rose 94.7%.

- CASH: H1 operating cash flow $1,487M vs $539M; free cash flow $1,070M vs $288M — and real: working capital was a net SOURCE of $105M, DSO 81 days vs 80. Capex only 2.6% of revenue. But cash paid for acquisitions was $930M — 87% of the free cash flow — and sits in investing, so it is never deducted. ~$5B of purchase price committed in 12 months.

- BALANCE SHEET: goodwill $7.87B + intangibles $3.22B = 39% of $28.29B of assets vs $9.64B of equity, so tangible book is NEGATIVE $1.45B. Net debt $5.60B = 1.35x guided adjusted EBITDA. Moody's upgraded to Baa2 from Baa3 in June. New $1B buyback authorized in May; the prior program bought only 540,788 shares for ~$135M.

- SEGMENTS (two, not three — Renewable Energy now sits inside Electric, per 10-Q Note 3): Electric $7,837.8M (+43.6%), 82.0% of revenue, 11.5% operating margin vs 10.1%. Underground and Infrastructure $1,719.2M (+30.7%), 9.1% vs 6.9%.

- STREET: Buy — 26 buy, 10 hold, 0 sell across 36 analysts. Average target $724.87, median $728, range $575-$940 — only +8.6% above the close. Truist raised to $940 (Buy); Bernstein raised to $748 but kept Market Perform. We DIFFER and are more CAUTIOUS at ~$500. We ALIGN completely on business quality.

What to watch: Bullish: 2027 guidance above $46B of revenue and $21 of adjusted EPS in February; or Q3 adjusted EPS above $4.90 on October 29 vs the $4.62 consensus, carried by the organic line. Bearish: firm orders (RPO) flattening — the MSA estimate line already fell 1.6% since December; DSO pushing past 90 days; or a fixed-price project charge.

Also on YouTube: @ChargedAlpha

DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.

Corcept Therapeutics Incorporated (CORT) Q2 2026 — Reported July 29, 2026 after the close for Q2 2026 (three months ended June 30). Revenue $256.1M (+31.7%) vs ~$220M expected, a 16% beat. Diluted EPS $0.36 vs $0.29 a year ago. Operating income $41.3M (+55%). Korlym and its authorized generic $208.6M (+7.3%); Lifyorli (relacorilant) $47.6M in its first quarter on the market, with 1,300+ patients started and 1,000+ prescribers. Full-year 2026 revenue guidance RAISED to $1.1-$1.2B from $950M-$1,050M. Cash and investments $544.6M, zero debt. The stock rose 27.29% on July 30 to $118.32, touching a 52-week high of $122.21 intraday, and closed the week at $114.49.

The arithmetic nobody did: that raised full-year guide leaves the second half needing $679-$779M against a first half of $421.1M — an average quarter of $339-$389M versus the $256.1M just printed, a 33-52% sequential step-up. Hold Korlym flat and it implies Lifyorli does $131-$181M a quarter against the $47.6M it just did, roughly 3x in two quarters. Five of the 36 cents came from a 6.4% tax rate. R&D FELL 10.9%. First-half operating cash flow was $16.8M on $421M of revenue, and the first half ran an $8.3M operating loss. On July 10 the Federal Circuit denied rehearing, ending Corcept's patent case against Teva — 81% of revenue is now unprotected. And on December 17 the FDA rules again on the exact application it rejected on December 31, 2025, the day this stock fell 50.4% in one session.

THE CALL: TRIM (3/5, A REAL LAUNCH, PRICED FOR A PERFECT ONE) — base-case value ~$80.0 vs ~$114.49 today.

KEY METRICS:

- CALL: TRIM 3/5 — fair value ~$80 vs $114.49 (-30%). Probability-weighted DCF at a 10% discount rate on 118.4M diluted shares plus $544.6M of net cash: BEAR $22 (a second CRL in December and a Korlym that finally erodes, 0% terminal), BASE $71 ($1.75B of revenue in 2027 building to $2.5B by 2031 with operating margin expanding from 16% to 37%, 2.5% terminal), BULL $157 (Cushing's approved, label expands, $4.35B by 2031). Weighted 30/45/25 = $78. Multiple cross-check: 20x base-case 2028 EPS of $4.75, discounted back = $79.

- REVERSE DCF: at $114.49 the enterprise value is $13.01B — 11.3x the midpoint of this year's guided revenue and about 58x the diluted EPS that guide implies (~$1.98). At a 10% discount rate that price asks Corcept to compound free cash flow at 23.8% a year for ten straight years, off a base that produced $16.8M of operating cash flow in the first half.

- THE QUARTER: Revenue $256.147M (+31.7% vs $194.430M). Korlym + authorized generic $208.583M (+7.3%). Lifyorli $47.564M (first quarter of availability). Cost of sales $4.061M — a 98.4% gross margin. R&D $53.890M (DOWN 10.9%). SG&A $156.896M (+51.1%, 61.3% of revenue). Operating income $41.300M (16.1% margin vs 13.7%). Net income $42.987M. Diluted EPS $0.36 vs $0.29.

- EARNINGS QUALITY: pre-tax income was $45.931M and the tax charge just $2.944M — a 6.4% effective rate. At a normal 21% rate net income would have been $36.3M and diluted EPS $0.31, not $0.36. A $178.7M deferred tax asset sits on the balance sheet, one fifth of total assets. First half 2026: revenue $421.050M, an OPERATING LOSS of $8.301M, diluted EPS of $0.09.

- THE GUIDANCE ARITHMETIC: FY26 guided to $1.1-$1.2B against a first half of $421.1M. That leaves H2 at $679-$779M, an average quarter of $339-$389M against the $256.1M just printed (+33% to +52%; +42% at the midpoint). Holding Korlym flat at ~$208.6M/quarter, the guide implies Lifyorli at $131-$181M a quarter versus $47.6M — 2.8x to 3.8x in two quarters.

- CASH AND DILUTION: first-half operating cash flow $16.771M on $421.1M of revenue, down from $49.067M a year earlier — 4% cash conversion at a 98% gross margin. Stock-based compensation $52.459M in the half, three times the operating cash generated. Basic shares 105.377M vs diluted 118.385M — a 12.3% option overhang. Zero buybacks in H1 2026 against $130.5M in H1 2025. Cash and investments $544.6M, no debt.

- THE LEGAL FILE: on July 10, 2026 the Federal Circuit denied Corcept's petition for rehearing en banc, ending the Teva patent case (the court affirmed non-infringement on February 19); Teva has sold a generic Korlym since January 2024, and 81% of revenue is now unprotected. Teva is separately suing Corcept for antitrust in N.D. Cal. over its specialty-pharmacy arrangement, with part of the case surviving dismissal. A securities class action filed February 20, 2026 alleges misleading statements about the relacorilant NDA. No provision recorded for any of it.

- THE BULL CASE: ROSELLA, the Phase 3 in 381 patients, met both dual primary endpoints and cut the risk of death 35%, published in The Lancet; the FDA approved Lifyorli three months early and NCCN made it a preferred regimen within a month. Eight oncology trials are running across platinum-sensitive ovarian, endometrial, cervical, pancreatic and prostate cancer. MONARCH (MASH) and BELLA Part A both read out by year end, as does the European decision. DAZALS showed an 84% reduction in risk of death in year one in ALS. Our own bull case is $157 — above today's price.

- STREET: Buy — 14 buy, 9 hold, 3 sell across 26 analysts. Median target $135, about +18% versus the $114.49 close. Post-print revisions were enormous: H.C. Wainwright $95 to $165, Piper Sandler $88 to $165, Canaccord to $161. We DIFFER and are far more CAUTIOUS at ~$80. We ALIGN that the science is good.

- THE DATE: December 17, 2026 — the FDA's decision on relacorilant in Cushing's syndrome, resubmitted in June after the December 31, 2025 Complete Response Letter. The stock fell 50.4% in a single session on that first answer, from $70.19 to $34.80 on 20.3 million shares. It bottomed at a $32.15 close on March 13 and has since risen 256%.

What to watch: Bullish: FDA approval of relacorilant in Cushing's syndrome on the December 17 PDUFA date, which moves our base case toward $110; or Lifyorli above $130M in Q3 against roughly $156M implied by the guide. Bearish: Lifyorli below $110M in Q3, which would force the full-year guide down within one quarter of being raised; Korlym and authorized generic revenue turning negative as the Teva generic takes share now that the patent case is over; or a second Complete Response Letter in December.

Also on YouTube: @ChargedAlpha

DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.

Garmin Ltd. (GRMN) Q2 2026 — Reported July 29, 2026 pre-market for Q2 2026 (the 13 weeks ended June 27). Revenue $2,022M (+11.4%) vs ~$1.93B expected. Pro forma EPS $2.81 vs $2.30 expected, a $0.51 beat; GAAP EPS $2.80. Gross margin a record 62.4% (+360bps), operating margin 30.4% (+440bps), operating income $615.5M (+30%). Gross margin expanded in ALL FIVE segments. Full-year guidance RAISED to ~$8.05B revenue and $10.00 pro forma EPS. The stock rose 12.61% to $294.83, an all-time closing high, and finished the week at $293.78.

The line nobody printed: Garmin's own RAISED full-year guidance implies second-half EPS growth of 6.9% against the 29% it just reported, and a second-half gross margin of 58.5% against the 62.4% just printed. About $0.18 of the $0.51 beat was a one-off tariff refund ($21M) plus a $21M year-on-year FX swing. Outdoor — the highest-margin segment at 68.8% gross margin and 24% of revenue — is shrinking. The stock re-rated 21% in five sessions to an all-time high and 29.4x guided earnings.

THE CALL: TRIM (3/5, A GREAT BUSINESS THAT JUST GOT 21% MORE EXPENSIVE) — base-case value ~$250.0 vs ~$293.78 today.

KEY METRICS:

- CALL: TRIM 3/5 — fair value ~$250 vs $293.78 (-15%). DCF: 2026E free cash flow $1.70B compounding at 9% for five years then 5%, discounted at 8.5% with a 2.5% terminal rate = enterprise value $41.73B, PLUS $4.37B of net cash, over 193.5M diluted shares = $238/sh. Bear $185, bull $322, probability-weighted 25/50/25 = $246. Multiple cross-check: 20x next year's earnings ex-cash plus the cash = $241. We round UP to $250 to respect a debt-free balance sheet. Note the BULL case at an 8.0% discount rate is $355 — above today's price, so the bull case is real, it is simply already paid for.

- REVERSE DCF: at $293.78 the enterprise value is $52.47B — 30.9x 2026E free cash flow, 29.4x guided FY26 EPS of $10.00 (27.1x stripping out the cash) and 24.1x operating income. At an 8.5% discount rate that price asks Garmin to compound free cash flow at 12.8% a year for five straight years off a $1.70B base, while its own guidance implies second-half EPS growth of 6.9%.

- STREET: Hold — 1 strong buy, 5 buy, 20 hold, 2 sell across 28 analysts. Average target $304, about +3.5%. But the analysts who actually updated after the print landed AT the stock: Barclays raised to $297, JPMorgan to $295, Morgan Stanley to $289 — below the current price. We ALIGN with the Street's neutral stance and go further: we DIFFER on the number and are more CAUTIOUS at $250. The gap is not the business — the Street capitalises earnings at ~30x; we discount free cash flow, which is $1.70B against $1.94B of net income because capex has doubled.

- THE PRINT: revenue $2,022.1M (+11.4%) vs $1,814.6M, beating the ~$1.93B consensus. Gross profit $1,262.0M, gross margin a record 62.4% vs 58.8% (+360bps). Operating expenses $646.5M, up only 8.7% against 11.4% revenue growth. Operating income $615.5M (+30.3%), operating margin 30.4% vs 26.0% (+440bps). Net income $541.9M (+35.2%). GAAP diluted EPS $2.80 (+35%), pro forma $2.81 (+29%) — a one-cent gap. Effective tax rate 16.8% vs 16.5%. Diluted shares 193.471M vs 193.416M — FLAT.

- WHAT THE $0.51 BEAT WAS MADE OF: revenue came in ~$96M above consensus, worth roughly $0.26/share — real volume, and the largest single piece. Then ~$21M of refunds of previously PAID tariffs, which Garmin names in the release as a driver of the gross margin: 104bps of the 360bps expansion, about $0.09/share, and non-recurring. Then FX: a $23.5M currency loss last year against just $2.5M this year, a $21.0M swing worth another ~$0.09/share. So roughly $0.18 of the $0.51 — 35% — is a tariff refund and the dollar.

- THE GUIDANCE TABLE: FY2026 guidance RAISED to ~$8.05B revenue, $10.00 pro forma EPS, 59.7% gross margin, 27.0% operating margin, 16.5% tax. H1 actual was $3,775.6M revenue, 61.0% gross margin, 27.7% operating margin, $4.89 EPS. Subtract: implied H2 revenue $4,274M (+9.7%), implied H2 EPS $5.11 (+6.9% vs $4.78) against the +29% just printed, implied H2 gross margin 58.5% (390bps BELOW the 62.4% just printed) and implied H2 operating margin 26.4% against 30.4% printed.

- SEGMENTS: Fitness $756.8M, +25%, gross margin 63.5% (+328bps), operating margin 36.6%, operating profit $277.0M — Fitness alone was 73% of ALL revenue growth and 55% of ALL operating-profit growth. Marine $341.4M, +14%, operating margin 29.2% vs 21.0% (+822bps), operating profit $99.8M. Aviation $268.7M, +8%, 75.2% gross margin, operating profit $72.2M. Auto OEM $172.4M, +1%, operating profit $2.9M vs a $9.5M loss. Outdoor $482.7M, DOWN 2% (down 3% in the half) — the highest gross margin in the company at 68.8% and 24% of revenue, blamed on the consumer auto and adventure watch (fenix) categories.

- THE BULL CASE WE TAKE SERIOUSLY: gross margin rose in ALL FIVE segments — Fitness +328bps, Outdoor +268bps while its revenue FELL, Aviation +77bps, Marine +630bps, Auto OEM +555bps. Margin rising in a shrinking segment is pricing power, not mix. And Garmin sandbags: the last four prints beat by $0.27, $0.39, $0.24 and $0.51. If H2 is conservative by the same margin, FY26 EPS lands nearer $10.60 than $10.00 and the multiple is 27.7x rather than 29.4x — which is exactly why conviction is 3/5 and not 4/5.

- BALANCE SHEET AND CASH: ZERO total debt against $4,370M of cash and marketable securities ($2,334M cash + $332M current + $1,704M noncurrent securities) — about $22.59 a share, 7.7% of market value. Total equity $9,029M on $11,424M of assets; goodwill only $748M. ROIC 18.8%, ROE 21%. H1 operating cash flow $939.5M (+58%), but H1 capex $194.4M vs $85.7M — up 127%, now running at 2.1x depreciation, so 2026E free cash flow of ~$1.70B sits BELOW the ~$1.94B of net income the guide implies. Q2 operating cash flow $404M, free cash flow $276M.

- CAPITAL RETURNS: dividends of $202M paid in the quarter; the annual rate is $4.20/share approved by shareholders under Swiss law and paid in four $1.05 instalments (next payment September 25, 2026), a 1.43% yield. Buybacks are almost nothing by comparison — $43M repurchased in Q2, leaving $448M unused of a $500M authorisation that runs to December 2028. Diluted shares 193.471M vs 193.416M a year ago: flat. Zero of this quarter's EPS growth came from the share count. Founded 1989 by Gary Burrell and Min Kao (still chairman); CEO Cliff Pemble since 2013.

What to watch: Bullish: Outdoor returning to revenue growth (24% of revenue at a 68.8% gross margin), or gross margin holding above 60% in Q3 against a guide implying 58.5%. Bearish: gross margin below 59% for two consecutive quarters, Fitness growth decelerating below 10% as the Forerunner cycle laps while Outdoor is still negative, or capex continuing to double against 11% revenue growth.

Also on YouTube: @ChargedAlpha

DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.

Eaton Corporation plc (ETN) Q2 2026 — Reported July 31, 2026 pre-market for Q2 2026 (quarter ended June 30). Revenue $8,531M (+21%, organic +14%) vs ~$8.16B expected. Adjusted EPS $3.15 vs $3.07 expected, a Q2 record. GAAP diluted EPS $2.11 vs $2.51 — DOWN 16%. Segment margin 23.1%, above the high end of guidance but down 80bps YoY. Electrical Americas orders +41% (12-month rolling, organic); Electrical backlog +43%; book-to-bill 1.2. Full-year organic growth guidance RAISED to 11-13%. The stock rose 7.32% to $415.20.

The line nobody printed: Eaton's own 2026 guidance puts adjusted EPS up 12% and GAAP EPS up 0.1%. Flat. Segment operating profit rose $292M year on year and income before taxes FELL $42M, because intangible amortisation nearly doubled to $255M, net interest nearly tripled to $201M, and the tax rate went from 17.1% to 28.1%. Eaton bought $12.6B of businesses in six months; net debt tripled to $19.9B and tangible book equity is negative $12.6B.

THE CALL: TRIM (3/5, A SUPERB BUSINESS AT A PRICE THAT NEEDS PERFECTION) — base-case value ~$340.0 vs ~$415.2 today.

KEY METRICS:

- CALL: TRIM 3/5 — fair value ~$340 vs $415.20 (-18%). DCF: 2026E free cash flow $4.4B compounding at 12% for five years then 6.5%, discounted at 8.5% with a 2.5% terminal rate = enterprise value $128.89B, LESS $19.92B of net debt, over 389.5M diluted shares = $280/sh. Bear $165, bull $412, probability-weighted 20/55/25 = $290. Multiple cross-check: 24x the Street's 2027 adjusted EPS of $15.80 = $379. We sit between them at $340. Note the BULL case at an 8.0% discount rate is $463 — above today's price, so the bull case is real, it is simply already paid for.

- REVERSE DCF: at $415.20 the enterprise value is $181.6B — 41x 2026E free cash flow, 30.8x 2026 adjusted EPS and 39.7x GAAP EPS. At an 8.5% discount rate that price asks Eaton to compound free cash flow at 17.7% a year for five straight years off a $4.4B base.

- STREET: Buy — 25 buy, 14 hold, 0 sell across 39 analysts. Average target $469, range $428-$500, implying about +13%. Even the LOWEST target on the Street is above the current price. We DIFFER and are materially more CAUTIOUS. The disagreement is not about the business: the Street capitalises adjusted EPS of $13.50 which excludes ~$2/share of amortisation; we discount free cash flow, which cannot exclude the $19.9B of debt raised to buy those intangibles.

- THE PRINT: revenue $8,531M (+21%; 14% organic, 7% acquisitions) vs $7,028M, beating the ~$8.16B consensus. Segment operating profit $1,974M (+17%). Adjusted EPS $3.15 vs $2.95, a Q2 record, +6.8% on 21% revenue growth. GAAP diluted EPS $2.11 vs $2.51, DOWN 16%; net income $821M vs $982M. Operating cash flow $1,127M (+23%), free cash flow $874M (+22%).

- THE $334M THAT DISAPPEARED: segment operating profit ROSE $292M year on year while income before taxes FELL $42M ($1,186M to $1,144M). Intangible amortisation went $129M to $255M (+$126M). Net interest expense went $71M to $201M (+$130M). Other corporate expense went $277M to $353M (+$76M). That is $332M of new below-the-line cost against $292M of new segment profit. Then the effective tax rate went 17.1% to 28.1% on a smaller pre-tax base.

- EARNINGS QUALITY: Q2 adjustments were $1.04/share ($0.50 amortisation, $0.49 acquisitions/divestitures, $0.05 restructuring) vs $0.44 a year ago. Eaton's own FY2026 guide: GAAP EPS $10.36-$10.56, adjusted EPS $13.40-$13.60 — a $3.04 gap, 23% of the adjusted number. In 2025 the gap was $1.62 (13%). Adjusted EPS is guided UP 12%; GAAP EPS is guided UP 0.1%.

- SEGMENTS: Electrical Americas $3,951M, +18% organic with no acquisition help, operating profit $1,088M, margin 27.5% (+190bps sequentially, but DOWN 196bps YoY from 29.5%). Electrical Global $2,517M, +44% = 18% organic + 25% Boyd Thermal + 1% FX, operating profit $499M, margin 19.8%. Aerospace $1,222M, +13% (7% organic + 6% Ultra PCS), operating profit $278M, margin 22.8%. Mobility $841M, organic -2%, operating profit $109M, margin 13.0%.

- ORDERS AND BACKLOG — THE BULL CASE: 12-month rolling average orders up 41% organically in Electrical Americas, 33% in Electrical Global, 17% in Aerospace. Total Electrical sector backlog +43% YoY; Electrical Americas backlog +33%, Electrical Global backlog +103%, Aerospace backlog +28%. Rolling 12-month book-to-bill is 1.2 in BOTH Electrical and Aerospace. Guidance RAISED: FY organic growth 11-13%, Q3 organic 13.5-15.5%, Q3 segment margin 24.6-25.0% vs the 23.1% just printed.

- BALANCE SHEET: Eaton spent ~$12.6B on acquisitions in six months — Boyd Thermal (data centre liquid cooling) $9.55B in March, Ultra PCS (aerospace electronics) $1.53B in January, plus Fibrebond $1.43B in April 2025, Resilient Power and a $75M stake in SPAN. Total debt went $9.9B (Dec) to $20.6B (June); cash and short-term investments $695M, so net debt roughly TRIPLED to $19.9B. Goodwill $15.8B to $20.2B; other intangibles $5.1B to $12.6B. Against $20.3B of total equity, tangible book equity is NEGATIVE $12.6B.

- THE DANA SEPARATION: on June 10 Eaton signed definitive agreements to separate Mobility and combine it with Dana Incorporated in a Reverse Morris Trust. Eaton distributes Mobility via an exchange offer (split-off), SpinCo then merges with Dana, and Eaton shareholders end up owning at least 50.1% of the combined company. Eaton receives ~$1.1B of cash beforehand, earmarked for debt repayment. Intended to be tax-free; expected to close in Q1 2027, subject to Dana stockholder and regulatory approval. If it fails, Eaton will spin Mobility off instead. Note the split-off RETIRES Eaton shares, cushioning the earnings that leave.

What to watch: Bullish: Q3 segment margin landing in the guided 24.6-25.0% range (from 23.1% printed), plus Electrical Americas orders holding above 20% growth for two more quarters. Bearish: Electrical book-to-bill below 1.0 for two consecutive quarters, a cut to the 24.1-24.5% full-year margin guide, or another debt-funded acquisition before the balance sheet is repaired.

Also on YouTube: @ChargedAlpha

DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.

Yum China Holdings, Inc. (YUMC) Q2 2026 — Reported July 30 pre-market for Q2 2026 (quarter ended June 30). Total revenue $3,138M (+13% reported, +6% ex-F/X) vs ~$3.1B expected. Operating profit $348M (+14%), a Q2 record; core operating profit $328M (+7%). OP margin 11.1%, the 9th straight quarter of expansion. Diluted EPS $0.70 (+21%) vs ~$0.67 expected. Restaurant margin 16.1%, exactly FLAT. Same-store sales +1% on transactions +5% and ticket about -4%. 560 net new stores, a Q2 record; 19,297 total. The stock gapped up 3.6%, faded, closed +1.35% at $46.47, then added 3.7% on July 31 to $48.18 (+5.1% over two days).

The line nobody printed: that 21% EPS growth splits into roughly three equal thirds — about 7 points from the restaurants, about 7 points from a weaker US dollar translating renminbi, and about 7 points from the buyback. Only a third of it is the operating business. Meanwhile restaurant margin was flat at 16.1% because delivery went from 45% to 54% of company sales in a year and the rider cost ate the commodity relief. And the balance sheet funding a capital return that has run at 1.8x free cash flow for two years is about to write a $1.2B cheque for the Pizza Hut brand.

THE CALL: HOLD (3/5, A GOOD QUARTER, GENEROUSLY READ, AND FAIRLY PRICED) — base-case value ~$47.0 vs ~$48.18 today.

KEY METRICS:

- CALL: HOLD 3/5 — fair value ~$47 vs $48.18 (-2%). DCF on FY27E free cash flow of ~$1.13B (FY26E ~$1.0B plus the Pizza Hut royalty saving), 6.5% then 4% growth, 10.5% discount, 2.25% terminal = $46/sh (EV $16.53B, PLUS $0.34B PRO-FORMA net cash after the $1.2B payment, LESS ~$0.92B for the noncontrolling interests, / 345M shares). Bear $34, bull $55, prob-weighted 25/50/25 = $45; rounded to $47 on a ~16x FY26E EPS cross-check.

- REVERSE DCF: at $48.18 the EV is ~$17.2B — about 16x FY26E earnings and 8.0x EBITDA. At 10.5% that price asks Yum China to compound free cash flow ~7.2% a year for ten years, faster than the 6% system sales growth it just printed ex-currency. The Street's $61.32 asks for 9-10% a year.

- STREET: Buy — 14 buy / 5 hold / 0 sell (19 analysts), average target $61.32 (range $59-$63.64), +27% vs $48.18. Since the print JP Morgan went Neutral to Overweight ($35.50 to $60) and Macquarie went Underperform to Outperform. We DIFFER and are materially more CAUTIOUS. Our own BULL case at a 10% discount rate is $60 — the Street's target is our bull case at our lowest discount rate.

- THE 21% DECOMPOSED: revenue +13% but F/X added $183M — ex-F/X +6%. Operating profit rose $44M to $348M, of which $20M was F/X; core OP $328M, +7%. Interest income FELL from $25M to $12M. Net income to shareholders +14% to $244M. Diluted shares 374M -> 349M (-6.7%). The company's own checkpoints: EPS +14% ex-F/X, and only +10% ex-F/X and ex-mark-to-market.

- TRAFFIC VS TICKET: same-store sales +1% = transactions +5% (14th consecutive quarter of growth) and ticket about -4%. KFC: transactions +4%, ticket -3% (smaller KCOFFEE/KPRO orders). Pizza Hut: transactions +13% against ticket -11%. Restaurant margin FLAT at 16.1% group; KFC +20bps to 17.1%; Pizza Hut DOWN 40bps to 12.9%.

- DELIVERY: delivery sales +26% and now ~54% of company sales, up from 45% a year ago (KFC 54%, Pizza Hut 52%). The release attributes the flat restaurant margin 'primarily to increased rider cost from a higher delivery mix, offset by streamlined operations.' The automation and commodity gains were handed to riders.

- SEGMENTS: KFC revenue $2,338M, OP $332M (core $313M, +7%), 13,789 stores, +335 net new. Pizza Hut revenue $613M (+11% reported, only +4% ex-F/X), OP $51M (core $48M, +5%), 4,549 stores, +174 net new. All Other Segments (Lavazza, Little Sheep, Huang Ji Huang, Taco Bell) $274M of revenue but only $12M of restaurant sales and a $1M operating LOSS across 959 stores.

- CAPITAL RETURN AND THE $1.2B BILL: Q2 returned $402M ($301M buybacks + $101M dividends); FY26 target $1.5B, which the release calls ~10% of market cap. But FY25 free cash flow was $840M against $1,497M returned, and FY24 $714M against $1,497M — 1.8x FCF two years running, funded from the balance sheet. Net cash is ~$2.0B ($485M cash + $901M short-term investments + $688M long-term deposits, less $66M borrowings). Now add $1.2B for the Pizza Hut brand on an offshore bridge loan: 2026 cash out is ~$2.7B against ~$1.0B of FCF, taking net cash to roughly $0.3B by December.

- PIZZA HUT BRAND DEAL: $1.2B cash to Yum! Brands for ownership of the Pizza Hut brand in mainland China (out of Yum! Brands selling Pizza Hut globally for $2.7B). Cannot close before Aug 17, 2026; expected in Q3. It deletes the ~3% of net sales license fee — roughly $82M/yr pre-tax against $30-40M of financing cost. Management guides to mid-single-digit EPS accretion in 2027 and 2028. Genuinely good capital allocation.

- STRUCTURE: Yum China (NYSE: YUMC, HKEX: 9987) is NOT Yum! Brands (YUM). It is a Delaware-incorporated US DOMESTIC filer reporting in USD on 10-Qs — not an ADR, not a 20-F foreign issuer. CEO Joey Wat. 19,297 stores in 2,700+ cities; 82% company-owned. 2026 outlook reiterated: 20,000+ stores (1,900+ net new), 40-50% franchise mix of net new, capex $600-700M, $1.5B capital return.

What to watch: Bullish: average ticket flat or better for two consecutive quarters with transactions still growing, or group restaurant margin above 17% while delivery mix is still rising. Bearish: same-store transactions turning negative, or the 2027 capital-return commitment coming in materially below $1.5B.

Also on YouTube: @ChargedAlpha

DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.

IES Holdings, Inc. (IESC) Q3 FY2026 — Reported July 31 for fiscal Q3 2026 (quarter ended June 30; IES's fiscal year ends Sept 30). Revenue $1,242.7M (+40%) vs ~$1,080M expected — a 15% beat. Operating income $178.5M (+60%), margin 14.4% vs 12.6%. Adjusted diluted EPS $6.70 vs $4.83 expected (+39%); GAAP diluted EPS $7.57 includes a $26.2M marketable-securities gain. Backlog $4.53B, +119% YoY. The stock rose 30.27% to $744.54 on triple normal volume. A 2-for-1 stock split was announced (record Aug 14, distributed Aug 21).

The line nobody printed: a year ago 39% of IES revenue was residential housing; this quarter it was 26%. Without changing its name, IES has become a data-centre electrical contractor — 74% of revenue now sits in segments whose stated growth driver is the same single end market. And 38.1% of that celebrated $4.5B backlog consists of letters of intent the company says it cannot enforce.

THE CALL: AVOID (3/5, EXCEPTIONAL BUSINESS, THE PRICE ALREADY PAID FOR IT) — base-case value ~$560.0 vs ~$744.54 today.

KEY METRICS:

- CALL: AVOID 3/5 — fair value ~$560 vs $744.54 (-25%). DCF: FY27E revenue ~$5.5B (+25%, backlog-supported) at a normalised 13.5% operating margin gives FCF ~$356M; grown through the decade and discounted at 9.0% with 3.0% terminal = $563/sh (EV $10.98B PLUS $387.9M net cash / 20.198M diluted shares). Bear $263, bull $703, prob-weighted 20/55/25 = $538. The BULL case at 8.5% is $775 — above today's price, so the bull case is not silly, it is fully priced.

- REVERSE DCF: at $744.54 the EV is $14.65B — 17.8x our FY27 adjusted EBITDA and 26.9x FY27 earnings, for an electrical contractor. At a 9% discount rate that price asks IES to compound free cash flow at 32.3% a year for five straight years off a $356M base.

- STREET: Hold. IESC is a ~$15B company with only 1-2 sell-side analysts — there is no real consensus. Most recent published target $700, which is 6% BELOW the $744.54 close; a stale $458 target from February (set when the stock was $420) is still quoted by data providers. We ALIGN on direction and are materially more CAUTIOUS on magnitude.

- THE QUARTER: revenue $1,242.7M (+40%) vs $890.2M. Gross margin 27.4% vs 26.9%. SG&A down to 13.0% of revenue from 14.3%. Operating income $178.5M (+60%) at a 14.4% margin, +179bps. Adjusted EBITDA $201.3M (+60%), 16.2% margin. Adjusted diluted EPS $6.70 (+71%); GAAP $7.57 includes a $26.2M securities gain.

- WAS IT VOLUME OR MARGIN? Almost all the margin gain is one segment. Commercial & Industrial revenue +109% to $241.4M while its operating margin went 11.2% -> 22.5%. Management's own words: results benefited from 'certain large, quick-turning jobs that we executed at favourable margins.' Normalise C&I to a still-excellent 15% and operating income falls ~$18M and company margin goes 14.4% -> ~12.9%. Annualising 14.4% is a mistake.

- SEGMENTS: Communications $453.1M +51% (OI $83.6M, 18.5% margin) — data centres. Residential $324.1M -6% (OI $16.3M, margin COLLAPSED 9.7% -> 5.0%, profit -51%) — housing starts, no pricing power. Infrastructure Solutions $224.1M +73% (OI $53.4M) — Gulf Island added $51.7M. Commercial & Industrial $241.4M +109% (OI $54.2M). Corporate -$29.0M.

- BACKLOG QUALITY: total backlog $4,525.1M, +119% YoY and +91% since the FY25 year end, covering 1.13x TTM revenue vs 0.66x a year ago. But only $2,801.6M is remaining performance obligations (enforceable, +116%). The other $1,723.5M is letters of intent IES says it cannot enforce until work begins — 38.1% of backlog, up from 29.0% at the fiscal year end. Inside Infrastructure Solutions it is 68.5%.

- BALANCE SHEET AND CASH: ZERO long-term debt — the $190M revolver draw for Gulf Island was fully repaid from operating cash flow. Cash $77.3M plus marketable securities $310.6M = $387.9M NET CASH. 9M operating cash flow of $239.4M contains $153.9M of securities purchases inside operating activities; add it back and true OCF was $393.3M, FCF ~$270M. Capex +160% to $123.0M and PP&E $183M -> $354M. The buyback SLOWED to $19.5M from $41.6M — management's own read on the price.

- STRUCTURE: 11,000+ US employees, Houston TX. CEO Matt Simmes, CFO Tracy McLauchlin, Executive Chairman Jeff Gendell — a controlling shareholder the company lists as a risk factor, alongside the stock's relatively low trading volume. IES gives NO guidance of any kind, so every forward number here is inference from backlog. Two-for-one stock split: record date Aug 14, 2026, distributed after the close Aug 21 — post-split the price is ~$372 and our fair value ~$280. A split creates zero value.

What to watch: Bullish: Commercial & Industrial holding an operating margin above 18% for two more quarters, plus the Gulf Island / Abilene / Manitowoc plants visibly contributing in FY2027. Bearish: C&I margin falling back below 15% for two quarters, or the non-enforceable share of backlog pushing past 45%.

Also on YouTube: @ChargedAlpha

DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.

Garrett Motion Inc. (GTX) Q2 2026 — Reported pre-market July 29 (calendar Q2 ended June 30, 2026). Net sales $976M (+7% reported, +5% cc) vs ~$963M expected; diluted EPS $0.53 vs ~$0.46 (+26%); adjusted EBIT margin a record 15.6%, up 200bps; FY26 guidance RAISED on every line. The stock fell 3.81% to $28.78 on the print, then rose 7.75% the next session to close the week at $31.15.

The line nobody printed: 52% of Garrett's revenue is Europe and the US is 18% — and the US shrank. Everyone models GTX as an American auto supplier. It is a European one with an Asian growth engine and a data-centre genset business no model carries.

THE CALL: AVOID (3/5, GREAT QUARTER, THE RE-RATING ALREADY HAPPENED) — base-case value ~$24.0 vs ~$31.15 today.

KEY METRICS:

- CALL: AVOID 3/5 — fair value ~$24 vs $31.15 (-23%). Owner-earnings DCF: FY26E adj. FCF mid $430M less ~$28M stock comp = $402M; +4%/yr for 5 years then 1%, 0.5% terminal at 9.0% = $23.35/sh (EV $5.59B less $1.228B net debt / 186.8M shares). Bear $16.07, bull $34.09, prob-weighted $24.21. Note the BULL case at 8.5% is $37.36 — the Street's $38 IS our bull case.

- STREET: Buy — 4 buy / 3 hold / 2 sell (9 analysts). Average target $38 ($36-$42), +22%. Deutsche Bank went to $36 on July 30, the day after the print, from $14 in October. Stifel went $17 (Oct) to $21 (Dec) to $36 (May). RBC is high at $42. Every revision came AFTER the price moved. We DIFFER and are far more CAUTIOUS.

- THE QUARTER WAS A RECORD: net sales $976M (+7% reported, +5% cc) vs ~$963M expected. Gross margin 21.7% vs 19.8%. Net income $101M (10.3%). Adjusted EBIT $152M at a RECORD 15.6% margin, +200bps. Diluted EPS $0.53 vs $0.42, +26%.

- GUIDING TO GROW WHILE THE MARKET SHRINKS: FY26 guidance assumes light-vehicle production DOWN 2-4% and ~19% BEV penetration — yet Garrett guides +1% to +7% cc growth. Every line raised: sales $3.7-3.9B (was $3.6-3.9B), net income $330-360M (was $300-360M), adj. EBIT $560-600M (was $520-600M), adj. FCF $385-475M (was $355-475M).

- GARRETT IS A EUROPEAN COMPANY: Europe $509M or 52% of revenue, Asia $261M or 27%, the US just $174M or 18% — and the US FELL from $178M. FX added 2 of the 7 points of reported growth.

- THE MIX RANKING IS BACKWARDS FROM THE NARRATIVE: commercial vehicle/industrial $188M +10% cc (fastest), aftermarket $119M +7% cc (after FALLING 10% a year ago), diesel $235M +6% cc — faster than gasoline at +3% cc ($416M, 43% of sales). The 10-Q credits industrial growth to North America gensets FOR DATA CENTERS; Q2 brought a major MEG award, SOP 2027.

- CASH DID NOT FOLLOW PROFIT: adjusted EBIT +23% but operating cash flow FELL 8% to $145M from $158M on $84M of working-capital drag. In Garrett's favour, its adjusted FCF definition SUBTRACTS the $47M YTD factoring benefit — reported H1 FCF was $197M and it published $171M.

- BALANCE SHEET AND BUYBACK: the -$675M deficit is a Chapter-11 fresh-start plus $655M treasury-stock artifact, not distress. Net debt $1,228M = 1.73x FY26E EBITDA; adj. EBIT covers interest 5.9x. Basic shares fell 7.6% YoY, so ~40% of the 26% EPS growth is the share count, with only $135M of authorisation left. At $31.15 that is 10.0x EV/EBITDA vs auto-supplier peers at 4-6x, after a 142% twelve-month run.

What to watch: Bullish: commercial vehicle + industrial + aftermarket above 35% of revenue with the data-centre genset business scaling into its 2027 SOP. Bearish: gasoline turbo revenue declining at constant currency two quarters running, or FY26 adjusted FCF below $400M.

Also on YouTube: @ChargedAlpha

DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.

Mettler-Toledo International Inc. (MTD) Q2 2026 — Reported after the close on July 30 (calendar Q2 ended June 30, 2026). Net sales $1,027.3M (+4.5% reported, +6% local currency ex a one-time customer tariff refund, +4% organic); adjusted EPS $11.46 vs ~$10.79 expected (+14%); GAAP diluted EPS $11.55 — higher than the adjusted figure; FY26 guidance raised to $47.15-$47.50. The stock rose 2.59% to $1,416.30 on July 31.

The line nobody printed: free cash flow was $801M in 2021 and $849M in 2025 — 1.5% a year — while free cash flow per share compounded at 4.7%. Sixty-eight percent of the per-share growth is the shrinking share count, not the business.

THE CALL: AVOID (3/5, GREAT BUSINESS, FOUR YEARS OF FLAT CASH) — base-case value ~$815.0 vs ~$1416.3 today.

KEY METRICS:

- CALL: AVOID 3/5 — fair value ~$815 vs $1,416.30 (-42%). Owner-earnings DCF: FY26E adj. FCF ~$857M less $22M stock comp = $835M; +6%/yr for 5 years then 4%, 2.5% terminal at 8.25% = $807/sh (EV $18.23B less $2.06B net debt / 20.04M shares). Bear $608, bull $1,029, prob-weighted $813.

- STREET: Hold — 8 buy / 11 hold / 0 sell (19 analysts). Average target $1,416.50 against a $1,416.30 close: ZERO upside. Post-print Jefferies upgraded to Buy at $1,580; the low is Baird at $1,194. We ALIGN on the conclusion but are far more CAUTIOUS on the number.

- THE QUARTER WAS GOOD: net sales $1,027.3M (+4.5%; +6% local ccy ex-tariff refund, +4% organic). Adjusted EPS $11.46 (+14%) beat ~$10.79. Adjusted operating profit $309.3M at 29.3% (+50bps). Guidance RAISED: FY26 adj. EPS $47.15-$47.50; Q3 $12.00-$12.15.

- THE MARGIN DID NOT REALLY EXPAND: reported gross margin 63.3% vs 59.0% contains a one-time $52.4M IEEPA tariff refund booked as a REDUCTION OF COST OF SALES, less $27.8M refunded to customers. Underlying: 59.3% vs 59.0% — 30bps, not 430. Cost of sales FELL 6.5% while revenue rose 4.5%. Management excluded the $24.6M net benefit, which is why adjusted EPS sits BELOW GAAP.

- THE BUYBACK IS DOING 68% OF THE WORK: free cash flow was $801M (2021), $738M, $861M, $864M, $849M (2025) — 1.5%/yr. Diluted shares fell 23.46M to 20.67M, so FCF PER SHARE grew 4.7%/yr: 1.5 points business, 3.2 points share count. The buyback is shrinking ($1,100M in 2022 to $800M) and H1 repurchases of $420.1M were 115% of adjusted FCF.

- THE PREMIUM FRANCHISE IS THE SLOW ONE: Laboratory (55% of sales) grew just 2.7% to $552.6M; Industrial (40%) +5.8%; Food Retail (5%) +12.6%. The Americas FELL 2.8%, Europe +7.2%, Asia/RoW +12.3%. Organic local currency: Americas +1%, Europe +4%, Asia/RoW +9%.

- CHINA IS THE PROFIT ENGINE: of $333.9M of segment profit, Chinese Operations earned $102.1M (30.6%) — more than Swiss ($68.9M) and Western European ($48.9M) COMBINED — at a 37.1% margin vs 25.8% and 17.7%, on just $0.7M of goodwill. Chinese profit +14.3%; Swiss -2.4%; W. European -5.7%.

- BALANCE SHEET: equity is $12.8M on $3,671M of assets ($10.26B of treasury stock); net debt $2,060.6M, ~1.6x EBITDA. H1 adjusted FCF fell 10.3% to $366.7M while adjusted EPS rose 11%. At $1,416.30 that is 29.9x guided FY26 EPS and 36.5x owner earnings; the reverse DCF demands 12.7%/yr for five years against 1.5% delivered since 2021.

What to watch: Bullish: adjusted free cash flow growing above 6% for two or three straight quarters, and laboratory growth above 5%. Bearish: FY2026 adjusted free cash flow at or below 2025's $849M (a fifth flat year), or the buyback dropping under ~$700M a year.

Also on YouTube: @ChargedAlpha

DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.