Atmus Filtration (ATMU) Posts Record Q2 Sales, Lifts Full-Year Top-Line Guidance

Atmus Filtration (ATMU) reported record sales of $528 million in Q2, a 16.4% increase from the previous year, achieving a company milestone. Adjusted earnings per share (EPS) rose to $0.82, up from $0.75, while adjusted free cash flow more than doubled to $67 million from $36 million. The quarter followed a period of growth for Atmus, fueled by a rebound in the aftermarket and its first non-core acquisition.

Power Solutions, the core diesel filtration business, saw a 7% sales increase to $486 million, with gains coming from pricing, volume, and foreign exchange. Gross margin expanded to 29.2% from 28.9% in the prior year, and total adjusted EBITDA reached $109 million. Management attributed the positive numbers to a cyclical recovery and clearer EPA regulations, which could reduce pressure on truck demand.

The acquisition of Koch Filter, an industrial filtration business, is 95% complete, contributing $42 million in sales and an 18.9% adjusted EBITDA margin. The full-year adjusted EBITDA guidance was narrowed to a 19.75% to 20.25% range, with adjusted EPS expected between $2.85 and $3.00. However, SG&A expenses increased to $62 million, driven by higher personnel costs and IT consulting.

Gross margin gains were tempered by increased material and manufacturing costs. Joint venture income remained flat at $8 million, benefiting from strong performance in China but hindered by India due to the Middle East conflict. Free cash flow funded $18 million in dividends and buybacks. While freight market sentiment improved, the company remained cautious about calling for a real inflection in aftermarket demand.

Atmus plans to expand further into industrial filtration, relying on future acquisitions to grow the broader platform. Hedge fund ownership rose to 39 funds, showing growing conviction, and short interest is minimal at 3.99% of float. This suggests little organized skepticism about ATMU's stock. The company enters 2026 with record sales, improved margins, and nearly finished integration, but bears point to rising SG&A costs and elevated material expenses holding back the recovery.