Forgent Power (FPS) Reports $3B Backlog. Can Manufacturing Keep Up?

Forgent Power Solutions, Inc. (NYSE:FPS) disclosed a staggering $3.0 billion backlog as of June 30, 2026, alongside a 94% year-over-year increase in fourth-quarter revenue to approximately $462 million. Bookings reached an impressive $1.503 billion, marking a 375% increase. The company anticipates 2027 revenue between $2.4 billion and $2.6 billion, representing a 76% growth.

However, the expansion raises questions about whether the necessary manufacturing capacity, employees, and working capital can keep pace while maintaining cash generation.

Operating income for the fourth quarter soared to $91.9 million, up from $8.3 million a year earlier, and operating cash flow exceeded capital expenditures by $74 million. Management attributes the improved profitability to revenue growing faster than operating costs as new campuses near target production levels. Notably, revenue from the fast-growing modular Powertrain Solutions category increased 259% in fiscal 2026 and now accounts for nearly one-third of fourth-quarter revenue.

An expansion at the Tijuana campus for Powertrain Solutions is slated to commence in fiscal 2027's fourth quarter, adding roughly $800 million in annual revenue capacity, bringing the total to around $5.8 billion. Actual sales will hinge on demand, product mix, and execution. Forgent Power Solutions, Inc. (NYSE:FPS) has completed most of its earlier expansion program, suggesting it could capitalize on the near-term growth before the additional Tijuana capacity becomes operational.

Strong operating cash flow in fiscal 2026 was $109.1 million, whereas capital spending exceeded operating cash generation by approximately $6.8 million. Working capital concerns persist, with increases in receivables and inventory absorbing $315.6 million of cash in fiscal 2026. Growth in deferred revenue helped offset these requirements, albeit alongside increases in supplier balances and accrued expenses. Customer deposits, while financing production, also create obligations to deliver, presenting a balancing act.