Timken (NYSE:TKR) executives said the company ended 2025 with stronger-than-expected fourth-quarter results and is positioning the business for higher margins and organic growth in 2026, despite ongoing uncertainty tied to tariffs and global trade. Management also outlined an expanded enterprise-wide “80/20” initiative aimed at simplifying the portfolio and operating model, while emphasizing that the financial benefits will take time to materialize.
Fourth-quarter performance and cash generation
President and CEO Lucian Boldea said fourth-quarter adjusted earnings per share came in at $1.40, above the high end of the company’s guidance range, while total sales rose 3.5% year over year. Boldea attributed the quarter’s organic growth—up more than 1%—to pricing and volume growth in the Industrial Motion segment. He also highlighted stronger free cash flow and balance sheet progress, noting the company generated $141 million of free cash flow in the quarter, returned $36 million to shareholders, and reduced debt by more than $100 million during the period.
On the quarterly profitability bridge, Discenza cited several notable factors:
- Mix headwinds, with original equipment shipments outperforming distribution, and an unfavorable comparison to prior-year defense mix.
- Pricing benefit of $25 million, adding more than 2% to the quarter’s top line as the company implemented pricing actions aimed at mitigating tariff impacts.
- Tariffs as a $30 million year-over-year headwind, with costs higher sequentially as expected.
- Lower material and logistics costs versus the prior year, driven mostly by savings tactics in Engineered Bearings.
- Lower SG&A and other expenses, reflecting cost reduction initiatives and lower bad-debt accruals.
Segment results: Industrial Motion outpaced Engineered Bearings
In Engineered Bearings, fourth-quarter sales were $714 million, up 0.9% year over year. Discenza said foreign currency added nearly 2%, while organic sales declined 1% because higher pricing was more than offset by lower volumes. He noted the strongest gains came from off-highway and renewable energy, with growth also in aerospace and general industrial. Revenue declined across distribution, on-highway, heavy industries, and rail. Segment adjusted EBITDA was $115 million (16.1% of sales), down from $122 million (17.2%) last year, with mix and tariffs cited as key pressures. Discenza said cost savings and pricing helped offset those headwinds.
Industrial Motion delivered stronger growth, with sales of $397 million, up 8.4% year over year. Organic sales increased 5.6% on higher demand across most sectors plus higher pricing, and currency translation added 2.8%. Discenza said growth was broad across product platforms and led by regional gains in the Americas and Europe. By market sector, automation and aerospace showed the strongest gains; solar and distribution were down. Management said Industrial Motion margin improvement reflected operational execution and volume and pricing benefits that more than offset tariff costs and mix pressure.
Demand signals and order trends entering 2026
On the Q&A, Boldea said the company is encouraged by orders after experiencing “eight quarters of negative growth” before seeing “green shoots” in the second half of 2025. He said the order book ended the year up “high single digits,” with off-highway, general industrial, wind, and aerospace identified as the largest contributors. Sequential order movement from the third to fourth quarter was described as down modestly due to seasonality but “very, very low,” which he said could “almost” be called flat.
Management also commented on regional and market pockets of weakness. Boldea said Latin America and China were the only regional “minuses” in the quarter, while Discenza noted the company is not seeing “a lot of life” in heavy truck and that agriculture remains down within off-highway, even as mining and construction show improvement. On distribution, Discenza said the company feels comfortable with inventory levels where it has visibility and expects distribution to contribute in 2026, describing the outlook as low single-digit growth to “close to neutral.”
2026 guidance: modest organic growth, higher margins, and tariff tailwind
For full-year 2026, Discenza said Timken expects total revenue to increase 2% to 4%, including about 1% benefit from currency tied to a weaker U.S. dollar. Organic revenue is expected to rise 2% at the midpoint, with both segments contributing through higher volumes and pricing. Adjusted EPS guidance is $5.50 to $6.00, which Discenza said is up about 8% at the midpoint versus 2025. He added that for modeling purposes, adjusted EPS is expected to be split roughly 54% in the first half and 46% in the second half, and that the outlook assumes year-over-year earnings growth in every quarter.
The company’s 2026 EBITDA margin is expected to be in the “high 17% range” at the midpoint, up from 17.4% in 2025, implying an incremental margin of about 30% for the year. For the first quarter, currency is expected to add around 3% to sales, while organic sales and adjusted EBITDA margins are expected to be relatively flat with the prior year; Discenza clarified that pricing will be up, implying slightly lower volumes in Q1 due to a tougher comparison.
Discenza also discussed the company’s expectations around tariffs in the 2026 EPS bridge, estimating a year-over-year positive impact of $0.10 to $0.15 per share. He said this estimate includes pricing actions already taken and is expected to be more favorable in the first half on a year-over-year basis because pricing actions were more heavily weighted to the second half of 2025. However, he reiterated the company does not expect to fully recapture tariff margin until it is “exiting 2026,” and noted the estimate does not include any potential impact from a recently announced tariff agreement with India.
Free cash flow is expected to be around $350 million in 2026, or approximately 105% conversion on GAAP net income at the midpoint. Discenza said fourth-quarter free cash flow benefited from strong working capital performance, including accounts receivable collection and reduced days, and he expects working capital discipline and improved earnings to support next year’s cash generation. He also said 2026 capital spending is expected to be around 3.5% of sales, at the low end of the company’s typical range.
Strategic actions: expanding 80/20, leadership changes, and auto OE “pruning”
Boldea said Timken is extending its 80/20 discipline beyond portfolio actions to the “entire enterprise,” including portfolio simplification and process optimization, and described it as a potential “major driver of value creation” that will take time to flow through results. In response to analyst questions, he said the portfolio actions under consideration represent a “single digit percentage” of the company and emphasized management is “not looking to shrink significantly,” but rather to reposition the company for growth.
Boldea explained that the broader 80/20 effort—applied to operations, supply chain, and footprint—typically includes a period of analysis and training, followed by a period where costs and benefits may offset before net benefits emerge. He said there is not a significant amount of cost or benefit embedded in the current 2026 outlook and that the company expects to provide more details at its May Investor Day, including a transformation roadmap over a “zero to 36 months timeframe.”
Executives also discussed leadership changes intended to support growth, including new roles for a Chief Technology Officer, Vice President of Marketing, and Regional President. Boldea said these appointments are market-facing and intended to improve alignment around macro trends such as electrification and automation, and to establish common growth processes and metrics across the company.
On automotive, Boldea said the company’s auto and truck performance remained down in the fourth quarter, with aftermarket “more flattish,” and he did not point to a significant near-term change. He added that discussions with customers on exiting or reducing exposure to auto OEM business are “mostly complete,” and said the company expects more significant revenue decline in 2027 from these arrangements. He also said the company expects margin uplift from those negotiations in both 2026 and 2027, with additional details expected by Investor Day.
About Timken (NYSE:TKR)
The Timken Company is a global manufacturer specializing in engineered bearings and mechanical power transmission products. Its core offerings include tapered and cylindrical roller bearings, spherical and plain bearings, mounted bearing units, and precision gear drives. Timken’s products serve a broad range of industries, from industrial machinery and aerospace to automotive, rail, wind energy and heavy equipment.
Beyond bearings, Timken’s portfolio extends to industrial chains, belts, couplings and related components designed to optimize power transmission systems.
