Graham Corporation

What they do

Graham designs and manufactures custom-engineered equipment including ejectors, condensers, turbines, pumps, blowers, and mixing systems. Its products serve nuclear and non-nuclear naval propulsion, oil refining, chemical processing, small modular reactors, and space propulsion. The company operates production facilities in Batavia, NY, and has subsidiaries in Arvada, CO, Greenville, SC, Jupiter, FL, and Louisville, CO, with sales and engineering offices in Houston, TX, Suzhou, China, and India.

Revenue drivers

• Defense market — Largest end market; fiscal 2026 sales increased 21% to $25.5M, driven by project milestones and new/existing programs. Includes power plant systems, torpedo ejection, thermal management, and advanced mixing.
• Energy & Process market — Fiscal 2026 sales increased 14% to $10.1M, led by New Energy demand, particularly small modular reactors. Includes heat transfer and vacuum systems, power generation, and mixing.
• Space market — Q1 FY27 sales increased 86% to $2.9M, driven by new programs and ramp-ups. Includes propulsion, power, thermal management, and life support systems.
• Aftermarket — Fiscal 2026 aftermarket sales totaled $36.9M, down 12% from record prior year but strong in Q1 FY27 at $9.7M, up 20%. Recurring revenue from consumables and services.

Recent performance

For Q1 FY27 (ended June 30, 2026), net sales rose 29% to a record $71.3M, with gross profit up 21% to $17.8M (25.0% margin). Net income was $3.9M or $0.33 per diluted share, down from $4.6M in Q1 FY26, while adjusted net income per share rose 9% to $0.49. Orders were $95.9M with a book-to-bill of 1.3x and record backlog of $557.2M. The company ended the quarter with $27.0M cash and zero debt.

Strategy

Graham is executing a growth strategy centered on defense and New Energy markets, including small modular reactors. It completed two acquisitions in fiscal 2026: Xdot Bearing Technologies (foil bearings) and FlackTek (advanced mixing), expanding technology and recurring revenue streams. Management introduced a three-year financial framework at its June 2026 Investor Day, focusing on converting record backlog into profitable growth and expanding margins. The company also issued $50M of stock to strengthen the balance sheet, repaying all debt.

Risks

• Defense concentration and margin mix — Higher Defense sales and material receipts carry lower margins, compressing gross margin (down 170 bps in FY26, 150 bps in Q1 FY27).
• Tariff exposure — Increased tariffs added approximately $1.0M to costs in fiscal 2026 versus the prior year.
• Acquisition integration — FlackTek acquisition includes $25M in performance-based earnouts over four years; failure to meet adjusted EBITDA targets could impact financial results.
• Project timing volatility — Revenue depends on timing of project milestones; Q1 FY27 growth was partly due to Defense milestone timing, which may not repeat.

Outlook

Management reaffirmed full-year fiscal 2027 guidance, citing record backlog and strong bookings. They expect continued growth across all business units and long-term profitability goals. The three-year framework introduced at Investor Day anticipates favorable end-market tailwinds, particularly in Defense and New Energy.