On August 10, Helios Technologies (NASDAQ:HLIO) reported second-quarter results that pushed its turnaround story into a new chapter. Sales hit $232 million, landing at the top end of management’s own guidance, while adjusted earnings cleared the high end of the outlook. It marked the fourth straight quarter of double-digit pro forma growth in both sales and adjusted earnings, a streak the company has been building since laying out its long-term plan five months earlier at its investor day. The question now is whether that momentum can survive a tougher back half of the year.
Bull Case: From Stabilization To Liftoff
The numbers back up the confidence. Order intake grew by double digits for the fourth consecutive quarter, with management pointing to both last year’s business wins ramping up and a steady stream of new ones. Gross margin expanded 280 basis points to 34.6%, the fourth straight quarter of year-over-year improvement, while operating income jumped 48% to $33 million. Adjusted EBITDA climbed 25% to $49 million, pushing the margin to 21.2% and marking the fourth quarter in a row above the 20% threshold. Diluted earnings per share nearly doubled to $0.66, and adjusted EPS of $0.88 came in $0.05 ahead of guidance.
Electronics stood out even more than Hydraulics. Sales rose 19% to $86 million, and Enovation Controls posted a record second quarter as recreational, health and wellness, and industrial demand all firmed up. Segment gross margin jumped 530 basis points to 34.6%, and operating income nearly doubled to $11 million. Hydraulics contributed too, with sales up 14% on a pro forma basis and a record pace in the Asia Pacific region for its Sun brand. The balance sheet keeps getting stronger underneath it all. Net debt fell to $264 million, the lowest level since the third quarter of 2020, and leverage dropped to 1.4 times EBITDA, below the company’s own target range. That gave management room to extend the dividend streak to 118 consecutive quarters and buy back $6 million in stock during the quarter.
Bear Case: Tougher Comparisons Loom
Not every signal points the same direction. The third quarter outlook implies a sharp deceleration from what the company just posted. Management guided to sales growth of only 8% at the midpoint, compared with the 16% pro forma growth just reported, and adjusted EPS growth of just 2% at the midpoint against the 49% jump in the second quarter. Adjusted EBITDA margin is expected to slip 30 basis points year over year in the third quarter, a reversal after four straight quarters of expansion. Management attributed the slower pace to tougher comparisons tied to the timing of end market recoveries and the ramp of recent business wins.
Some end markets are still soft. Marine remained weak within Electronics, and industrial demand within Hydraulics was roughly flat year over year. The company also flagged external pressures it is watching, including rising energy and fuel prices, tariff dynamics, broader inflationary pressures, and geopolitical tensions. A closer look at the quarter’s margin gains shows some of the help came from a one time item, about $1 million in net IEEPA tariff refunds, rather than purely organic improvement. Operating expenses also rose $2.2 million year over year, driven partly by an isolated bad debt expense, and capital spending increased to $11 million, or 4.9% of sales, as the company leans harder into organic investment.
Wall Street Quietly Buys In
Hedge fund ownership of Helios climbed from 23 funds to 29 in the most recent quarter. That points to institutional conviction building alongside the operating results. Short interest sits at just 2.9% of the float, which suggests little organized skepticism toward the stock right now. With guidance already raised this year, the bar for the third quarter print keeps climbing right along with expectations.
Where This Story Goes Next
Helios has clearly moved past the stabilization phase it described at its investor day, and the first half of 2026 shows a business generating real operating leverage, stronger cash flow, and a cleaner balance sheet. For the bull case to keep playing out, order growth and new business wins need to keep offsetting soft spots like marine and industrial demand. For the bear case, the sharp deceleration baked into third-quarter guidance and the reliance on a one-time tariff refund this quarter are worth watching closely. Investors now get to see whether Helios can grow into the higher bar it just set for itself.
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