TNC Q3 Deep Dive: Tariff Uncertainty and Industrial Softness Offset Product Gains

Industrial cleaning equipment manufacturer Tennant Company fell short of the markets revenue expectations in Q3 CY2025, with sales falling 4% year on year to $303.3 million. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $1.23 billion at the midpoint. Its non-GAAP profit of $1.46 per share was 2.9% below analysts’ consensus estimates.

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StockStory’s Take

Tennant Company's third quarter results were met with disappointment by the market, as revenue and non-GAAP profit both fell short of Wall Street expectations. Management cited the challenging comparison to the prior year’s backlog reduction and highlighted a sudden softening in North American industrial demand, where customers paused equipment purchases in response to tariff volatility. CEO Dave Huml explained, “We are clearly operating in a more complex trade environment with the continuing tariff volatility creating cost challenges and heightened uncertainty.” Despite these headwinds, the company saw order growth and noted that pricing actions and supply chain adjustments helped to partially offset increased costs.

Looking forward, Tennant’s management remains focused on mitigating tariff-driven inflation and navigating mixed end-market dynamics, particularly as industrial customers in North America continue to reassess spending. The company is banking on new product launches, expansion in strategic account sales, and a return to more typical seasonal patterns to support results in the coming quarters. CFO Fay West emphasized a cautious stance, noting that “sustained macroeconomic volatility and ongoing tariff-related pressures” are expected to persist, and that operational efficiency alongside focused cost management will be critical for delivering on profit targets.

Key Insights from Management’s Remarks

Management attributed the third quarter’s underperformance to volume declines in industrial equipment, new tariff impacts, and cautious customer behavior, but highlighted ongoing progress in product innovation and digital transformation.

• Tariff volatility impacts demand: CEO Dave Huml noted that uncertainty around tariffs led some North American industrial customers, particularly in manufacturing and warehousing, to delay or freeze equipment purchases, which slowed overall sales conversion.
• Gross margin expansion despite headwinds: The company achieved a 30-basis point improvement in gross margin, as disciplined pricing—including tariff-related price adjustments—offset higher freight and input costs, even as volumes declined.
• New product traction in EMEA and robotics: EMEA saw positive momentum from new product introductions and improved go-to-market execution, while Tennant’s autonomous mobile robot (AMR) business reported 9% sales growth and 25% unit growth year-to-date, driven by the X4 and X6 ROVR launches.
• ERP digital transformation milestone: Tennant successfully launched the first phase of its ERP modernization in the APAC region, aiming to enhance decision-making speed, customer experience, and future AI integration. The Americas and EMEA rollouts are scheduled for the next two quarters, with management closely monitoring for disruption.
• Shareholder returns and cost management: Management emphasized disciplined capital allocation, returning $28 million to shareholders during the quarter through dividends and share buybacks, while adjusted S&A costs fell due to restructuring and reduced variable compensation.

Drivers of Future Performance

Tennant anticipates continued macro uncertainty and tariff pressures, with future performance hinging on product innovation, strategic account growth, and the company’s ability to manage costs and supply chain disruptions.

• Industrial demand stabilization needed: Management expects North American industrial demand to stabilize but remains cautious about further order softness if tariff uncertainty persists, especially among manufacturing and warehousing customers.
• New products and strategic accounts: Sales momentum is expected from recent product launches like the Z50 Citadel outdoor sweeper and expanded strategic account relationships, particularly in EMEA and commercial segments, as well as ongoing strength in service and consumables.
• Cost management and margin discipline: Tennant aims to offset inflation and tariff impacts through targeted procurement, pricing, and supply chain optimization, with a focus on maintaining or growing adjusted EBITDA margins despite lower overall volume.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will watch (1) the pace of recovery in North American industrial orders amid ongoing tariff volatility, (2) execution and customer feedback from new product launches like the Z50 Citadel and expansion of AMR deployments, and (3) successful ERP rollouts in the Americas and EMEA regions. Additionally, supply chain adjustments and the ability to sustain pricing power will be key factors in Tennant’s performance.

Tennant currently trades at $75.29, down from $79.72 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free for active Edge members).

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