DXP’s third quarter was marked by strong sales growth, yet the market responded negatively due to profit shortfalls. Management cited robust end-market demand in segments like Innovative Pumping Solutions and Service Centers, with the water business contributing a larger share of revenue. CEO David Little noted that "our execution has resulted in both organic and acquisition-driven growth," but acknowledged that expenses rose more than expected due to increased investments in people, technology, and acquisition activities. Operating margins held steady, yet elevated spending weighed on non-GAAP earnings per share.
Is now the time to buy DXPE? Find out in our full research report (it’s free for active Edge members).
DXP (DXPE) Q3 CY2025 Highlights:
- Revenue: $513.7 million vs analyst estimates of $498.8 million (8.6% year-on-year growth, 3% beat)
- Adjusted EPS: $1.34 vs analyst expectations of $1.57 (14.4% miss)
- Adjusted EBITDA: $56.5 million vs analyst estimates of $54.7 million (11% margin, 3.3% beat)
- Operating Margin: 8.5%, in line with the same quarter last year
- Market Capitalization: $1.57 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From DXP’s Q3 Earnings Call
- Zachary Marriott (Stephens) asked for a breakdown of daily sales trends and color on the fourth quarter outlook. CFO Kent Yee provided a monthly sales snapshot and indicated that Q4 will see typical seasonal softness but expects profitability to remain around 11% EBITDA margin.
- Zachary Marriott (Stephens) inquired about the expected trajectory for EBITDA margins into Q4 and beyond. Yee reiterated the company’s comfort maintaining 11% EBITDA margins, though acknowledged fewer billing days and seasonal impacts in Q4.
- Zachary Marriott (Stephens) questioned the variability in corporate expenses and how sustainable current SG&A levels are. Yee explained that insurance renewal timing, increased premiums, and professional fees from acquisition activity drove higher costs, some of which could persist.
- Zachary Marriott (Stephens) sought insights on DXP’s exposure to the data center market. CEO David Little said current exposure is modest, but the company is actively pursuing projects in this sector and sees long-term potential.
- No further analyst questions on the call.
Catalysts in Upcoming Quarters
In upcoming quarters, the StockStory team will be monitoring (1) the pace and integration of new acquisitions, especially in water and wastewater markets, (2) margin trends as the company navigates higher SG&A and seasonal headwinds, and (3) progress in expanding into new verticals like data centers. Additionally, we will watch for signs of recovery in the Supply Chain Services segment and whether operational efficiency initiatives can sustain profitability.
DXP currently trades at $99.90, down from $122.24 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free for active Edge members).
Our Favorite Stocks Right Now
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.