Solstice Advanced Materials Inc. (SOLS) Earnings & Analysis

Latest quarter

Solstice reported second-quarter net sales of $1.148 billion, above the consensus by 7.29%. Adjusted diluted earnings per share of $0.88 also beat the consensus estimate of $0.79. CEO David Sewell said sales exceeded the top of the company’s quarterly guidance.

Solstice’s filing attributed the year-over-year sales increase to higher volumes and favorable pricing in both segments. CFO Tina Pierce said Refrigerants & Applied Solutions sales grew 12%, with demand for refrigerants and nuclear products contributing. Electronic & Specialty Materials sales grew 8%, driven by electronic materials volumes.

Pierce said Building Solutions and Intermediates sales fell 1% as construction demand remained soft. The company’s gross margin fell to 32.2% from 34.9%, while operating margin declined to 17.2% from 19.7%. Sewell attributed the year-over-year decline in adjusted EBITDA margin primarily to the timing of plant turnarounds and prior-year production incentive credits.

Solstice reported quarterly free cash flow of $123.0 million, compared with $72.0 million a year earlier. Its filing said first-half operating cash flow benefited from inventory reduction, primarily in Refrigerants & Applied Solutions.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO David Sewell said demand during the quarter came from nuclear energy, electronic materials, refrigerants and healthcare packaging. CFO Tina Pierce said refrigerant sales benefited from pricing and volumes, while healthcare packaging recovered as customers returned after destocking in the second half of 2025.

Asked about refrigerant margins, Sewell said he expected sequential expansion and a mid-30% adjusted EBITDA margin for Refrigerants & Applied Solutions in the second half. He said customers were accelerating their transition to HFO refrigerants and that the North American HFO aftermarket had largely not yet begun. Sewell also said sulfur inflation had affected the refrigerants business, but the company had secured pricing to offset it.

On investment, Sewell told an analyst that Solstice was bringing forward spending to accelerate its Spokane expansion because of demand for electronic materials. He said the company expected to increase output in the second half and had begun discussing whether another expansion would be needed. Pierce said Solstice was also investing in Spectra ballistic fibers and advancing nuclear conversion expansion.

Asked about nuclear capacity, Sewell said the company was studying brownfield and greenfield options as well as a modular design. He said customer discussions about longer-term contracts were progressing and that Solstice expected to share more after the study was completed.

For the third quarter, Pierce said the outlook assumed continued demand in refrigerants and electronic materials but more modest nuclear performance because of product loan returns and order timing. She expected approximately $30 million of negative revenue from final nuclear product loan returns in the second half, skewed modestly toward the fourth quarter.

Sewell said the planned Element Solutions acquisition would increase Solstice’s exposure to electronics and AI infrastructure. He expected the deal to close in the first half of 2027, subject to shareholder and regulatory approvals and other customary conditions.

Guidance

CFO Tina Pierce said Solstice raised its full-year 2026 outlook to net sales of $4.125 billion to $4.185 billion, adjusted EBITDA of $1.035 billion to $1.055 billion and adjusted diluted EPS of $2.75 to $2.95.

Pierce also raised expected capital expenditures to $420 million to $440 million, from the $400 million to $425 million range provided on the prior call.