Tomohiko Sano, an analyst from J.P. Morgan, has initiated a new Buy rating on Gates Industrial (GTES).
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Tomohiko Sano’s rating is based on Gates Industrial’s strategic transition from a traditional industrial supplier to a growth-oriented company, capitalizing on global trends in mobility and data center infrastructure. The company’s strong market position in power transmission, with a significant portion of sales coming from the aftermarket, supports its operational resilience and growth potential. Gates Industrial’s financial health is underscored by robust free cash flow conversion and a declining net leverage, expected to fall below 1.5x by 2026.
Additionally, Gates is well-positioned to benefit from long-term growth in emerging markets, with its products playing crucial roles in next-generation applications such as data centers and urban mobility. The company’s focus on innovation is evident in its increasing revenue contributions from new product introductions. Furthermore, Gates has demonstrated strong operational discipline, maintaining high gross margins and effectively managing supply chain and pricing challenges. These factors contribute to a favorable valuation outlook, with a price target of $35 by December 2026, reflecting confidence in sustained margin resilience and improved financial metrics.
Sano covers the Industrials sector, focusing on stocks such as Armstrong World, Carlisle Companies, and Allegion. According to TipRanks, Sano has an average return of 7.5% and a 59.09% success rate on recommended stocks.