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Gates Industrial Corp Plc (GTES)
NYSE:GTES
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Gates Industrial (GTES) AI Stock Analysis

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GTES

Gates Industrial

(NYSE:GTES)

Rating:68Neutral
Price Target:
$27.00
▲(6.68%Upside)
Gates Industrial's overall stock score is driven by its strong financial health and solid cash flow generation. However, the technical analysis suggests potential caution due to overbought conditions, and the stock's valuation appears stretched with a high P/E ratio. The positive aspects from the earnings call provide some optimism but are offset by ongoing market challenges.
Positive Factors
Earnings Outlook
Management raised the adjusted EPS forecast, implying higher expectations for earnings performance.
Financial Performance
Gates Industrial Corporation showed a beat driven by firm margins behind productivity initiatives and price/cost leverage.
Market Expansion
GTES secured meaningful new replacement/aftermarket customer to expand its reach.
Negative Factors
Market Challenges
Guidance was lowered for incremental end market weakness in first-fit channels (particularly construction, ag, auto).
Market Trends
Management is pulling forward internal initiatives to take advantage of slower-than-anticipated trends.

Gates Industrial (GTES) vs. SPDR S&P 500 ETF (SPY)

Gates Industrial Business Overview & Revenue Model

Company DescriptionGates Industrial Corporation plc (GTES) is a leading global manufacturer and provider of power transmission and fluid power solutions. The company operates primarily in the industrial and automotive sectors, offering a diverse range of products such as belts, hoses, and other related components. Gates Industrial is known for its innovation and technological advancements, serving a broad customer base across various industries including construction, agriculture, energy, and transportation.
How the Company Makes MoneyGates Industrial makes money through the sale of its power transmission and fluid power products. Its revenue model is primarily based on manufacturing and distributing a wide range of engineered products and services that are essential for motion and fluid control applications. The company's key revenue streams include the sale of belts, hoses, and other related components to both original equipment manufacturers (OEMs) and the aftermarket. Gates Industrial has a global presence, which allows it to leverage significant scale and reach, enhancing its revenue potential. Additionally, strategic partnerships and a strong focus on research and development contribute to the company's ability to innovate and maintain competitive pricing, further driving its earnings.

Gates Industrial Earnings Call Summary

Earnings Call Date:Apr 30, 2025
(Q1-2025)
|
% Change Since: 40.77%|
Next Earnings Date:Jul 30, 2025
Earnings Call Sentiment Neutral
The earnings call indicated that despite facing challenges such as a slight decline in total revenues and ongoing market softness in some segments, the company managed to exceed initial sales guidance and maintain a strong financial position. Adjusted EBITDA margins and gross margin expansions, along with strategic share repurchases and ongoing enterprise initiatives, positioned the company to effectively manage potential tariff impacts and market uncertainties.
Q1-2025 Updates
Positive Updates
Sales Outpace Initial Guidance
First quarter sales outpaced initial guidance with a core sales growth of 1.4%, driven by volume and price increases.
Automotive Replacement Growth
Replacement channel sales grew mid-single digits, with high-single-digit growth in automotive replacement.
Adjusted EBITDA Margin and Gross Margin
Adjusted EBITDA margin exceeded 22%, and gross margin expanded to 40.7%.
Personal Mobility Growth
Personal mobility segment grew by more than 30%.
Net Leverage Improvement
Net leverage finished at 2.3x at the quarter end, slightly decreased year-over-year.
Share Repurchase Activity
Repurchased $13 million of shares during the quarter with over $100 million remaining under existing authorization.
Power Transmission Segment Performance
Power Transmission segment revenues increased by approximately 2% on a core basis.
Strong Balance Sheet
The balance sheet is in solid shape, supporting future strategic investments.
Negative Updates
Revenue Decline
Total revenues were down just under 2%, inclusive of unfavorable foreign currency effects.
Ongoing Market Softness
Continued softness in agriculture, construction markets, and weakness in energy.
Adjusted EBITDA Margin Decline
Adjusted EBITDA margin decreased by 60 basis points year-over-year.
Tariff Impact Concerns
Estimated tariff exposure of approximately $50 million for 2025, with mitigation actions required.
Segment Margin Pressure
Fluid Power segment experienced margin pressure due to ongoing demand softness in agriculture and construction.
Company Guidance
During Gates Industrial Corporation's Q1 2025 earnings call, the company provided guidance indicating that they are maintaining their initial 2025 financial targets. They achieved core sales growth of 1.4% in the first quarter, with total sales of $848 million, despite a slight decline of just under 2% in total revenues due to unfavorable foreign currency effects. The company reported an adjusted EBITDA of $187 million, representing a margin rate of 22.1%. Their adjusted earnings per share increased by approximately 6% to $0.36. Gates is also focusing on mitigating a $50 million tariff impact through price actions and operational initiatives, aiming to fully offset this impact without affecting adjusted EBITDA for the full year. The company reiterated its full-year guidance for 2025, projecting core revenue changes between a decline of 0.5% and an increase of 3.5%, with adjusted EBITDA ranging from $735 million to $795 million and adjusted EPS from $1.36 to $1.52.

Gates Industrial Financial Statement Overview

Summary
Gates Industrial displays solid financial health characterized by strong operating performance and robust cash flow generation. The income statement shows a healthy EBIT margin at 14.49% and strong EBITDA margin at 17.54%, although revenue growth has been slightly declining. The balance sheet reveals a low debt-to-equity ratio of 0.05, indicating minimal leverage and strong equity coverage. Cash flow metrics are favorable, with high operating and free cash flow relative to net income.
Income Statement
75
Positive
The income statement reveals a mixed performance. The gross profit margin for TTM stands at 40.58%, indicating robust profitability from core operations. However, the net profit margin is relatively low at 6.39%, suggesting significant expenses or finance costs. Revenue growth has been stagnant with a slight decrease, as TTM revenue is marginally lower than the previous annual figure. The EBIT margin is healthy at 14.49%, and the EBITDA margin is strong at 17.54%, reflecting effective cost management and solid operating performance.
Balance Sheet
82
Very Positive
Gates Industrial's balance sheet shows strong equity financing with an equity ratio of 45.06%. The debt-to-equity ratio is low at 0.05, indicating minimal leverage and reduced financial risk. Return on equity is moderate at 7.00%, reflecting average profitability on shareholders' investments. Overall, the company maintains a solid financial position with low leverage and sufficient equity coverage.
Cash Flow
78
Positive
The cash flow analysis highlights positive trends. Operating cash flow to net income ratio is 1.88, indicating strong cash generation relative to net income. The free cash flow to net income ratio is also high at 1.45, suggesting efficient capital expenditure management. While free cash flow growth is positive at 6.34% compared to the previous year, it is important to monitor the potential impact of any future increase in capital expenditure.
BreakdownDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue3.41B3.57B3.55B3.47B2.79B
Gross Profit1.36B1.36B1.25B1.34B1.03B
EBITDA478.70M676.30M620.20M720.50M489.70M
Net Income194.90M232.90M220.80M297.10M79.40M
Balance Sheet
Total Assets6.79B7.25B7.19B7.53B7.43B
Cash, Cash Equivalents and Short-Term Investments682.00M720.60M578.40M658.20M521.40M
Total Debt2.48B2.56B2.58B2.68B2.82B
Total Liabilities3.45B3.71B3.75B4.05B4.24B
Stockholders Equity3.02B3.22B3.11B3.10B2.81B
Cash Flow
Free Cash Flow296.50M409.60M178.80M295.40M241.60M
Operating Cash Flow379.60M481.00M265.80M382.40M309.00M
Investing Cash Flow-104.40M-81.80M-90.70M-86.00M-77.50M
Financing Cash Flow-286.70M-258.30M-253.10M-148.60M-353.80M

Gates Industrial Technical Analysis

Technical Analysis Sentiment
Positive
Last Price25.31
Price Trends
50DMA
22.80
Positive
100DMA
20.79
Positive
200DMA
20.74
Positive
Market Momentum
MACD
0.69
Positive
RSI
70.39
Negative
STOCH
94.13
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GTES, the sentiment is Positive. The current price of 25.31 is above the 20-day moving average (MA) of 24.29, above the 50-day MA of 22.80, and above the 200-day MA of 20.74, indicating a bullish trend. The MACD of 0.69 indicates Positive momentum. The RSI at 70.39 is Negative, neither overbought nor oversold. The STOCH value of 94.13 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for GTES.

Gates Industrial Risk Analysis

Gates Industrial disclosed 41 risk factors in its most recent earnings report. Gates Industrial reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Gates Industrial Peers Comparison

Overall Rating
UnderperformOutperform
Sector (65)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
75
Outperform
$4.45B52.715.90%0.58%2.92%
75
Outperform
$3.94B27.4817.68%1.06%10.96%43.44%
73
Outperform
$4.26B24.4114.11%1.10%-1.26%-4.84%
73
Outperform
$4.07B36.6613.38%0.38%6.83%-1.84%
68
Neutral
$6.52B30.656.93%-4.01%-8.86%
65
Neutral
$11.14B15.765.26%2.01%3.16%-25.01%
64
Neutral
$4.76B33.8516.19%0.19%10.78%29.12%
* Industrials Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
GTES
Gates Industrial
25.26
7.51
42.31%
NPO
Enpro
211.62
42.28
24.97%
FELE
Franklin Electric Co
93.39
-10.17
-9.82%
KAI
Kadant
344.02
-8.05
-2.29%
MWA
Mueller Water Products
24.95
4.53
22.18%
CSW
CSW Industrials
282.90
-15.88
-5.31%

Gates Industrial Corporate Events

Executive/Board ChangesShareholder Meetings
Gates Industrial Shareholders Approve Key Resolutions
Neutral
Jun 10, 2025

On June 5, 2025, Gates Industrial Corporation held its annual general meeting where shareholders approved all resolutions, including the election of nine directors and the ratification of Deloitte & Touche LLP as the independent auditor. The company will conduct annual advisory votes on executive compensation, reflecting shareholder preferences, and has authorized the board to allot equity securities, enhancing its financial flexibility.

The most recent analyst rating on (GTES) stock is a Buy with a $21.00 price target. To see the full list of analyst forecasts on Gates Industrial stock, see the GTES Stock Forecast page.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Jul 10, 2025