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Gates Industrial Corp Plc (GTES)
NYSE:GTES
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Gates Industrial
(NYSE:GTES)
Rating:74Outperform
Price Target:
$28.00
▲(7.98% Upside)
Positive Factors
Company Transformation
Gates Industrial Corp is rated Overweight with a price target of $35, reflecting confidence in the company's ability to convert its legacy in engineered power transmission into a structurally stronger, innovation-driven, and operationally resilient platform.
Market Position
Gates has a #1 global position in power transmission, with around 70% of aftermarket sales, well-protected margins, robust free cash flow conversion, and net leverage on track to fall below 1.5x by 2026.
Operational Resilience
Gates demonstrates operational resilience and cash-driven discipline with gross margins above 40% for five straight quarters and free cash flow conversion exceeding 90%.
Negative Factors
Gates Industrial (GTES) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$6.68B
Dividend YieldN/A
Average Volume (3M)2.02M
Price to Earnings (P/E)33.3
Beta (1Y)1.37
Revenue Growth-2.67%
EPS Growth-17.55%
CountryUS
Employees14,100
SectorIndustrials
Sector Strength73
IndustryIndustrial - Machinery
Share Statistics
EPS (TTM)0.39
Shares Outstanding257,584,140
10 Day Avg. Volume1,937,493
30 Day Avg. Volume2,022,927
Financial Highlights & Ratios
PEG Ratio-2.15
Price to Book (P/B)1.78
Price to Sales (P/S)1.58
P/FCF Ratio18.12
Enterprise Value/Market Cap1.22
Enterprise Value/Revenue2.39
Enterprise Value/Gross Profit5.90
Enterprise Value/Ebitda13.13
Forecast
1Y Price Target
$29.78Price Target Upside14.85% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering9
Gates Industrial Business Overview & Revenue Model
Company DescriptionGates Industrial Corporation plc (GTES) is a global leader in the manufacturing of power transmission and fluid power solutions. The company operates primarily in the industrial and automotive sectors, providing a diverse range of products including belts, hoses, and fittings that are essential for various applications in machinery, vehicles, and industrial processes. Gates serves a wide array of markets, including construction, agriculture, energy, and transportation, with a focus on innovation and high-performance solutions that enhance efficiency and reliability.
How the Company Makes MoneyGates Industrial generates revenue through the sale of its core products, which include industrial and automotive belts, hoses, and related accessories. The company's revenue model is primarily based on direct sales to original equipment manufacturers (OEMs), distributors, and end-users across various industries. Key revenue streams include the sale of replacement parts and maintenance products, which are essential for ongoing operations in industrial settings. Additionally, Gates benefits from strategic partnerships with other companies in the automotive and industrial sectors, enhancing its distribution capabilities and market reach. The company also invests in research and development to innovate and expand its product offerings, which can lead to increased sales and market competitiveness.
Gates Industrial Earnings Call Summary
Earnings Call Date:Jul 30, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Oct 31, 2025
Earnings Call Sentiment Neutral
The earnings call presented a mixed picture with strong performance in personal mobility and improvements in financial metrics like EBITDA margin and leverage. However, there were notable challenges in core revenue growth, industrial OEM sales, and the Fluid Power segment. Despite these challenges, the company remains optimistic about growth opportunities, particularly in the data center and personal mobility markets.Q2-2025 Updates
Positive Updates
Strong Personal Mobility Growth
Personal mobility had another quarter of double-digit growth, contributing significantly to the results.
Adjusted EBITDA Margin Performance
Adjusted EBITDA margin solidly exceeded 22%, with a gross margin expansion of 40 basis points.
Free Cash Flow and Leverage Improvement
Free cash flow grew 11% year-over-year, and net leverage declined to 2.2x, with a target to go below 2x by year-end.
Increase in 2025 Guidance
Adjusted EBITDA midpoint raised to $780 million, and adjusted EPS midpoint increased to $1.48.
Data Center Market Opportunities
Significant acceleration in quoting and booking activity in the data center market, with expected positive impact in 2026.
Personal Mobility Business Outlook
The opportunity pipeline exceeds $300 million, aiming for significant revenue growth by 2028.
Negative Updates
Core Revenue Decline
Total sales were $884 million, representing a 0.6% decline on a core basis.
Challenges in Industrial OEM Sales
Industrial OEM sales were under pressure, primarily due to soft demand in construction and on-highway.
Fluid Power Segment Decline
Fluid Power segment sales decreased by 2.5% on a core basis, impacted by weaker markets and end market dynamics.
Automotive OEM Sales Decline
Automotive OEM sales declined, with particular weakness noted in Europe.
Onetime Real Estate Gain Impact
A $7 million gain on a real estate transaction in the previous year impacted the adjusted EBITDA margin by 80 basis points.
Company Guidance
During the Gates Industrial Corporation Q2 2025 earnings call, the company provided updated guidance for the fiscal year. Gates reported a positive outlook for its financial metrics, raising its adjusted EBITDA midpoint to $780 million and the adjusted EPS midpoint to $1.48. The company maintained its core growth midpoint at 1.5% and noted a 0.6% decline in core sales for the second quarter, with total sales reaching $884 million. Adjusted EBITDA for the quarter was $199 million, reflecting an adjusted EBITDA margin of 22.5%. The company also highlighted a gross margin of 40.8% and a free cash flow of $74 million, which grew 11% year-over-year. Gates continues to focus on reducing its net leverage, which declined to 2.2x, aiming for below 2x by year-end 2025. For the third quarter, Gates estimates total revenues between $845 million and $885 million, with a core revenue increase of approximately 3% at the midpoint and an expected adjusted EBITDA margin increase ranging from 50 to 90 basis points.Gates Industrial Financial Statement Overview
Summary
Gates Industrial exhibits a stable financial performance with a consistent gross profit margin of approximately 40.6%. Despite a slight revenue decline of 0.5%, the company maintains strong EBIT and EBITDA margins at 13.8% and 16.9%. The balance sheet is solid with low financial leverage and a robust equity ratio of 45.3%. The cash flow is particularly strong, with a free cash flow growth rate of 7.5% and high cash conversion ratios.Income Statement
Gates Industrial demonstrates a stable financial performance with a consistent gross profit margin of approximately 40.6% in TTM. The net profit margin has slightly improved to 6.0% over the TTM, indicating effective cost management. However, revenue has slightly declined by 0.5% from the previous year, reflecting potential challenges in sales growth. EBIT and EBITDA margins remain strong at 13.8% and 16.9% respectively, showcasing the company's operational efficiency.80
Positive
Balance Sheet
The balance sheet of Gates Industrial shows a solid equity position with a debt-to-equity ratio of 0.05, indicating low financial leverage. The return on equity (ROE) stands at 6.2% for TTM, reflecting a moderate return for shareholders. The equity ratio is robust at 45.3%, highlighting a strong capital structure. However, the company must remain cautious about its debt management despite a low debt level in the recent period.75
Positive
Cash Flow
Cash flow analysis reveals a positive outlook with a free cash flow growth rate of 7.5% over the TTM, underscoring the company's ability to generate cash from its operations. The operating cash flow to net income ratio is strong at 2.06, indicating efficient cash conversion. Moreover, the free cash flow to net income ratio of 1.57 reflects robust cash generation relative to earnings.85
Very Positive
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 3.39B | 3.41B | 3.57B | 3.55B | 3.47B | 2.79B |
| Gross Profit | 1.38B | 1.36B | 1.36B | 1.25B | 1.34B | 1.03B |
| EBITDA | 618.70M | 478.70M | 676.30M | 620.20M | 720.50M | 489.70M |
| Net Income | 202.70M | 194.90M | 232.90M | 220.80M | 297.10M | 79.40M |
Balance Sheet | ||||||
| Total Assets | 7.22B | 6.79B | 7.25B | 7.19B | 7.53B | 7.43B |
| Cash, Cash Equivalents and Short-Term Investments | 719.70M | 682.00M | 720.60M | 578.40M | 658.20M | 521.40M |
| Total Debt | 2.47B | 2.51B | 2.56B | 2.58B | 2.68B | 2.82B |
| Total Liabilities | 3.61B | 3.45B | 3.71B | 3.75B | 4.05B | 4.24B |
| Stockholders Equity | 3.27B | 3.02B | 3.22B | 3.11B | 3.10B | 2.81B |
Cash Flow | ||||||
| Free Cash Flow | 318.80M | 296.50M | 409.60M | 178.80M | 295.40M | 241.60M |
| Operating Cash Flow | 417.10M | 379.60M | 481.00M | 265.80M | 382.40M | 309.00M |
| Investing Cash Flow | -126.30M | -104.40M | -81.80M | -90.70M | -86.00M | -77.50M |
| Financing Cash Flow | -162.50M | -286.70M | -258.30M | -253.10M | -148.60M | -353.80M |
Gates Industrial Technical Analysis
Positive
25.93
Price Trends
24.59
Positive
22.56
Positive
21.58
Positive
Market Momentum
0.41
Negative
60.09
Neutral
70.39
Neutral
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 25.93 is above the 20-day moving average (MA) of 24.99, above the 50-day MA of 24.59, and above the 200-day MA of 21.58, indicating a bullish trend. The MACD of 0.41 indicates Negative momentum. The RSI at 60.09 is Neutral, neither overbought nor oversold. The STOCH value of 70.39 is Neutral, 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 42 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 (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $8.78B | 41.97 | 15.02% | ― | 8.90% | 29.18% | |
74 Outperform | $6.68B | 33.33 | 6.31% | ― | -2.67% | -17.55% | |
74 Outperform | $7.22B | 25.03 | 13.91% | 1.52% | 3.15% | 14.18% | |
71 Outperform | $4.62B | 54.92 | 5.78% | 0.56% | 4.99% | 169.24% | |
65 Neutral | $5.36B | 562.65 | 0.67% | ― | 7.88% | ― | |
64 Neutral | $4.46B | 31.75 | 15.79% | 0.20% | 12.27% | 19.05% | |
64 Neutral | $10.75B | 15.69 | 7.62% | 2.01% | 2.75% | -15.14% |
* Industrials Sector Average
Performance Comparison
GTES
Gates Industrial
25.93
9.53
58.11%
NPO
Enpro
219.39
74.79
51.72%
FLS
Flowserve
55.20
10.07
22.31%
SPXC
SPX
187.81
45.00
31.51%
CSW
CSW Industrials
265.58
-46.71
-14.96%
MIR
Mirion Technologies
22.90
13.25
137.31%
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.