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Gates Industrial Corp Plc (GTES)
NYSE:GTES
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Gates Industrial
(NYSE:GTES)
74Outperform
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. S&P 500 (SPY)
Market Cap
$5.10B
Dividend YieldN/A
Average Volume (3M)2.73M
Price to Earnings (P/E)23.9
Beta (1Y)1.37
Revenue Growth-4.01%
EPS Growth-8.86%
CountryUS
Employees14,100
SectorIndustrials
Sector Strength78
IndustryIndustrial - Machinery
Share Statistics
EPS (TTM)0.36
Shares Outstanding257,771,180
10 Day Avg. Volume2,398,342
30 Day Avg. Volume2,727,579
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.00
Price to Cash Flow (P/CF)0.00
P/FCF Ratio0.00
Enterprise Value/Market Cap1.37
Enterprise Value/RevenueN/A
Enterprise Value/Gross Profit5.13
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$23.67Price Target Upside18.35% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering7
Gates Industrial Business Overview & Revenue Model
Company DescriptionGates Industrial Corporation plc manufactures and sells engineered power transmission and fluid power solutions worldwide. It operates in two segments, Power Transmission and Fluid Power. The company offers synchronous or asynchronous belts, including V-belts, CVT belts, and Micro-V belts, as well as related components, such as sprockets, pulleys, water pumps, tensioners, or other accessories; solutions for stationary and mobile drives, engine systems, personal mobility, and vertical lifts application platforms; metal drive components; and kits for automotive replacement channels. It also provides fluid power solutions comprising stationary hydraulics, mobile hydraulics, engine systems, and other industrial application platforms; and hydraulics, including hoses, tubing, and fittings, as well as assemblies. The company serves construction, agriculture, energy and resources, automotive, transportation, mobility and recreation, consumer products, and various industrial applications, such as automated manufacturing and logistics systems. It sells its engineered products under the Gates brand. The company offers its products to replacement channel customers, as well as to original equipment manufacturers. Gates Industrial Corporation plc was founded in 1911 and is headquartered in Denver, Colorado.
How the Company Makes MoneyGates Industrial generates revenue primarily through the sale of its power transmission and fluid power products. The company's revenue streams are divided into two main segments: Power Transmission and Fluid Power. The Power Transmission segment includes the sale of belts and related components, while the Fluid Power segment involves the sale of hoses, tubing, and hydraulic systems. Gates Industrial benefits from long-term relationships with original equipment manufacturers (OEMs) and aftermarket distributors, which provide stable and recurring revenue. The company also leverages its global distribution network and strong brand recognition to maintain a competitive edge and expand its market presence. Additionally, strategic partnerships and innovation in product development contribute to its revenue growth and profitability.
Gates Industrial Financial Statement Overview
Summary
Gates Industrial exhibits solid financial health with robust profitability from core operations and strong cash flow generation. The income statement shows a mixed performance with a low net profit margin but healthy EBIT and EBITDA margins. The balance sheet is strong with low leverage and sufficient equity coverage. Cash flow metrics are favorable, indicating efficient capital management.Income Statement
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.75
Positive
Balance Sheet
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.82
Very Positive
Cash Flow
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.78
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Mar 2022 | Mar 2021 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 3.41B | 3.57B | 3.55B | 3.47B | 2.79B | Gross Profit |
| 1.36B | 1.36B | 1.25B | 1.34B | 1.03B | EBIT |
| 478.70M | 462.60M | 384.00M | 484.10M | 211.10M | EBITDA |
| 478.70M | 676.30M | 620.20M | 720.50M | 489.70M | Net Income Common Stockholders |
| 194.90M | 232.90M | 220.80M | 297.10M | 79.40M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 682.00M | 720.60M | 578.40M | 658.20M | 521.40M | Total Assets |
| 6.79B | 7.25B | 7.19B | 7.53B | 7.43B | Total Debt |
| 2.48B | 2.56B | 2.58B | 2.68B | 2.82B | Net Debt |
| 1.80B | 1.84B | 2.01B | 2.02B | 2.30B | Total Liabilities |
| 3.45B | 3.71B | 3.75B | 4.05B | 4.24B | Stockholders Equity |
| 3.02B | 3.22B | 3.11B | 3.10B | 2.81B |
| Cash Flow | Free Cash Flow | |||
| 296.50M | 409.60M | 178.80M | 295.40M | 241.60M | Operating Cash Flow |
| 379.60M | 481.00M | 265.80M | 382.40M | 309.00M | 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
Positive
20.00
Price Trends
18.80
Positive
20.01
Negative
19.25
Positive
Market Momentum
0.21
Negative
64.14
Neutral
91.65
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 20 is above the 20-day moving average (MA) of 17.65, above the 50-day MA of 18.80, and above the 200-day MA of 19.25, indicating a bullish trend. The MACD of 0.21 indicates Negative momentum. The RSI at 64.14 is Neutral, neither overbought nor oversold. The STOCH value of 91.65 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 (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | $4.26B | 31.20 | 17.49% | 0.96% | 11.94% | 77.46% | |
74 Outperform | $5.10B | 23.94 | 6.93% | ― | -4.01% | -8.86% | |
74 Outperform | $5.39B | 38.34 | 16.33% | 0.30% | 10.41% | 34.56% | |
72 Outperform | $4.03B | 23.10 | 14.11% | 1.15% | -1.26% | -4.84% | |
71 Outperform | $3.53B | 31.86 | 13.30% | 0.43% | 6.83% | -1.84% | |
64 Neutral | $4.27B | 11.80 | 5.31% | 249.79% | 4.07% | -9.02% | |
56 Neutral | $3.32B | 45.63 | 5.14% | 0.77% | -1.00% | 174.41% |
* Industrials Sector Average
Performance Comparison
GTES
Gates Industrial
20.00
3.52
21.36%
NPO
Enpro
155.77
3.41
2.24%
FELE
Franklin Electric Co
87.68
-11.54
-11.63%
KAI
Kadant
293.21
13.11
4.68%
MWA
Mueller Water Products
27.04
10.68
65.28%
CSWI
CSW Industrials
317.94
70.64
28.56%
Gates Industrial Earnings Call Summary
Earnings Call Date:Apr 30, 2025
(Q1-2025)
| % Change Since: 11.23%|
Next Earnings Date:Aug 01, 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 Corporate Events
Executive/Board Changes
Gates Industrial Appoints Joseph Cantie as New Director
Positive
Mar 31, 2025
On March 27, 2025, Gates Industrial Corporation plc appointed Mr. Joseph S. Cantie as a director, effective March 30, 2025. Mr. Cantie is recognized as an independent director under NYSE standards and will receive a compensation package of $245,000 for his service. This appointment reflects the company’s commitment to strengthening its governance structure, potentially enhancing its industry positioning and stakeholder confidence.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
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.