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Gates Industrial Corp Plc (GTES)
NYSE:GTES
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Gates Industrial
(NYSE:GTES)
70Outperform
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
$4.70B
Dividend YieldN/A
Average Volume (3M)3.06M
Price to Earnings (P/E)25.0
Beta (1Y)1.25
Revenue Growth-4.54%
EPS Growth-13.20%
CountryUS
Employees14,100
SectorIndustrials
Sector Strength65
IndustryIndustrial - Machinery
Share Statistics
EPS (TTM)0.74
Shares Outstanding255,413,510
10 Day Avg. Volume2,835,419
30 Day Avg. Volume3,056,177
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)1.44
Price to Cash Flow (P/CF)10.70
P/FCF Ratio14.10
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$25.57Price Target Upside38.89% 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 presents a solid financial position with stable profitability and effective cash flow management. Despite slight revenue contraction, the company manages its debt well and maintains operational efficiency. Continued focus on revenue growth and cost control could further enhance its financial standing.Income Statement
Gates Industrial shows a stable gross profit margin with a slight decrease in revenue over the last year. The EBIT margin is consistent, indicating operational efficiency. However, the net profit margin has slightly declined, suggesting increased costs or other expenses impacting net income.75
Positive
Balance Sheet
The company's debt-to-equity ratio has improved, which indicates better leverage management, though it remains moderately high. Return on equity is stable, reflecting consistent shareholder returns. The equity ratio suggests a solid asset base supported by equity, providing stability.70
Positive
Cash Flow
Gates Industrial demonstrates strong operating cash flow relative to net income, indicating efficient cash generation from operations. Although free cash flow growth has declined, the company maintains a healthy free cash flow to net income ratio, pointing to robust cash conversion.80
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 |
| 166.40M | 2.56B | 2.58B | 2.68B | 2.82B | Net Debt |
| -515.60M | 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
Negative
18.41
Price Trends
20.68
Negative
20.94
Negative
19.06
Negative
Market Momentum
-0.51
Positive
36.14
Neutral
16.05
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GTES, the sentiment is Negative. The current price of 18.41 is below the 20-day moving average (MA) of 19.46, below the 50-day MA of 20.68, and below the 200-day MA of 19.06, indicating a bearish trend. The MACD of -0.51 indicates Positive momentum. The RSI at 36.14 is Neutral, neither overbought nor oversold. The STOCH value of 16.05 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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 (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $10.48B | 20.44 | 19.60% | 0.99% | 10.59% | 27.04% | |
77 Outperform | $23.94B | 8.98 | 24.30% | 1.18% | -2.99% | 159.26% | |
76 Outperform | $39.32B | 28.75 | 14.97% | 0.66% | 5.22% | 4.46% | |
74 Outperform | $29.03B | 32.68 | 8.55% | 1.24% | 16.23% | 34.42% | |
70 Outperform | $4.70B | 24.96 | 6.26% | ― | -4.54% | -13.20% | |
67 Neutral | $13.67B | 27.19 | 13.77% | 1.52% | -0.16% | -15.42% | |
62 Neutral | $8.05B | 13.60 | 4.04% | 3.11% | 3.70% | -14.19% |
* Industrials Sector Average
Performance Comparison
GTES
Gates Industrial
18.41
0.87
4.96%
AME
Ametek
172.14
-7.06
-3.94%
DOV
Dover
175.68
3.81
2.22%
IEX
IDEX
180.97
-55.52
-23.48%
ITT
ITT
129.16
0.18
0.14%
XYL
Xylem
119.46
-7.24
-5.71%
Gates Industrial Earnings Call Summary
Earnings Call Date: Feb 6, 2025 | % Change Since: -11.36% | Next Earnings Date: Apr 30, 2025
Earnings Call Sentiment Neutral
The earnings call reflected a mix of positive achievements and some challenges. Gates Industrial achieved significant margin improvements and reduced leverage while dealing with a decline in core revenues and pressures in OEM sales, particularly in agriculture and construction. The company's strategic initiatives in personal mobility and automotive replacement showed promising growth, and the successful debt refinancing positioned them well financially. However, foreign currency headwinds and industrial market weaknesses pose ongoing challenges.Highlights
Adjusted EBITDA Margin Growth
Gates Industrial grew adjusted EBITDA margins by 140 basis points in 2024, significantly exceeding their initial forecast despite a challenging demand environment.
Record Adjusted Earnings Per Share
The company achieved record adjusted earnings per share and adjusted EBITDA dollars in 2024.
Debt Refinancing and Leverage Reduction
Successfully refinanced debt stack, lowered financing costs, and reduced net leverage ratio from 2.3x to 2.2x.
Stock Repurchase
Repurchased $175 million of stock, supporting Blackstone's sell down and facilitating their exit prior to year-end.
Personal Mobility Core Growth
Personal mobility core growth increased for the first time in seven quarters, expanding approximately 20%.
Automotive Replacement Channel Growth
Automotive replacement grew high single digits, contributing to the stability of the replacement business.
High Free Cash Flow Conversion
Achieved free cash flow conversion of 168% in the fourth quarter, bringing the full year conversion to 74%.
Lowlights
Core Revenue Decline
Fourth quarter total revenue was $829 million, representing a 2.6% decrease on a core basis.
OEM Sales Decrease
OEM sales decreased primarily due to volume reductions in the agriculture and construction end markets.
Foreign Currency Impact
Strengthening of the U.S. dollar negatively impacted reported revenues, and FX is estimated to be a $34 million headwind to profitability in 2025.
Adjusted Earnings Per Share Decline
Adjusted earnings per share was $0.36, down 3% versus the prior year.
Industrial Markets Weakness
Industrial end markets declined mid-single digits, primarily driven by North America and Europe.
Agriculture and Construction End Markets Pressure
Industrial OEM sales in the Fluid Power segment declined high teens on a core basis, driven by continued demand pressure in agriculture and construction.
Company Guidance
During the Gates Industrial Corporation's fourth quarter and full year 2024 earnings call, several key metrics and guidance details were discussed. The company reported a 140 basis points increase in adjusted EBITDA margins for 2024, surpassing initial forecasts despite a challenging demand environment. Adjusted earnings per share (EPS) and adjusted EBITDA dollars reached record levels. The company also achieved a gross margin of 40.4% in the fourth quarter, marking a record for that period, driven by enterprise initiatives and favorable channel mix. Gates successfully reduced its net leverage ratio to 2.2x from 2.3x at the end of 2023, with a target range of 1 to 2x by 2026. For 2025, Gates projected core revenue growth between -0.5% and 3.5%, with an adjusted EBITDA guidance range of $735 million to $795 million, reflecting a 50 basis point margin improvement. The company plans to spend more on capital expenditures to support high-return projects. Additionally, the first quarter of 2025 is expected to see total revenues between $805 million and $835 million, with core revenues down approximately 1% at the midpoint.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.