Gates Industrial Corporation’s third quarter was met with a negative market reaction, despite the company’s non-GAAP earnings per share exceeding Wall Street’s consensus. Management attributed the mixed performance to subdued macroeconomic conditions, particularly in its industrial and agriculture end markets, and cited low single-digit growth in the replacement channel and strong Personal Mobility momentum as offsetting factors. CEO Ivo Jurek noted, “Our replacement channel grew low single digits, supported by mid-single-digit growth in automotive replacement,” while acknowledging that demand softness persisted in North American and European agriculture segments.
Is now the time to buy GTES? Find out in our full research report (it’s free for active Edge members).
Gates Industrial Corporation (GTES) Q3 CY2025 Highlights:
- Revenue: $855.7 million vs analyst estimates of $859.5 million (3% year-on-year growth, in line)
- Adjusted EPS: $0.39 vs analyst estimates of $0.37 (5.4% beat)
- Adjusted EBITDA: $195.8 million vs analyst estimates of $195.4 million (22.9% margin, in line)
- Management raised its full-year Adjusted EPS guidance to $1.50 at the midpoint, a 1.4% increase
- EBITDA guidance for the full year is $780 million at the midpoint, in line with analyst expectations
- Operating Margin: 13.5%, in line with the same quarter last year
- Organic Revenue rose 1.7% year on year vs analyst estimates of 2.7% growth (97.5 basis point miss)
- Market Capitalization: $5.55 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Gates Industrial Corporation’s Q3 Earnings Call
- Nigel Coe (Wolfe Research) asked about the margin floor and cost impacts from restructuring. CEO Ivo Jurek affirmed the margin bridge provides a foundational floor and that a volume recovery would be additive, while CFO Brooks Mallard detailed expected one-time costs and ERP benefits not yet factored into outlooks.
- Deane Dray (RBC Capital Markets) pressed for specifics on the scope and payback of restructuring. Mallard outlined multiple factory closures affecting hundreds of employees, with payback periods of one to two years and about $30–35 million in one-time costs expected in the first half of next year.
- Julian Mitchell (Barclays) inquired about fourth-quarter revenue seasonality and margin dynamics. Jurek explained Q4 guidance is based on current demand with no assumed recovery, while Mallard pointed to ongoing material cost initiatives and manageable inventory levels.
- Jeffrey Hammond (KeyBanc Capital Markets) sought clarity on margin targets and capital allocation. Jurek emphasized that margin expansion is being achieved through internal execution despite weak volumes, and that the company will balance buybacks with debt reduction and potential M&A.
- Andrew Kaplowitz (Citigroup) asked if restructuring plans were being accelerated and about the impact of the 80/20 program. Jurek stated the company is executing its original plan, and that 80/20 continues to drive operational improvements and supports incremental profitability as growth returns.
Catalysts in Upcoming Quarters
Going forward, our team will monitor (1) progress on factory closures and ERP implementation as restructuring ramps up, (2) the trajectory of Personal Mobility and data center revenue growth, and (3) stabilization or improvement in key end markets like agriculture and commercial on-highway. Execution on these priorities, along with discipline in capital deployment, will be central to Gates’ ability to expand margins and support long-term growth.
Gates Industrial Corporation currently trades at $21.48, down from $25.84 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free for active Edge members).
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