Gates Industrial Stock Slips After Q3 Results, Cuts FY21 Adjusted EBITDA Margin Outlook

Gates Industrial Corp PLC GTES reported third-quarter net sales growth of 21.1% year-over-year to $862.4 million, and core revenue growth of 19%, beating the consensus of $854.21 million.
Adjusted EPS improved to $0.31 from $0.26 in 3Q20, in line with the consensus of $0.31.
Sales by segments: Power Transmission $549.4 million (+17.1%Y/Y) and Fluid Power $313 million (+28.8% Y/Y).
The gross margin expanded by 110 bps to 39.5%. The operating income more than doubled to $130.5 million, and the margin expanded by 616 bps to 15.1%.
Adjusted EBITDA of $183.9 million (+31.4%) and margin expanded 160 bps to 21.3%.
As of October 2, 2021, Gates Industrial had total cash of $540.6 million and total outstanding debt of $2.6 billion. It generated $101.7 million of cash from operations during Q3.
FY21 Outlook: Gates Industrial maintains the outlook for core revenue growth of 20% - 22%.
It reduced Adjusted EBITDA margin outlook to 21% - 21.5%, from previous range of 22.2% - 22.8%.
The company noted additional inflation, particularly related to freight and logistics, and costs incurred to support the demand lead to margin pressure on the business.
Price Action: GTES shares are trading lower by 6.41% at $17.00 on the last check Monday.

Overview Rating:

Speculative

100

0100

Earnings Calendar