Gates Industrial Q4 Top-Line Misses Street View; Guides FY22 EPS Below Consensus

Gates Industrial Corp PLC GTES reported fourth-quarter net sales growth of 2.7% year-over-year to $815.6 million and core revenue growth of 3.4%, missing the consensus of $821.59 million.
Adjusted EPS improved to $0.31 from $0.20 in 4Q20, beating the consensus of $0.21.
Power Transmission sales $518.8 million (-0.2%Y/Y) and Adjusted EBITDA margin declined 410 bps to 18.3%.
Fluid Power sales $296.8 million (+8.2% Y/Y) and Adjusted EBITDA margin declined 180 bps to 15%.
The gross margin declined by 290 bps to 35.1%. The operating income decreased by 11.1% Y/Y to $75.9 million, and the margin contracted by 145 bps to 9.3%.
Adjusted EBITDA declined to $139.6 million, and margin contracted 336 bps to 17.1%. This margin headwind resulted from price/cost and operational inefficiencies stemming from material and labor availability challenges.
Gates Industrial generated cash from operating activities of $382.4 million for FY21, compared to $309 million in FY20.
As of January 1, 2022, Gates Industrial held total cash of $658.2 million and total outstanding debt of $2.6 billion.
FY22 Outlook: Gates Industrial expects core revenue to grow 5% - 9% and Adjusted EBITDA of $755 million - $805 million.
It expects FY22 adjusted EPS of $1.20 - $1.30, versus the consensus of $1.42.
Price Action: GTES shares are trading lower by 2.22% at $15.00 on the last check Monday.

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