Gates Industrial Stock Earnings Reports

Gates reported Q1 2026 sales of $851 million, with core sales down 2.9% year-over-year. Adjusted EBITDA was $177 million (20.8% margin) and adjusted EPS was $0.35. Management attributed most of the near-term weakness to a major ERP implementation in Europe and two fewer working days in the quarter, which together represented roughly a 600-basis-point headwind to core sales and a ~$0.07 headwind to adjusted EPS. Europe has stabilized post-ERP, shipping and fill rates improved through March and into April, and management expects the remaining distribution inefficiencies to be largely recovered in Q2. Demand trends improved sequentially (industrial OEMs accelerating, APAC strong, data center revenue up ~700% from a small base). Free cash flow conversion over the last 12 months was ~101%; net leverage improved to ~1.9x and Moody's upgraded the rating to Ba2. Management reiterated full-year 2026 guidance and gave Q2 revenue guidance of $905–945 million (midpoint core growth ~3.5%). They expect temporary margin headwinds (ERP hypercare and footprint optimization) to fade and target adjusted EBITDA approaching ~23.5% in H2. The company announced an opportunistic tuck-in acquisition of Timken’s Industrial Belt business (estimated ~ $5M/month, ~ $60M annualized revenue) to augment North American power transmission presence. Key near-term risks called out include potential escalation in the Middle East and commodity/energy-driven cost pressure, though management does not expect material impact from recent Section 232 tariff revisions.