Gates raises annual earnings guidance as sales grow
Gates Industrial increased third-quarter sales by 5.6 percent and raised its annual adjusted earnings per share outlook. The power transmission business improved its margin, while the fluid power business posted a slight margin decline. Nine-month operating cash flow fell as higher receivables and inventories absorbed cash during the period.
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Quarterly sales and profit increase
Gates Industrial, a manufacturer of power transmission and fluid power systems, announced its third-quarter results. Quarterly earnings exceeded the estimate followed by Zacks. The fiscal reporting period ended September 26.[1], [2]
Net sales rose from 855.7 million dollars to 903.6 million dollars, an increase of 5.6 percent. Core growth excluding currency effects was 5.5 percent. Net income attributable to shareholders increased from 81.6 million dollars to 86.5 million dollars. Diluted earnings were 0.34 dollars per share and adjusted earnings were 0.47 dollars per share.[1]
Power Transmission expands its margin
Power Transmission sales increased 5.0 percent to 560.1 million dollars, with core growth of 5.2 percent. Adjusted earnings before interest, tax, depreciation and amortization rose from 122.1 million dollars to 137.1 million dollars. The division’s corresponding margin increased from 22.9 percent to 24.5 percent.[1]
Fluid Power sales grew 6.5 percent to 343.5 million dollars, including core growth of 6.1 percent. Its adjusted earnings on the same basis increased from 73.7 million dollars to 78.3 million dollars, although margin eased from 22.9 percent to 22.8 percent. For the company, adjusted earnings on that measure totaled 215.4 million dollars, a margin of 23.8 percent.[1]
Annual outlook rises as operating cash declines
Gates raised annual adjusted earnings per share guidance from 1.62 dollars to 1.70 dollars to 1.66 dollars to 1.72 dollars. It narrowed expected core sales growth from 2.5–4.5 percent to 3.2–3.8 percent, keeping the midpoint unchanged. The annual adjusted earnings before interest, tax, depreciation and amortization range moved from 800 million dollars to 830 million dollars to 809 million dollars to 823 million dollars, increasing its midpoint by 1 million dollars.[1]
Gates retained guidance for approximately 120 million dollars in capital expenditure and free cash flow conversion of at least 90 percent. The outlook excludes potential additional share repurchases. Nine-month operating cash flow declined from 208.3 million dollars to 170.0 million dollars. Higher receivables used 144.5 million dollars of cash and higher inventories used 118.0 million dollars.[1]
