Oct 30, 2026 earnings call — Raised EPS guidance, strong margins and industrial growth
Raised full year adjusted earnings per share guidance to a range of $1.66 to $1.72 per share.
Revenue $0.9B (est $0.9B) · EPS $0.47 (est $0.44) · Next-quarter revenue outlook $0.9B–$0.9B
Key quotes
"In the third quarter, we generated mid-single-digit core sales growth, consistent with our guidance, and delivered strong adjusted EBITDA margin, which approached 24%."
"We expect our second half adjusted EBITDA margin to approximate 23.5%, consistent with our commitment."
"Importantly, segment gross margins improved 130 basis points year-over-year, driven by volume growth and execution on enterprise initiatives, offset by investments into our data center growth vertical."
Analyst Q&A 10
Q4 margin drivers
Q (Stephen Volkmann · Jefferies): The analyst asked why margins step down into Q4 despite faster core growth and whether the offsets are Timken dilution or spending on data centers.
A: Management said the Q4 margin decline reflects normal seasonality, some price/cost dilution as pricing and costs rebalance, and a year-over-year increase in variable compensation that mostly hits in Q4. They noted at the midpoint they are about 120 bps up on EBITDA and expect second-half margins of "23.5% or better."
"So at the midpoint, we're about 120 bps up on EBITDA." — L. Mallard (CFO)
Inflation differences PT vs FP
Q (Jeffrey Hammond · KeyBanc): The analyst asked whether price/cost inflationary pressures differ between PT and FP, and about Gates' ability to pass costs through, and why the segments look different.
A: Management said FP is not experiencing greater inflation than PT, but they are making larger strategic investments in FP to scale product portfolio, commercial, and engineering teams. Brooks noted that as inflation ramps and pricing rolls in there is slight dilution at gross margin and EBITDA in FP.
"That being said, Brooks highlighted that as the inflation is ramping up and pricing is rolled in, there is slight dilution at the gross margin, at the EBITDA margin results." — Ivo Jurek (CEO)
2027 setup and new products
Q (Nigel Coe · Wolfe): The analyst asked for early thoughts on 2027 given 6.5% exit organic growth and asked for more detail on the product development pipeline for data center and the inventory pickup this quarter.
A: Management said the setup for 2027 is developing nicely and they'll outline their thinking on November 19 at their Capital Markets Day. They said many product launches are coming across hoses, pumps, and couplings and they are also investing in the commercial front end; on inventory, they built raw material safety stock, will convert it to finished goods through Q3 and Q4, and expect to maintain a 90-plus percent cash conversion.
"I think that you're going to see pretty significant increase in the product launches that we'll be talking about as we roll into 2027." — Ivo Jurek (CEO)
North America auto and drags
Q (Jeffrey Hammond · KeyBanc): The analyst asked what drags remain in North America versus the rest of the world and specifically asked about auto OEM (OE) and aftermarket (AR) in North America.
A: Management said North America auto OE was down slightly in very low single digits while auto aftermarket was up slightly and should reaccelerate as large customer normalization continues. They noted industrial OE markets are growing strongly in the 20s and industrial aftermarket has accelerated into the low teens, so industrial end markets have inflected well even as auto mutes overall growth.
"So in North America, in particular, auto OE was down slightly, so kind of very low single digits." — Ivo Jurek (CEO)
Investor Day and personal mobility
Q (Andrew Kaplowitz · Citi): The analyst asked whether there will be an enterprise initiatives 2.0 at Investor Day and whether any specific cost-out areas will be highlighted, and also asked about visibility in the personal mobility business.
A: Management said they will provide a window into enterprise initiatives 2.0 at Investor Day but emphasized their focus on delivering above-market and premium growth while continuing to advance profitability initiatives. They said they have terrific visibility in personal mobility, have broadened their product portfolio and are taking meaningful share, and believe a long-term 20% to 30% growth trajectory is in front of them.
"We will certainly provide you a window into how we are thinking about the enterprise initiatives 2.0." — Ivo Jurek (CEO)
Data center capabilities and NPI
Q (Tomohiko Sano · JPMorgan): The analyst asked what capabilities give Gates a right to win in data centers, what customer engagements exist, and whether they are working on specific applications, and also asked about the NPI pipeline and R&D allocation across data center and personal mobility.
A: Management said Gates has exposure across the full spectrum of end users and is already ramping production—citing a production ramp-up of e-water pumps with a large North American server manufacturer—and is working with hyperscalers and infrastructure builders. They said NPI vitality is expected to reach the low 20s and they are on a trajectory to deliver that, with more detail to be shared at the November 19 event.
"We've spoken last quarter around our production ramp-up of our e-water pumps with a large manufacturer of servers in North America." — Ivo Jurek (CEO)
Off-highway demand and pricing
Q (David Raso · Evercore): The analyst asked for more color on off-highway customers—pace of growth, inventories, ramp—and about pricing power into OEMs versus aftermarket; then asked how unusual the 100 bps variable comp drag is.
A: Management said off-highway was mixed but was up in the mid-single-digit range driven by construction while ag remained weak and was flattish to about 1% down, and they believe they are likely taking some market share. On pricing, they said they have been measured but forward-leaning to ensure all customers get price increases and are improving analytical pricing tools; on variable comp they said this year is a little bit higher than normal while last year was lower than normal.
"I mean they were up kind of in the mid-single-digit range." — Ivo Jurek (CEO)
Q4 headwinds and margin upside
Q (Jerry Revich · Wells Fargo): The analyst asked whether anything in Q3 results should make investors cautious about Q4 beyond normal seasonality, and asked if there is further margin upside cycle over cycle ahead of Analyst Day.
A: Management said the main Q4 headwind is some gross margin dilution from price/cost as higher-cost inventory moves through while pricing becomes fully in place, in addition to normal seasonality. They also said enterprise initiatives and above-market volume growth should both contribute to continued margin expansion over time and they expect to discuss this further at Investor Day.
"As kind of some of that higher-cost inventory continues to move through the system and our pricing is all in place, you're going to see a little bit of a creep up from a cost perspective as the price/cost gets normalized." — L. Mallard (CFO)
Timken belts acquisition impact
Q (Christopher Dankert · D.A. Davidson): The analyst asked for details on the belts acquisition completed about a month ago: sales contribution, margin level, and any other details on timing.
A: Management said the acquisition closed at the beginning of Q4 so there was no Q3 revenue and only a diminutive revenue impact in Q4 because Timken customers prebought inventory during the carve-out transition. They said the business should contribute about "100 bps, plus or minus, of revenue for our company in '27' and that Timken's profitability was dilutive but Gates expects to bring the business to company-average profitability over the next 12 months.
"I would say it's about 100 bps, plus or minus, of revenue for our company in '27." — Ivo Jurek (CEO)
Personal mobility growth and capacity
Q (Brandon Knutson · Morgan Stanley): The analyst asked what is driving the acceleration in personal mobility growth, how much production capacity exists for personal mobility and data center to hit multiyear targets, and to quantify growth investments this quarter and in the Q4 guide.
A: Management said personal mobility growth was broad-based, especially in Asia, driven by pipeline penetration and product penetration, and they target a longer-term 20% to 30% growth trajectory. They said they have placed capacity in place to support personal mobility and are investing in R&D and production scale-up for data center with new capacity coming online across hoses, couplings and pumps; Brooks said investments are broad-based across operations, R&D, and sales but they do not quantify the specific components in the quarter or guide.
"We have placed the capacity in place for support of our personal mobility business." — Ivo Jurek (CEO)