Gates Industrial Corporation plc

Second-quarter 2026 sales were $942 million, up 6.6% including foreign currency benefits and up 4.9% on a core basis. Adjusted EBITDA was about $211 million, with a 22.5% margin, and adjusted gross margin increased 50 basis points. Adjusted EPS rose 13% to $0.44. By segment, Power Transmission sales were $589 million with over 5% core growth and a 60 bps margin increase; Fluid Power sales were $353 million with 4.2% core growth, while its adjusted EBITDA margin decreased 120 bps due to footprint realignment costs and enterprise investments. For 2026, Gates raised full-year core sales growth guidance to 2.5% to 4.5%, adjusted EBITDA to $800 million to $830 million, and adjusted EPS to $1.62 to $1.70. Third-quarter revenue is expected to be $880 million to $920 million, with core revenue up about 5.5% at the midpoint and adjusted EBITDA margin up 50 bps to 90 bps versus Q3 2025.

Ivo Jurek framed the quarter as evidence that Gates is moving into an early industrial recovery, with improving industrial OEM schedules, solid distributor orders, and broadening demand across most end markets. He emphasized that the company’s self-help initiatives are starting to show through in margins and that strategic growth areas like personal mobility and data centers should support outgrowth over time. His tone was confident and constructive, repeatedly pointing to stronger second-half growth, margin expansion, and a strong balance sheet with capital allocation flexibility.

Brooks Mallard focused on the mechanics behind the margin and guidance changes. He said Q2 free cash flow was about $60 million, trailing 12-month free cash flow to adjusted net income was 94%, net leverage fell to 1.8x, and the company repurchased about $22 million of stock. He also said the company is seeing price increases to offset oil- and petroleum-related cost inflation, expects Q3 incrementals of 35% to 40% before moving back to 45% plus in Q4, and expects price/cost to be at least neutral in the back half. He described footprint optimization, restructuring, and cost realignment as ongoing supports to margins, with benefits rolling through into 2027.

Analysts pressed on how much of the expected second-half margin improvement comes from temporary headwinds fading versus better organic leverage, and management said both are contributing, with Q3 incrementals temporarily diluted by pricing actions before improving in Q4. Questions also focused on EMEA’s strong 6.4% core growth, where management cited broad industrial strength, and on North America’s slower pace, which they said improved as the quarter progressed and was held back by weak agriculture and auto OEM. Analysts probed the growth in personal mobility, on-highway, and data centers, and management said these are real secular and cyclical opportunities, not just inventory restocking, with personal mobility still expected to grow 25% to 30% over the next couple of years and data center revenue targeted at $100 million to $200 million by 2028.