How does l. corp. make money?

l. corp. generates $3.4B in annual revenue (annual revenue · their business grew +1.0% last year).

What is GTES's XVARY composite score?

l. corp. (GTES) has an XVARY composite score of 57/100, rated below average. This combines growth, value, risk, and momentum factors.

GTES — l. corp. stock analysis

Start here if you're new

what it is

Gates makes the belts, hoses, and hydraulic parts that keep factories, trucks, and heavy equipment moving.

how it gets paid

Last year L made $3.4B in revenue. Power Transmission International was the main engine at $1.33B, or 39% of sales.

why it's growing
Revenue grew 1.0% last year. The 40.4% gross margin mattered most because it shows pricing and mix held up even while demand looked shaky.

what just happened

GTES beat estimates by 5.56%, but the bigger story is still soft end-market demand.

At a glance

B+ balance sheet — decent shape, but not bulletproof

65/100 earnings predictability — reasonably predictable

14.7x trailing p/e — the market's not buying it — or you found a deal

9.5% return on capital — nothing to write home about

xvary composite: 57/100 — below average

What they do

Gates makes the belts, hoses, and hydraulic parts that keep factories, trucks, and heavy equipment moving.

Gates wins because its parts are small next to the cost of a machine shutdown. If your belt or hose fails, your line stops, your truck sits, and your repair bill gets loud fast. That helps a 14,100-employee supplier with 48 plants in 30 countries stay embedded in customer systems.

energy mid-cap industrial-parts aftermarket global-manufacturing

How they make money

$3.4B annual revenue · their business grew +1.0% last year

Power Transmission International

$1.33B

Power Transmission North America

$0.78B

Fluid Power International

$0.81B

Fluid Power North America

$0.48B

The products that matter

industrial components portfolio

Power transmission and fluid power products

$3.4B revenue

this is the whole business as presented here: $3.4B in annual revenue, 1.0% growth, and margins strong enough to still convert 12.7% of sales into net profit.

100% of revenue

newer demand pockets

Personal mobility and liquid cooling wins

qualitative growth lever

the page does not give revenue for these programs, so we will not pretend it does. what matters is that management pointed to them as the next source of mix improvement if demand steadies.

watch execution

cost structure reset

Footprint optimization and ERP rollout

margin lever

this is not a product you sell. it is the internal project that decides whether a 26.5% operating margin holds when volume does not help.

execution risk

Key numbers

$28

18-month target

$28 is 27% above the $22.02 stock price. That gap is the whole debate: soft demand today versus a better 2026.

14.7x

trailing p/e

P/E → how many dollars you pay for one dollar of profit → so what: GTES is not priced like a fast grower.

13.5%

operating margin

Operating margin → profit after running the business, before interest and taxes → so what: Gates still turns a decent chunk of sales into operating profit.

$2.2B

long-term debt

Debt → money the company owes → so what: leverage is manageable at 28% of capital, but it matters more when demand is weak.

Financial health

B+

strength

balance sheet grade B+ — solid but not elite
risk rank 3 — safer than 50% of stocks
price stability 55 / 100
long-term debt $2.2B (28% of capital)
net profit margin 14.9% — keeps 15 cents of every dollar in revenue
return on equity 12% — $0.12 profit for every $1 investors have put in

B+ — functional but not a standout on the balance sheet.

Total return vs. market

You invested $10,000 in GTES 3 years ago → it's now worth $20,150.

The index would have given you $13,920.

same period. same starting point. GTES beat the market by $6,230.

source: institutional data · total return

What just happened

beat estimates

GTES beat estimates by 5.56%, but the bigger story is still soft end-market demand.

Last reported EPS came in at $0.38 versus a $0.36 estimate, according to consensus data. Revenue was $2.6B and gross margin was 40.4%, but management commentary still pointed to pressure in agriculture and commercial on-highway.

$2.6B

revenue

$0.38

eps

40.4%

gross margin

the number that mattered

The 40.4% gross margin mattered most because it shows pricing and mix held up even while demand looked shaky.

it appears that end-market conditions may have failed to improve as expected.
industrial pmis point to pressure, as agricultural and commercial on-highway demand weakened further, and oem production rates declined late in the year.

management also alluded to restructuring, footprint optimization, and erp-related costs that have been a strain on margins and are limiting near-term earnings visibility. while productivity remained strong, investors focused on softer core sales growth, tariff-related margin dilution, and the absence of a well-defined cyclical recovery.
to wit, the stock declined over the past three months as the market discounted near-term uncertainty, despite decent fundamentals.
nonetheless, 2026 looks promising.

operationally, gates industrial is positioned for a stronger 2026 as structural cost improvements begin to flow through results.
footprint optimization and erp deployment will drive lower structural costs and efficiency gains, expanding margins as execution completes mid-year.

material cost savings from employed strategies continue to compound, improving gross margins despite uneven volume. end markets such as personal mobility and data center liquid cooling are expected to accelerate as design wins convert to revenue. stabilizing industrial demand, especially in off-highway and automotive oem channels, should further support core sales growth.

source: company earnings report, 2026

What could go wrong

the #1 risk is soft industrial and automotive OEM demand.

∘

med

Cyclical demand stays weak

Agricultural, commercial on-highway, and OEM production rates were already weak late in the year. With only one revenue line shown here, that softness effectively touches 100% of the $3.4B business.

If volume does not improve, the stock stops being a recovery setup and starts being a low-growth industrial at 14.7x earnings.

∘

med

ERP and footprint execution drags on

Management is asking investors to wait for savings from restructuring, footprint optimization, and ERP deployment. That works only if the cost program finishes before patience runs out.

A 26.5% operating margin is the cushion. If implementation keeps consuming it while sales stay near $3.4B, the margin story weakens fast.

∘

med

Debt matters more in a slow cycle

GTES carries $2.2B in long-term debt, equal to 28% of capital. That is manageable in a steady business and less comfortable when demand stalls.

Debt does not break the thesis on its own. It limits how many bad quarters the market will forgive.

all three risks hit the same place: a $3.4B revenue base, a 12.7% net margin, and $2.2B of long-term debt. if margins slip while demand stays soft, the cheap-looking multiple stops looking cheap.

source: institutional data · regulatory filings · risk analysis

Pay attention to

earnings

Next quarterly EPS versus $0.36

The latest quarter printed $0.36. You want the next report to show that cost work is landing before volume fully recovers.

trend

Industrial and on-highway demand

Agricultural and commercial on-highway markets were weak late in the year. If those order books stabilize, the revenue line has room to do more than +1.0%.

risk

ERP and footprint milestones

Management is selling a cleaner 2026 through structural savings. Missed milestones would tell you the margin bridge is longer than expected.

metric

Margin holding power

The business posted a 26.5% operating margin and 12.7% net margin. If those numbers crack before sales recover, the whole valuation argument changes.

Analyst rankings

short-term outlook

average

momentum score 3 — in human-speak, analysts see a stock waiting for cleaner demand data before it picks a direction.

risk profile

average

stability score 3 — this is not a bunker stock, but it is not a chaos story either.

chart momentum

top 20%

technical score 2 — the chart is stronger than the headline fundamentals suggest.

earnings predictability

65 / 100

You usually get a readable earnings path here, but end-market noise still creates surprises.

source: institutional data

Institutional activity

institutions have been net buying for 3 consecutive quarters — 232 buyers vs. 140 sellers in 3q2025. total institutional holdings: 0.3B shares. net buying for 3 quarters.

source: institutional data · 1q2025-3q2025

source: institutional data

Price targets

3-5 year target range

$17 $39

$22 current price

$28 target midpoint · +27% from current · 3-5yr high: $35 (+60% · 12% ann'l return)

source: institutional data · analyst targets

The deep dive

GTES

xvary deep dive

gtes

the full analysis is in the works.

what you'll get

dcf valuation model

bull / base / bear scenarios

competitive moat breakdown

quarterly earnings tracker

operating model projections

risk matrix with kill criteria

original price target + conviction

updated with every earnings

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