Gates Industrial (GTES) Barclays 43rd Annual Industrial Select Conference summary

Market outlook and demand trends

• Industrial OEM demand has shown robust recovery, with a book-to-bill ratio of 1.06, indicating strengthening order intake.

• Commercial construction equipment and on-highway segments are improving, while agricultural markets are recovering from previous lows.

• The industrial economy is emerging from a prolonged downturn, with cautious optimism for a better 2026.

• Distributors typically follow large OEMs with a one to two quarter lag, and confidence is building as PMIs begin to firm.

• Diversified industrial end markets and in-plant demand recovery are contributing to a positive outlook.

Growth initiatives and segment performance

• Personal mobility is targeted for high-20s to 30% CAGR through 2028, with $300 million revenue expected and long-term growth potential.

• Data center products are projected to reach a $100–$200 million run rate by 2028, driven by liquid cooling adoption.

• Automotive OE exposure has been reduced to 8% of revenue, down from 15% in 2018, focusing on selective participation and higher returns.

• Automotive aftermarket remains steady, growing at GDP-plus rates, with positive organic growth expected in 2026 due to an aging car fleet.

Operational efficiency and cost management

• European ERP rollout is past maximum risk, with operations stabilizing and efficiency expected to normalize in 1–1.5 quarters.

• Manufacturing footprint optimization will complete by Q2–Q3, providing earnings benefits into 2027 and further flexibility.

• Inflation is mainly in labor and energy, with pricing power in aftermarket and ongoing efficiency improvements through material science and AI.