Gates Q3 2026 slides: record margins, industrial momentum builds
Gates Industrial Corporation reported strong third-quarter 2026 earnings results on October 30, 2026, surpassing analyst expectations. The Denver-based manufacturer of power transmission and fluid power products announced adjusted earnings per share of $0.47 on $903.6 million in revenue, showing impressive growth. However, shares fell 9.22% in regular trading before recovering slightly to $23.98 in after-hours trading, likely due to concerns about near-term margin pressure and ongoing growth investments.
Gates demonstrated robust execution across its portfolio, with core sales growth accelerating to 5.5%, up from the previous quarter. Net sales reached $904 million, reflecting 5.6% total year-over-year growth, with diversified industrial sales expanding in the high single digits. Profitability metrics hit record highs, with adjusted EBITDA of $215 million and a 23.8% margin, up 90 basis points from the prior year.
Adjusted earnings per share grew 21% year-over-year at $0.47, representing an incremental margin above 40%. The company raised its full-year adjusted EPS guidance and highlighted three key themes: strong sales growth with record earnings, accelerating industrial demand, and raising full-year adjusted EPS guidance. Gates operates through two segments, the Power Transmission and Fluid Power segments, each showing distinct performance.
The Power Transmission segment reported $560 million in net sales, a 5.2% year-over-year growth, and a 24.5% adjusted EBITDA margin expanding by 160 basis points. The Fluid Power segment posted $343 million in net sales with a 6.1% core growth, but the adjusted EBITDA margin declined by 10 basis points. The company's balance sheet and cash generation metrics improved, with free cash flow conversion reaching 82% on a last-twelve-months basis, and net leverage at 1.8 times adjusted EBITDA.
Management raised its full-year 2026 outlook, emphasizing the strong capital structure and its capacity for capital deployment.
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