Power transmission and fluid power solutions provider Gates Corporation (NYSE: GTES) met Wall Street’s revenue expectations in Q4 CY2025, with sales up 3.2% year on year to $856.2 million. Its non-GAAP profit of $0.38 per share was 4% above analysts’ consensus estimates.

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Ivo Jurek, Gates Industrial's Chief Executive Officer, commented, "In 2025, we delivered double-digit growth in earnings per share and reduced our net leverage ratio while managing through an uncertain demand environment. Our strategic growth initiatives continued to gain momentum and we improved the cost position of our business. We generated a substantial increase in cash from operating activities and our balance sheet is strong."

Company Overview

Helping create one of the most memorable moments for the iconic “Jurassic Park” film, Gates (NYSE: GTES) offers power transmission and fluid transfer equipment for various industries.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Gates Industrial Corporation grew its sales at a sluggish 4.3% compounded annual growth rate. This was below our standard for the industrials sector and is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Gates Industrial Corporation’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 1.8% annually.

We can dig further into the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Gates Industrial Corporation’s organic revenue averaged 1.4% year-on-year declines. Because this number aligns with its two-year revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, Gates Industrial Corporation grew its revenue by 3.2% year on year, and its $856.2 million of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 3.1% over the next 12 months. While this projection implies its newer products and services will fuel better top-line performance, it is still below average for the sector.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Gates Industrial Corporation’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 13% over the last five years. This profitability was top-notch for an industrials business, showing it’s an well-run company with an efficient cost structure. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Gates Industrial Corporation’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q4, Gates Industrial Corporation generated an operating margin profit margin of 12.6%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Gates Industrial Corporation’s EPS grew at a spectacular 16.8% compounded annual growth rate over the last five years, higher than its 4.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Gates Industrial Corporation’s earnings to better understand the drivers of its performance. A five-year view shows that Gates Industrial Corporation has repurchased its stock, shrinking its share count by 11.5%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Gates Industrial Corporation, its two-year annual EPS growth of 6.1% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q4, Gates Industrial Corporation reported adjusted EPS of $0.38, up from $0.36 in the same quarter last year. This print beat analysts’ estimates by 4%. Over the next 12 months, Wall Street expects Gates Industrial Corporation’s full-year EPS of $1.52 to grow 4.1%.

Key Takeaways from Gates Industrial Corporation’s Q4 Results

It was good to see Gates Industrial Corporation beat analysts’ EPS expectations this quarter. On the other hand, its EBITDA missed and its organic revenue fell slightly short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded up 2.8% to $27.25 immediately following the results.

Is Gates Industrial Corporation an attractive investment opportunity at the current price? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).