A month has gone by since the last earnings report for Modine (MOD). Shares have lost about 1.2% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Modine due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important catalysts.
Modine Q4 Earnings Beat Estimates
Modine posted adjusted earnings of $1.71 per share for the fourth quarter of fiscal 2026, which increased 53% from the year-ago quarter and came above the Zacks Consensus Estimate of $1.51 by 13.2%. Net sales were $954.4 million, which rose 47% year over year and topped the consensus mark of $907 million by 5.2%.
Momentum in the company’s data center cooling business remained the key catalyst, with Data Centers revenues exceeding $400 million in the quarter, even after severe weather reduced production time.
Climate Solutions to Drive Growth
Modine delivered another quarter of outsized growth as demand for its thermal management solutions stayed strong in mission-critical applications. The quarter capped a fourth consecutive year of record revenues and adjusted EBITDA, underscoring the pace of its portfolio shift toward faster-growing end markets.
Despite supply chain constraints and weather-driven downtime across multiple locations, it still pushed meaningful volume through the system. That execution mattered because Modine is expanding capacity to meet rising needs from hyperscale data center customers.
Higher Tariffs & Material Costs Bite
Profitability reflected the near-term cost of growth. Gross margin fell 320 basis points year over year to 22.5% due to temporary costs tied to the rapid capacity expansion for data center products. Higher tariffs and material costs also weighed on the quarter, while storm-related disruption added overtime and other temporary labor expenses.
Even with those headwinds, gross profit increased to $214.7 million, helped by the sharp pickup in sales. Operating income rose to $103.9 million from $74.5 million in the year-ago period, though results included a restructuring expense of $5.2 million and $12.5 million of costs related to the pending spin-off of the Performance Technologies segment.
Climate Solutions Drives Profitability Higher
Climate Solutions was the clear engine of the quarter. Segment sales surged 87% year over year to $665.9 million, powered by strength across both data centers and HVAC technologies. Data Centers sales jumped 158% from the prior year, while HVAC Technologies sales increased 51%, including $38.2 million of incremental sales from acquired businesses.
The growth came with planned margin pressure as Modine accelerates manufacturing investments. Climate Solutions’ gross margin was 24.6%, down 510 basis points year over year, yet earnings still expanded meaningfully as scale improved. Segment operating income climbed 77% to $108.8 million, and adjusted EBITDA increased 63% to $124.3 million.
Performance Technologies Steadies Ahead of Spin-Off
Performance Technologies was largely stable on the top line. Segment sales were $294 million versus $294.8 million a year ago, as lower stationary power demand was mostly offset by higher volumes tied to automotive, commercial vehicle and off-highway customers.
Margins, however, tightened. Performance Technologies’ gross margin declined 390 basis points year over year to 16.5%, primarily due to higher material costs and tariffs. Operating income slipped 7% to $27.7 million, and adjusted EBITDA declined 15% to $37.4 million, reflecting the tougher cost backdrop as the business moves toward separation.
Cash Flow Supports Investment-Led Growth
Balance sheet and cash generation remained an important support as Modine ramps up capital spending to expand data center capacity. For fiscal 2026, net cash provided by operating activities increased to $248.7 million, while free cash flow was $105.4 million as working capital and higher capital expenditures absorbed cash.
As of March 31, 2026, cash and cash equivalents totaled $73.5 million, up from $71.6 million as of March 31, 2025. Total debt was $436.3 million, leaving net debt at $362.8 million, as borrowings funded working capital needs, acquisitions and capital expenditures during the year.
FY27 Outlook
The company’s fiscal 2027 outlook calls for another year of record performance, supported by customer relationships and a significant order book in Data Centers. Modine expects net sales growth of 20% to 35% for fiscal 2027, alongside adjusted EBITDA of $650 million to $680 million.
The company’s outlook includes Performance Technologies for all of fiscal 2027 and will be refreshed for the remaining business once the timing of the planned spin-off is finalized. Modine also expects to incur approximately $30 million to $40 million of additional costs during fiscal 2027 tied to the pending Reverse Morris Trust transaction with Gentherm.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -13.58% due to these changes.
VGM Scores
At this time, Modine has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Modine has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Modine belongs to the Zacks Automotive - Original Equipment industry. Another stock from the same industry, Westport Innovations (WPRT), has gained 9.6% over the past month. More than a month has passed since the company reported results for the quarter ended March 2026.
Westport reported revenues of $2.29 million in the last reported quarter, representing a year-over-year change of -96.8%. EPS of -$0.33 for the same period compares with -$0.14 a year ago.
For the current quarter, Westport is expected to post a loss of $0.45 per share, indicating a change of -55.2% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Westport. Also, the stock has a VGM Score of F.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
