Gates Industrial (GTES) recently dipped 25% off 2025 highs but snapped back strong this week and retook the rising 200MA on 3-11. GTES is also seeing unusual call buys on multiple days including 3/11 action with 2000 April $20 calls bought where 4000 are already in open interest and 3000 March $21 calls bought to open on 2/5. GTES has also seen insiders purchase shares, Director Wilson Neely was a buyer in February and March 2024 and also recently bought in August while another Director purchased 60,000 shares on 3/7 at $19.56/share increasing his position 47%.

Gates manufactures and sells engineered power transmission and fluid power solutions offering synchronous or asynchronous belts, including V-belts, CVT belts, and Micro-V belts, as well as related components, such as sprockets, pulleys, water pumps, tensioners, and other accessories; solutions for stationary and mobile drives, engine systems, and personal mobility application platforms; metal drive components; and kits for automotive replacement channels. It also provides fluid power solutions comprising stationary hydraulics, mobile hydraulics, vehicle systems, and other industrial application platforms; and hydraulics, including hoses, tubing, coupling, and fittings, as well as assemblies. The company’s products are used in applications across various markets, including industrial off-highway, such as construction and agriculture; industrial on-highway commercial vehicles comprising heavy-duty trucks and buses, energy and resources, automotive, and personal mobility; and various industrial applications, such as automated manufacturing and logistics systems. Gates last year partnered with CoolIT Systems, a leader in liquid cooling in data centers.

GTES has a market cap of $5B and trades 11.5X Earnings, 9.2X EBITDA and 16.8X FCF with revenues seen rising 4.6% in FY26 with 17.5% EPS growth after a mixed FY25. GTES beat estimates last quarter and noted it has optionality for capital deployment. Datacenter liquid cooling applications with its electronic water pumps and hoses should present an exciting new growth opportunity for Gates Industrial.

At the Barclays Conference last month, CEO, Ivo Jurek, provided an optimistic outlook for 2025, citing positive signs of growth in Asia, a potential recovery in industrial end markets, and the company’s ability to continue driving margin expansion through productivity initiatives and cost savings, even without a rebound in volumes. GTES sees a significant opportunities to convert the $7 billion TAM in the MOEM space over the next 10-30 years. GTES developed new products for data center applications, including an electric water pump for cooling solutions, and is working with hyperscale operators on projects. It expects $100-200 million in revenue from data center opportunities over the next 2-3 years. GTES sees positive trends in electronics and logistics/warehousing equipment markets, which are starting to show signs of bottoming out.