Bull of the Day: Modine (MOD)
Modine MOD is operating in some of the hottest areas of the economy, including data centers. This Zacks Rank #1 (Strong Buy) just reported a record fiscal first quarter.
Modine operates in thermal management with operations in North America, South America, Europe and Asia. This $2.3 billion market cap company is headquartered in Racine, WI and has over 11,000 employees.
The company has two segments: Climate Solutions and Performance Technologies. Modine has been in business over 100 years.
A Record Quarter in Fiscal Q1
On Aug 2, 2023, Modine reported its fiscal first quarter results and posted record revenue and significant margin expansion.
It beat the Zacks Consensus by 98%, reporting earnings of $0.85 versus the Zacks Consensus of $0.43. That's a $0.42 beat.
Modine has been executing its 80/20 strategy to transform the business but the benefits have come faster than expected. The Data Center vertical had a strong quarter, with orders materializing earlier than expected.
Net sales rose 15% to $622.4 million from $541 million a year ago due to sales volume improvements in both Climate Solutions and Performance Technologies.
Gross margin improved by 520 basis points to 20.6%, primarily due to the favorable impact of higher sales.
Climate Solutions sales were up 11% to $271.8 million due to higher sales of data center cooling products, partially offset by lower sales of heat transfer products and HVAC and refrigeration products.
Performance Technologies sales jumped 18% to $358.9 million due to higher sales across all product groups as well as favorable commercial pricing.
Raised Full Year Fiscal 2024 Guidance
The quarter was so good, Modine raised its full year fiscal 2024 guidance while also remaining cautious on some segments heading into the end of the year.
As a result, the analysts have been raising Modine's earnings estimates. In the last 60 days, 2 estimates were raised for Fiscal 2024, pushing the Zacks Consensus up to $2.88 from $2.32.
That's earnings growth of 48% as the company only made $1.95 in fiscal 2023.
Analysts also see further growth in fiscal 2025 with those estimates jumping to $3.27 from $2.84 during the same time. That's another 13.4% earnings growth.
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Shares Soar, But Are Still Cheap
As business began to heat up this year, and earnings moved higher, the shares jumped to new 5-year highs. They're up 120% year-to-date, easily beating the S&P 500 which is up 10.7%.
Image Source: Zacks Investment Research
Yet, they're still attractive on a valuation basis. Modine trades with a forward P/E of just 15.8 and has a PEG ratio of 0.6. A PEG ratio under 1.0 means a company has both growth and value, a rare combination.
If you're looking for a company with strong earnings growth and is a value stock, Modine should be on your short list.
[In full disclosure, Tracey owns MOD in the Zacks Value Investor portfolio.]
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Modine Manufacturing Company (MOD) : Free Stock Analysis Report
