Modine Posts Strong Rebound in Fiscal Q4, Raises 2023 Guidance

Edward Kim  |

Modine Manufacturing (MOD) reported better-than-expected results on Wednesday for its fiscal fourth quarter ended March 31, 2022.

The Racine, Wisconsin-headquartered maker of thermal management systems, posted revenues of $574.4 million in the quarter, up 12% from the prior year.

Operating income was $20.6 million in the quarter, compared to a loss of $14.3 million in the prior year, while adjusted EBITDA came in at $56.7 million, up 34% from the previous year.

Modine reported adjusted earnings per share of $0.57 for the quarter, compared to $0.51 in the prior year

For the full fiscal year 2022, the company reported revenues of $2.1 billion, up 13% from fiscal 2021.

Operating income was $119.2 million, compared to a loss of $97.7 million in the prior year.

For fiscal 2023, Modine is guiding the street to a 6% to 12% increase in revenues, and 13% to 23% increase in adjusted EBITDA.

On Thursday's earnings call, CEO Neil Brinker said, "I'm pleased to report that we have had strong earnings growth, driven by higher revenues in key markets, and also due to the actions taken earlier this year to improve our business."

"We have spent much of this past year strengthening our commercial organization, and we definitely saw the positive impacts of those changes this quarter, particularly in our building HVAC [heating, ventilation and air conditioning] and CIS [commercial and industrial solutions] segments. We have implemented multiple pricing adjustments, and have improved our commercial agreements with our customers."

Investment thesis

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  • Modine stock has been a disappointment for investors, having lost 53% over the past 12 months through Wednesday's close.
  • The strong earnings report drove the stock 24.7% higher Thursday to close at $10.85.
  • It was the NYSE's best performer on a strong day for markets.
  • Even with Thursday's spike, the stock's market capitalization stands at just $563 million.
  • While investors are understandably shy after riding the slide of the past year, we are encouraged by the strong close to fiscal 2022, and expect continued top and bottom line growth in fiscal 2023 from this management team.
  • Modine navigated a challenging year to show strong operational results.
  • We find notable that the company was able to both raise prices and increase volume.
  • The company's sales growth of $60 million came from $33 million in positive pricing and $41 million in higher volume, which more than offset a $14 million hit in foreign currency exposure.
  • Modine's $15 million in EBITDA growth is a testament to the company's ability to find manufacturing efficiencies and manage supply chain costs.
  • The company actually enjoyed a net $1 million decline across supply chain costs, offsetting $32 million in increased commodity and logistics costs with $33 million of material pass-through agreements and other pricing actions.

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Source: Equities News

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