Modine Manufacturing Co Reports Strong Q1 2026 Earnings, Boosts Growth Outlook in Climate Solutions Segment

Modine Manufacturing Co reported a strong start to fiscal 2026 with increased revenue and earnings outlook. The climate solutions segment saw an 11% revenue increase and 10% adjusted EBITDA improvement, driven by recent acquisitions. However, the performance technology segment faced tough market conditions, with an 8% decline in revenues and lower adjusted EBITDA. The company anticipates lower free cash flow as a percentage of sales this year due to increased capital expenditures.

Modine Manufacturing Co (NYSE: MOD) has reported a strong start to fiscal 2026, with a revised outlook for revenue and earnings growth. The company's first-quarter results, ending June 30, 2025, showed increased net sales and earnings, driven by improved performance in the Climate Solutions segment. However, the Performance Technologies segment faced market-related challenges, leading to a decline in revenues.

Revenue and Earnings Growth

Net sales for Modine increased by 3% to $682.8 million compared to the prior year. The Climate Solutions segment contributed significantly to this growth, with an 11% increase in sales to $397.4 million. This segment also saw a 10% improvement in adjusted EBITDA, reaching $79.4 million. The segment's gross margin improved by 20 basis points to 28.4%.

In contrast, the Performance Technologies segment experienced an 8% decrease in sales to $285.5 million. This decline was primarily due to market-related declines in heavy-duty equipment and on-highway applications products, as well as strategic product line exits. The segment's adjusted EBITDA decreased by 14% to $37.5 million, reflecting lower sales volume and higher material costs.

Outlook for Fiscal 2026

Modine has raised its revenue and earnings outlook for the fiscal year, anticipating net sales growth between 10% to 15%. The company expects adjusted EBITDA to range from $440 million to $470 million, resulting in growth between 12% and 20%. The outlook reflects the impact of recent acquisitions in the Climate Solutions segment and increased demand from data center customers.

Neil D. Brinker, President and Chief Executive Officer of Modine, stated, "We are making important investments in our business that are advancing our competitive position in key markets and allowing us to capture incremental growth opportunities this fiscal year and beyond." The company's focus remains on advancing its multi-year transformation strategy, including reallocating resources to higher growth and higher margin businesses.

Financial Performance

Net earnings increased by 8% to $51.7 million, while adjusted EBITDA increased by 0.5% to $101.4 million. Earnings per share increased by 8% to $0.95, and adjusted earnings per share increased by 2% to $1.06.

Balance Sheet and Liquidity

Net cash provided by operating activities decreased by $12.8 million to $27.7 million. Free cash flow decreased by $13.5 million to $0.2 million, primarily due to an increase in working capital, related to higher inventory balances in the Climate Solutions segment. Total debt increased by $123.4 million to $527.1 million, reflecting borrowings to fund acquisitions.

Conclusion

Modine's strong performance in the Climate Solutions segment, coupled with a revised outlook for fiscal 2026, signals a promising start to the year. However, the Performance Technologies segment's challenges and anticipated lower free cash flow as a percentage of sales highlight areas for improvement. Investors should closely monitor the company's progress and the impact of its strategic initiatives on future performance.

References

[1] https://investors.modine.com/news/news-details/2025/Modine-Reports-First-Quarter-Fiscal-2026-Results/default.aspx