We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
How is Modine Becoming a Higher-Quality Stock Than Before?
Read MoreHide Full Article
Key Takeaways
MOD's Climate Solutions made up nearly 56% of fiscal 2025 sales and grew 51% year over year.
Management expects Climate Solutions adjusted EBITDA margins to rise from 17.9% to 20-21%.
Data center revenues are projected to grow 50-70% annually over two years, backed by long-term engagements.
Modine Manufacturing (MOD - Free Report) has delivered massive gains, with shares up 62% so far this year. Traditionally, the company operated as a thermal components supplier to automotive and industrial end markets, with exposure to cyclical demand and uneven margins. That profile is now changing, as Modine steadily evolves into a higher-growth, higher-margin climate solutions player.
Image Source: Zacks Investment Research
The Climate Solutions segment, which made up nearly 56% of fiscal 2025 sales, is now the core growth engine. In the last reported quarter, segment revenues rose 51% year over year, with adjusted EBITDA margin at 17.9% and expected to move into the 20-21% range in the near term. Management is targeting 20-23% margins in the longer term, bringing the business closer to more stable, higher-quality peers.
At the same time, the planned separation of the Performance Technologies segment should further streamline the portfolio by removing a lower-margin, cyclical business. This shift alone can meaningfully improve the consistency and quality of earnings.
Modine’s growth remains strong, with improving visibility backed by a solid order pipeline. The data center business is expected to grow 50-70% annually over the next two years, supported by a multi-year pipeline and long-term customer engagements. This visibility is reflected in earnings, with consensus estimates pointing to EPS growth of about 19% in fiscal 2026 and 50% in fiscal 2027.
See how the EPS estimates have been revised in the past 90 days.
Image Source: Zacks Investment Research
As volumes scale, operating leverage is improving. The company is beginning to absorb earlier expansion costs, which should support further margin improvement.
As such, Modine is no longer trading like a typical auto or industrial name. At around 30x forward earnings, the stock sits well above its own 5-year average as well as the industry average.
Image Source: Zacks Investment Research
That gap reflects a shift in how the business is evolving. If Modine continues to deliver on margin expansion, sustain growth in Climate Solutions, and complete its portfolio transition, it may increasingly be viewed alongside higher-quality industrial and HVAC companies rather than traditional cyclical peers.
Companies like Trane Technologies (TT - Free Report) and Johnson Controls (JCI - Free Report) operate with consistently higher and more stable margins, typically above 20%, setting a benchmark for the industry. While Modine Manufacturing is moving toward this range, it still has ground to cover. Unlike these larger, more diversified peers, Modine lacks scale and a broad service network.
However, its exposure to faster-growing niches like data center cooling and its ongoing portfolio shift position it as a higher-growth, albeit still evolving, player.
View the Zacks #1 Rank List
Image: Bigstock
How is Modine Becoming a Higher-Quality Stock Than Before?
Key Takeaways
Modine Manufacturing (MOD - Free Report) has delivered massive gains, with shares up 62% so far this year. Traditionally, the company operated as a thermal components supplier to automotive and industrial end markets, with exposure to cyclical demand and uneven margins. That profile is now changing, as Modine steadily evolves into a higher-growth, higher-margin climate solutions player.
The Climate Solutions segment, which made up nearly 56% of fiscal 2025 sales, is now the core growth engine. In the last reported quarter, segment revenues rose 51% year over year, with adjusted EBITDA margin at 17.9% and expected to move into the 20-21% range in the near term. Management is targeting 20-23% margins in the longer term, bringing the business closer to more stable, higher-quality peers.
At the same time, the planned separation of the Performance Technologies segment should further streamline the portfolio by removing a lower-margin, cyclical business. This shift alone can meaningfully improve the consistency and quality of earnings.
Modine’s growth remains strong, with improving visibility backed by a solid order pipeline. The data center business is expected to grow 50-70% annually over the next two years, supported by a multi-year pipeline and long-term customer engagements. This visibility is reflected in earnings, with consensus estimates pointing to EPS growth of about 19% in fiscal 2026 and 50% in fiscal 2027.
See how the EPS estimates have been revised in the past 90 days.
As volumes scale, operating leverage is improving. The company is beginning to absorb earlier expansion costs, which should support further margin improvement.
As such, Modine is no longer trading like a typical auto or industrial name. At around 30x forward earnings, the stock sits well above its own 5-year average as well as the industry average.
That gap reflects a shift in how the business is evolving. If Modine continues to deliver on margin expansion, sustain growth in Climate Solutions, and complete its portfolio transition, it may increasingly be viewed alongside higher-quality industrial and HVAC companies rather than traditional cyclical peers.
Companies like Trane Technologies (TT - Free Report) and Johnson Controls (JCI - Free Report) operate with consistently higher and more stable margins, typically above 20%, setting a benchmark for the industry. While Modine Manufacturing is moving toward this range, it still has ground to cover. Unlike these larger, more diversified peers, Modine lacks scale and a broad service network.
However, its exposure to faster-growing niches like data center cooling and its ongoing portfolio shift position it as a higher-growth, albeit still evolving, player.
MOD currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.