Power transmission and fluid power solutions provider Gates Corporation (NYSE: GTES) reported Q2 CY2026 results topping the market’s revenue expectations, with sales up 6.6% year on year to $941.6 million. Its non-GAAP profit of $0.44 per share was 5.8% above analysts’ consensus estimates.

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Company Overview

Helping create one of the most memorable moments for the iconic “Jurassic Park” film, Gates (NYSE: GTES) offers power transmission and fluid transfer equipment for various industries.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, Gates Industrial Corporation’s 1.2% annualized revenue growth over the last five years was weak. This was below our standards and is a poor baseline for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Gates Industrial Corporation’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

Gates Industrial Corporation also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Gates Industrial Corporation’s organic revenue was flat. Because this number aligns with its two-year revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, Gates Industrial Corporation reported year-on-year revenue growth of 6.6%, and its $941.6 million of revenue exceeded Wall Street’s estimates by 1.7%.

Looking ahead, sell-side analysts expect revenue to grow 4.7% over the next 12 months. While this projection suggests its newer products and services will fuel better top-line performance, it is still below average for the sector.

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Operating Margin

Gates Industrial Corporation has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 12.8%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Gates Industrial Corporation’s operating margin rose by 2.1 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q2, Gates Industrial Corporation generated an operating margin profit margin of 14%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Gates Industrial Corporation’s EPS grew at 5.2% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 1.2% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Gates Industrial Corporation’s earnings to better understand the drivers of its performance. As we mentioned earlier, Gates Industrial Corporation’s operating margin was flat this quarter but expanded by 2.1 percentage points over the last five years. On top of that, its share count shrank by 14%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Gates Industrial Corporation, its two-year annual EPS growth of 5.2% is similar to its five-year trend, implying stable earnings.

In Q2, Gates Industrial Corporation reported adjusted EPS of $0.44, up from $0.39 in the same quarter last year. This print beat analysts’ estimates by 5.8%. Over the next 12 months, Wall Street expects Gates Industrial Corporation’s full-year EPS to grow 15% from $1.56 to $1.79.

Key Takeaways from Gates Industrial Corporation’s Q2 Results

It was encouraging to see Gates Industrial Corporation beat analysts’ revenue expectations this quarter. We were also happy its organic revenue narrowly outperformed Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 3.8% to $26.77 immediately after reporting.

Gates Industrial Corporation put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here (it’s free).