Commercial, industrial and automobile HVAC systems maker Modine Manufacturing (NYSE:MOD) stock has been rallying solidly on the heels of improving fundamentals post-pandemic. The Company manufactures ventilation and HVAC systems for use in everything from cars, buses, trucks to data centers, buildings, and heavy construction vehicles with operations worldwide. The strong recovery in the automotive market and the return to normal bodes well for its core business as commuters and workers populate roads and buildings.
The acceleration of COVID vaccinations should continue to press the reopening theme. The Company has also implemented various environmental initiatives to reduce carbon emissions. For example, it’s exhaust gas recirculation (EGR) coolers for light and heavy duty vehicles capture, cool, and remove harmful chemicals from a vehicle’s exhaust gas. It recirculates the cleaned gas back through the engine thereby reducing greenhouse gases. The Company is working on optimizing fuel cell technology for transit buses. Prudent investors looking for exposure in the economic reopening can watch shares of Modine Manufacturing for opportunistic pullback levels.
Fiscal Q4 2021 Earnings Release
On May 26, 2021, Modine released its fiscal fourth-quarter 2021 results for the quarter ended March 2021. The Company reported an adjusted earnings-per-share (EPS) profit of $0.51 versus $0.27 consensus analyst estimates, a $0.24 beat. Revenues grew 8.9% year-over-year (YoY) to $514.9 million, beating analyst estimates for $493 million. Full-year fell (-8%) to $1.8 billion with full fiscal year impairment charges resulting in a (-$97.7 million) loss or (-$4.11) per share. Modine Manufacturing President and CEO, Neil Brinker stated:
“The Building HVAC segment delivered another impressive quarter with significant increases in heating and data center sales. This, along with market-driven improvements in our Heavy Duty Equipment segment, resulted in solid top-line performance… Overall we are please with our fiscal 2021 results given the impact of the pandemic and numerous challenges faced this year. We expected our markets to continue to improve and to carry this positive momentum into fiscal 2022.”
Raising Full-Year Fiscal 2022 Guidance
Modine raised full-year fiscal 2022 revenues to grow 12% to 18%, which is $2.03 billion to $2.14 billion versus the $1.92 billion consensus analyst estimates. Adjust EBITDA is expected to come in between $170 million to $185 million versus $166 million analyst estimates.
Conference Call Takeaways
CEO Brinker pointed out:
“Last October, we announced the sale of our liquid cooled automotive business to Dana. And then in February, we announced that we had reached an agreement for the sale of our Austrian air-cooled automotive plant…. I am pleased to announce that we closed on the sale of the Austrian facility at the end of April, completing the transaction. The sale of that facility drive significant value, allowing us to avoid operating losses, capital expenditures and future restricting expenses.”
He went on to point out that the regulatory process can be time intensive for the pending sale of the liquid-cooled automotive business, but the Company is working with the buyer. There is no time frame or guarantee of the outcome.
Growth Drivers
Modine CFO Mick Lucareli pointed out where the growth drivers can predictably be seen. He stated:
“As we look to the new fiscal year, we are encouraged by positive trends and general recoveries across most of our end markets. We anticipate 15% to 25% revenue growth across our three focus segment: HDE, CIS and Building HVAC, partially offsetting our strong revenue growth with our cost increases in a few areas.”
The Company expects wage expenses to rise with the recovery, in addition to “significant” expenses in the supply chain. The Company had benefitted from a $21 million savings from COVID recovery measures. The significant cost increases include higher raw materials, packaging, and freight. Metals are up 30% to 50% over prior year. “While our pass-through agreements and pricing mechanisms will recover much of these increases, we will be impacted the normal contractual lag on pass-throughs.”. The Company expects net metals costs increases to exceed $20 million this fiscal year.
MOD Opportunistic Pullback Levels
Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for MOD stock. The weekly rifle chart uptrend has a stalling 5-period moving average (MA) support at $17.18 with weekly upper BBs near the $19.38 Fibonacci (fib) level. The weekly 15-period MA support is still rising at $16.23, however, the weekly stochastic has crossed back down off the 80-band. The weekly market structure high (MSH) sell triggers on a breakdown below $13.96.
The daily rifle chart uptrend is stalled as the 5-period MA slows down at $17.48 with the daily MSH trigger forming on a breakdown under $17.45. The daily uptrend originally formed on the market structure low (MSL) trigger on the breakout through $15.48, which the bulls will protect. The daily stochastic is falling with a mini inverse pup as its tests the daily 15-period MA at $17.28. Prudent investors can monitor for opportunistic pullback levels at the $16.45 fib, $15.48 daily MSL trigger, $14.05 fib, $13.00 fib, $12.21 fib, and the $11.43 fib. Upside trajectories range from the $20.88 fib to the $28.69 fib.