Modine Manufacturing edged past fiscal fourth-quarter earnings estimates late Tuesday but revenue came in a little light. The heating and air conditioning (HVAC) company forecast fiscal 2025 revenue growth based on increased AI data center demand. However, MOD shares sank on earnings.
The Wisconsin-based HVAC company announced fiscal Q4 earnings grew 15% to 77 cents per share while sales totaled $603.5 million, down 2% vs. a year earlier. Analysts expected Modine earnings per share with revenue at $605 million.
Additionally, for the full fiscal year, revenue increased 5% to $2.41 billion with earnings jumping 67% to $3.25 per share. Analysts had predicted full fiscal year profit of $3.24 per share. Consensus among analysts has Modine Manufacturing's profit growing another 30% by 2026, according to FactSet.
Part of this growth is due to the demand surge for artificial intelligence (AI) and the data centers needed to train and deploy machine learning. The high heat generated from these facilities has lifted demand for cooling products.
Chief Executive Neil Brinker said Tuesday the company's record sales in fiscal 2024 were "led by our data center business with revenues increasing 69%."
"Our fiscal 2024 results were among the best in the company's history," Brinker said. The company is "clearly benefiting from our actions to transform Modine and drive sustainable margin improvement," he added.
Fiscal 2025 Outlook
Meanwhile, looking to fiscal 2025, Modine is adding additional data center manufacturing capacity in the U.S., Canada and in the U.K. The additions will "ensure that we can meet demand from our customers in the future," Brinker said.
The company announced Tuesday that its outlook for fiscal 2025 includes net sales growth between 5% and 10% with adjusted earnings of $3.55-$3.85 per share. The revenue guidance is in line with views, but the midpoint of the EPS target is below consensus of $3.81.
"We expect revenue growth to be driven by continued strength in the data center market and growth in other targeted markets," Brinker said.
Modine Manufacturing Stock Performance
MOD stock dropped 4.5% to 96.93, hitting an intraday low of 85.77, during market trade on Wednesday. Shares had dropped 0.9% to 101.47 on Tuesday, testing the 97.91 cup-with-handle buy point intraday.
Ahead of Wednesday action, Modine stock had soared 70% in 2024.
The 13 stocks in the IBD-tracked Building-A/C & Heating Products industry group have collectively gained 16% in 2024, outperforming the S&P 500.
HVAC stock peer Carrier Global Chief Executive David Gitlin said on the company's Q1 earnings call in late April that a growth area for the HVAC business is the AI data center market.
Gitlin said that artificial intelligence offers "an outsized opportunity for cooling providers, given that AI chips drive seven times the heat generation vs. traditional chips."
He sees the data center HVAC market growing from $7 billion in 2023 to $15 billion-$20 billion in 2027.
MOD stock has a near-perfect 97 Composite Rating. The stock also has a 99 Relative Strength Rating and a 95 EPS Rating.
Please follow Kit Norton on X @KitNorton for more coverage.
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