Global leader in thermal management solutions Modine Manufacturing MOD recently gave its investors a reason to cheer by announcing plans to buy back up to $100 million worth of its own stock. Modine has also expanded its capacities for its range of coolant distribution units (CDUs) under the Airedale by Modine brand. The expansion is in response to growing demand from data centers for high-performance, energy-efficient hybrid cooling solutions. The Airedale CDU, which was initially launched as a 1MW unit, has been made available in 400kW to 2MW capacities as part of the global, standardized range manufactured in the United States and Europe.
Amid these developments, is Modine Manufacturing worth investing in now? Let’s explore.
CDU Demand, Expansion Efforts and Buyouts to Fuel Growth
The company’s investment in liquid cooling solutions, especially its CDUs, has been gaining significant traction, with increasing interest from hyperscaler and colocation customers. It has been seeing strong growth in its climate solutions segment, particularly in the data center business, which had a 176% increase in revenues in the third quarter of fiscal 2025.
Last month, the company announced $180 million in orders for its Airedale by Modine brand data center cooling systems from a new customer that is a leading AI infrastructure developer. The delivery of these orders is expected throughout 2025 and the first half of 2026, potentially boosting MOD’s top-line growth. The Scott Springfield acquisition has been a key driver, boosting the company’s global service capabilities and portfolio.
MOD’s expansion in India with a new manufacturing facility is another positive step, supporting both data center cooling and power generation needs in the region. Furthermore, Modine’s HVAC & Refrigeration products also had 15% growth in the third quarter, driven by Indoor Air Quality sales from the Scott Springfield acquisition and school products.
The company now has a favorable sales mix in its Climate Solutions, with higher data center sales benefiting the adjusted EBITDA margin with a 200 basis point improvement in the third quarter.
Challenges in MOD’s Path
MOD has been facing challenges in its Performance Technologies segment due to weakness in automotive, commercial vehicle and off-highway markets. Extended customer shutdowns and market slowdowns have been impacting sales, particularly in liquid and air-cooled applications.
The company’s advanced solutions sales were down 7% in the third quarter of fiscal 2025, due to a decline in EV auto and eVantage systems due to temporary supply chain issues impacting major North American bus customers. These issues are expected to persist amid the ongoing macroeconomic uncertainties and hiked tariffs on auto imports from Mexico and Canada.
MOD Price Performance & Stock Valuation
MOD shares have plunged 25.2% over the past six months, underperforming the Zacks Auto, Tires and Trucks sector and the Zacks Automotive – Original Equipment industry’s decline of 2.2% and 6.5%, respectively. The S&P 500 index has returned 4.7% in the same time frame.
Modine shares have also underperformed industry peers like China Yuchai International CYD, Dana DAN and Strattec Security STRT in the past six months. CYD, DAN, and STRT shares have appreciated 68%, 49.2% and 23.4%, respectively, over the same period.
Six Month Performance
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MOD shares are currently cheap, as suggested by the Value Score of B. In terms of the forward 12-month price/earnings, MOD is trading at 17.26x, lower than its median of 28.43x and the broader sector’s 20.13x.
Price/Earnings Ratio (F12M)
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MOD’s Fiscal 2025 Outlook Positive
For fiscal 2025, Modine expects net sales in the range of $2.55-$2.67 billion, indicating year-over-year growth of 6% to 11%. Adjusted EBITDA is expected to be between $375 million and $395 million, implying growth of 19-26% on a year-over-year basis. Adjusted EPS is anticipated between $3.65 and $3.95, suggesting growth of 12% to 22%.
The company foresees strong growth in its data center segment, expecting 110-120% growth in fiscal 2025. HVAC & Refrigeration and Advanced Solutions segments are also expected to experience moderate growth. However, liquid-cooled applications, air-cooled applications and heat transfer products are anticipated to have double-digit declines in the fiscal year.
MOD’s FY25 and FY26 EPS Estimates
The Zacks Consensus Estimate for Modine’s fiscal 2025 EPS is currently pegged at $3.88, up by 1.04% over the past 30 days. However, EPS estimates for fiscal 2026 have moved south in the past 30 days by 3 cents.
Modine Manufacturing Company Price and Consensus
Modine Manufacturing Company Price and Consensus
Modine Manufacturing Company price-consensus-chart | Modine Manufacturing Company Quote
MOD Stock: Buy, Sell or Hold?
Modine’s strategic investments in data center cooling, liquid cooling solutions and global footprint expansion, along with the latest $100 million share buyback plan, position it well for long-term growth. Its Growth Score of A makes the stock attractive for growth-oriented investors.
However, near-term challenges in the Performance Technologies segment and macroeconomic risks continue to pose headwinds for the company.
MOD currently carries a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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