Sunday, February 26, 2017

Modine Looking To Break From Its Past

Modine Manufacturing (NYSE:MOD) has some work to do. Not only have the shares been lackluster performers compared to broadly-defined peers like BorgWarner (NYSE:BWA), Dana (NYSE:DAN), Valeo (OTCPK:VLEEY), and Lennox (NYSE:LII) for some time now, the weak history with respect to margins, revenue growth, returns on capital, and cash flow suggests that that underperformance is not unreasonable.

Management hasn't been sitting still, though, and there is perhaps a more bullish outlook now. Multiple restructuring efforts have seen several plants closed over the past decade and tens of millions of dollars taken out of the cost structure more recently. What's more, management significantly accelerated its mix shift away from vehicles with what looks like a logical and reasonably priced deal. If these improvements can move the company close to a 10% EBITDA margin, there may be an argument that the shares are undervalued, though the lackluster free cash flow generation is a risk factor that I wouldn't ignore.

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Modine Looking To Break From Its Past

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