Modine Raises Fiscal 2027 Sales Outlook After Spin-Off

The Tip Desk · November 3, 2026 · 4 min read

The thermal-management company lifted continuing-business net sales to $3.1 billion to $3.2 billion after spinning off Performance Technologies on October 1.

Modine Manufacturing (MOD), a diversified global leader in thermal management technology and solutions, reported second-quarter fiscal 2027 net sales of $994.4 million, up 35% from a year earlier, as Data Centers and Commercial HVAC carried the top line and the company completed the spin-off of Performance Technologies on October 1.

Year-over-year sales growth accelerated from 28% in the quarter ended June 30. Adjusted EBITDA rose 31% to $136.2 million, faster than the 5% increase in the prior quarter. Operating income was $97.8 million, up 33% after a 1% year-over-year decline in the first quarter.

Net earnings fell 32% to $30.3 million, reversing a 44% year-over-year increase in the prior quarter. The company said the decline included $29.5 million of income tax expense related to legal-entity restructuring to facilitate the Performance Technologies spin-off. Diluted earnings were $0.56 a share, down from $0.83. Adjusted earnings were $1.35 a share, up 27% from $1.06.

President and Chief Executive Officer Neil D. Brinker said Data Centers and Commercial HVAC delivered revenue growth of 95% and 23%, respectively, and that demand remained robust, with record orders and backlog in Data Centers. The company said it entered long-term agreements with multiple strategic suppliers to secure critical components.

Data Centers sales were $439.7 million, matching the 90% growth rate cited in the prior quarter. The company said the increase was primarily driven by higher sales to hyperscale customers in North America. Segment operating income was $61.2 million, up 70%, and adjusted EBITDA was $67.6 million, up 66%. Gross margin in the segment fell 470 basis points to 19.7%, which the company attributed primarily to higher material, component and tariff costs.

Commercial HVAC sales were $285.5 million, up 23%. The company said the increase was primarily driven by higher sales of coils, coatings, and heating and ventilation products. Segment operating income was $34.3 million, up 30%, and adjusted EBITDA was $43.0 million, up 22%. Gross margin was 23.1%, down 140 basis points, primarily due to unfavorable sales mix and higher material and tariff costs.

Performance Technologies sales were $287.7 million, up less than 1%. Higher sales to power generation and commercial vehicle customers were largely offset by lower sales to automotive and off-highway customers. Segment operating income was $32.1 million, up 8%, and adjusted EBITDA was $40.9 million, down 3%. Gross margin was 18.6%.

Consolidated gross margin compressed a further 160 basis points to 20.7% after a 340-basis-point decline to 20.8% in the prior quarter. Gross profit was $205.4 million. SG&A expenses were $104.6 million, up 24%, and decreased as a percentage of sales. The company said the SG&A increase was primarily due to higher expenses in Data Centers to support growth and costs related to the spin-off. It recorded $3.0 million of restructuring expenses, primarily severance and equipment-transfer costs, and $14.1 million in costs related to the spin-off.

For the six months ended September 30, 2026, free cash flow was a use of $145.6 million, down $115.3 million from the prior year. The company said the decrease was primarily due to higher capital expenditures to increase production capacity in Data Centers and higher net working capital, including increased inventory to support growing demand for data center cooling products. Total debt was $724.3 million as of September 30. Cash and cash equivalents were $150.6 million. Net debt was $573.7 million, up $210.9 million from the end of fiscal 2026, which the company said primarily resulted from increases in working capital and purchases of stock under its equity compensation plan.

The company said it is updating its Fiscal 2027 outlook to reflect higher expectations for its core businesses and the successful spin-off. Starting in the third fiscal quarter, Performance Technologies results will be reported as discontinued operations. Excluding Performance Technologies from both periods, the company expects revenues to increase 50 to 55 percent from the prior year. It expects full-year adjusted EBITDA for the continuing business to be $470 million to $500 million, a growth rate in excess of 50% from the prior year on the same exclusion. Fiscal 2027 net sales are now $3.1 billion to $3.2 billion. The prior outlook, issued with fourth-quarter fiscal 2026 results, had called for 20% to 35% sales growth and adjusted EBITDA of $650 million to $680 million on a combined basis. Brinker said the company is looking forward to sharing longer-term revenue and earnings targets at an Analyst and Investor Day on November 18.