Modine Manufacturing: Data Center Boom Remains A Tailwind - Reiterate Buy

Core Viewpoint - Modine Manufacturing Company (MOD) is positioned favorably due to increasing demand for zero-emission and high-density cooling solutions, particularly in data centers and electric vehicle platforms, despite recent market volatility [2][4]. Financial Performance - MOD reported FQ1'25 revenues of $661.5 million, reflecting a 9.6% quarter-over-quarter (QoQ) and 6.2% year-over-year (YoY) increase, with adjusted EPS of $1.04, up 35% QoQ and 22.3% YoY [4]. - The Climate Solutions segment generated revenues of $357.3 million, a 35% QoQ and 10% YoY increase, with a gross margin of 28.2%, up 2.3 points QoQ and 1.8 points YoY [4]. - The Performance Technologies segment saw revenues of $309 million, down 10.2% QoQ and 9.9% YoY, attributed to softer automotive demand [4]. Growth Projections - The company raised its FY2025 midpoint guidance to net sales growth of 8.5% YoY and adjusted EPS growth to $3.80, up from previous estimates of 7.5% and $3.70, respectively [4]. - MOD's capital expenditures reached $100.2 million over the last twelve months, an increase of 80.8% sequentially, allowing for significant expansion in data center capacity [4]. Market Context - Despite a recent pullback in stock price, MOD has outperformed its thermal management peers and the broader market, indicating strong underlying demand for its products [3][4]. - The global spending on public cloud services is projected to grow from $561 billion in 2023 to $823 billion by 2025, with a compound annual growth rate (CAGR) of 21.1%, driven significantly by AI-related workloads [4]. Investment Outlook - MOD's stock is trading at a slight premium to updated fair value estimates, yet it remains an attractive option for growth-oriented investors, with a long-term price target of $151.30, indicating a potential upside of 28.5% [6].