Industry Overview - The U.S. automotive OEM industry is currently facing a challenging environment with vehicle sales expected to moderate in 2026 due to high interest rates, elevated car prices, and tighter household budgets impacting affordability [1] Company Highlights Modine Manufacturing Co. (MOD) - Modine reported third-quarter fiscal 2026 adjusted earnings of $1.19 per share, exceeding the Zacks Consensus Estimate of $0.99 per share, with quarterly revenues of $805 million surpassing estimates by 5.90% [4] - The company is experiencing strong growth driven by increasing data center demand, expanding margins, and disciplined portfolio transformation, with management expecting 50-70% annual growth in the data center business over the next two fiscal years [5][6] - Modine's Climate Solutions segment is showing margin expansion, with expectations of segment margins in the 20-21% range for the fourth quarter and a fiscal 2027 margin target of 20-23% [7] - The company is advancing its portfolio transformation through a Reverse Morris Trust, which will position it as a pure-play diversified Climate Solutions company, with the deal expected to close in the fourth quarter of calendar year 2026 [8] - Modine has an expected revenue growth rate of 21.3% and an earnings growth rate of 49.9% for the next year ending March 2027, with the Zacks Consensus Estimate for next year's earnings improving by 0.6% in the last seven days [9] Atmus Filtration Technologies Inc. (ATMU) - Atmus reported fourth-quarter 2025 earnings of $0.66 per share, beating the Zacks Consensus Estimate of $0.57 per share, with revenues of $446.6 million exceeding estimates by 5.75% [12] - The company has an expected revenue growth rate of 13% and an earnings growth rate of 7.3% for the current year, with the Zacks Consensus Estimate for current year's earnings improving by 4.6% in the last seven days [12] LCI Industries (LCII) - LCI Industries posted fourth-quarter 2025 earnings of $0.89 per share, surpassing the Zacks Consensus Estimate of $0.69 per share, with quarterly revenues of $932.7 million exceeding estimates by 1.59% [14] - The company has an expected revenue growth rate of 3.5% and an earnings growth rate of 17.8% for the current year, with the Zacks Consensus Estimate for current year's earnings improving by 7.2% in the last seven days [15]

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Core Insights - Investors are evaluating Strattec Security (STRT) and Atmus Filtration Technologies (ATMU) for potential undervalued stock opportunities in the Automotive - Original Equipment sector [1] Group 1: Zacks Rank and Analyst Outlook - Strattec Security has a Zacks Rank of 1 (Strong Buy), indicating a more favorable earnings estimate revision trend compared to Atmus Filtration Technologies, which has a Zacks Rank of 3 (Hold) [3] Group 2: Valuation Metrics - STRT has a forward P/E ratio of 14.33, while ATMU has a forward P/E of 22.86, suggesting STRT is more attractively priced [5] - STRT's PEG ratio is 1.43, indicating a better valuation relative to its expected earnings growth compared to ATMU's PEG ratio of 2.82 [5] - STRT's P/B ratio is 1.42, significantly lower than ATMU's P/B of 13.8, further supporting STRT's valuation advantage [6] Group 3: Value Grades - STRT has earned a Value grade of A, while ATMU has a Value grade of C, highlighting STRT's superior valuation metrics and earnings outlook [6]

Financial Performance - For the year ended December 31, 2025, Atmus generated $1,764.3 million in net sales, $207.4 million in net income, and $353.5 million in adjusted EBITDA[13]. - Approximately 46% of Atmus' net sales in 2025 came from outside the United States and Canada, with 86% of net sales generated in the aftermarket[18][30]. - Cummins accounted for approximately 18.8% of Atmus' net sales in 2025, with the next four top customers collectively contributing around 40% of net sales[29][42]. Research and Development - Research, development, and engineering expenses were $40.7 million in 2025, compared to $40.6 million in 2024 and $42.5 million in 2023[47]. - Atmus has approximately 1,200 worldwide active or pending patents and over 650 trademark registrations as of December 31, 2025[24][43]. Market Presence - Atmus operates through 11 distribution centers, 10 manufacturing facilities, and five technical facilities, with a presence on six continents[18]. - The company's core markets are on-highway and off-highway, representing approximately 58% and 42% of net sales in 2025, respectively[30]. - Atmus aims to expand into industrial filtration markets and leverage its global footprint for growth opportunities[19]. - The company has a strong history with leading OEMs, which accounted for approximately 70% of net sales in 2025[28]. Product Offering - Atmus' filtration products enable lower emissions and provide superior asset protection, enhancing customer value through extended service intervals and reduced maintenance costs[20]. - Atmus' products include fuel filters, lube filters, air filters, and hydraulic filters, with a recurring revenue model driving consistent demand across regions[49]. Employee and Organizational Culture - Atmus employed approximately 4,500 persons worldwide as of December 31, 2025, with 53% represented by unions under collective bargaining agreements[51]. - Atmus' leadership culture focuses on authentic, transparent, and approachable management to empower employees and enhance organizational effectiveness[55]. - The company maintains competitive pay and benefits, conducting annual compensation studies to ensure fair and equitable pay[58]. - Inclusion and diversity are critical to Atmus' success, with 43% of the executive team being female and 14% ethnically diverse[65]. Financial Obligations and Risks - The company has a $600 million term loan facility and a five-year $400 million revolving credit facility, with interest rates affected by the net leverage ratio[261]. - A 0.125% change in SOFR would result in a $0.7 million annual impact on interest expense based on outstanding borrowings as of December 31, 2025[261]. - Atmus' foreign currency contracts could experience a potential gain or loss of approximately $10.3 million with a hypothetical 10% fluctuation in currencies for the year ended December 31, 2025[260]. Commitment to Safety and Quality - Atmus has a commitment to health, safety, and environment, aiming for zero serious injury fatalities in the workplace[61]. - The company emphasizes product quality, performance, and customer service as principal methods of competition in the filtration markets[50].

Core Insights - Atmus Filtration Technologies reported a disciplined execution in challenging global markets, with a focus on the recent acquisition of Koch Filter, which establishes a new Industrial Solutions segment [3][2] Financial Performance - Q4 sales reached $447 million, a 9.8% increase driven by approximately 5% pricing and 4% volume growth, while full-year revenue was $1.764 billion, up 5.7% [4][9] - Adjusted EBITDA for Q4 was $85 million with a margin of 19.1%, and for the full year, adjusted EBITDA increased to $354 million with a margin of 20% [12][13] - The company reported adjusted EPS of $0.66 for Q4 and $2.73 for the full year, reflecting improvements in working capital [12][13] Acquisition and Strategic Developments - The acquisition of Koch Filter closed in early January, contributing to the establishment of an industrial air filtration platform and a new reporting segment [2][5] - Atmus is focusing on integrating Koch Filter and evaluating opportunities in industrial air, liquids, and water filtration [8] Growth Strategy - The company reiterated its "four-pillar growth strategy," which includes expanding into industrial filtration, enhancing aftermarket growth, and improving supply chain transformation [6][7][8] - Atmus plans to broaden coverage for its products through new distributors and partnerships with global OEMs [7] 2026 Outlook - For 2026, Atmus expects Power Solutions revenue to be between $1.79 billion and $1.85 billion, and Industrial Solutions revenue to be between $155 million and $165 million, contributing to total revenue guidance of $1.945 billion to $2.015 billion [20] - The company anticipates modest growth in Power Solutions and favorable market conditions for Industrial Solutions, with pricing expected to contribute approximately 1% to revenue growth [18][19] Regulatory Considerations - Atmus is monitoring regulatory developments related to greenhouse gas standards and expects NOx standards to remain in place for the 2027 engine launch [23]

Financial Data and Key Metrics Changes - Sales for Q4 2025 were $447 million, a 9.8% increase from $407 million in Q4 2024, driven by pricing, higher volumes, and favorable foreign exchange [10][16] - Full year sales reached $1.764 billion, up 5.7% from $1.67 billion in 2024, supported by higher volumes and pricing actions [11][18] - Adjusted EBITDA for Q4 was $85 million (19.1% margin), compared to $78 million (19.1% margin) in the prior year [10][18] - Full year adjusted EBITDA was $354 million (20% margin), up from $330 million (19.7% margin) in 2024 [11][20] - Adjusted earnings per share for Q4 was $0.66, compared to $0.58 in the previous year [10][18] - Full year adjusted EPS was $2.73, an increase from $2.50 in 2024 [11][20] Business Line Data and Key Metrics Changes - The company will report on two segments in 2026: Power Solutions and Industrial Solutions, following the acquisition of Koch Filter [4] - The Power Solutions segment is expected to generate revenue between $1.79 billion and $1.85 billion, reflecting a 3% increase at the midpoint from the previous year [14] - The Industrial Solutions segment is projected to generate revenue between $155 million and $165 million, including one week of sales from Koch Filter [14][25] Market Data and Key Metrics Changes - The heavy-duty market is expected to be flat to up 10% compared to 2025, while the Industrial Solutions segment is anticipated to contribute 1%-4% to growth in 2026 [12][14] - Overall pricing is expected to provide approximately 1% of revenue growth, with a weaker U.S. dollar contributing an additional 1% revenue tailwind [13][14] Company Strategy and Development Direction - The company is focused on a four-pillar growth strategy: growing share in first fit, accelerating profitable growth in the aftermarket, transforming the supply chain, and expanding into industrial filtration markets [7][9] - The acquisition of Koch Filter is expected to enhance the company's industrial air filtration platform and provide opportunities for organic and inorganic growth [4][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate challenging global markets and achieve strong performance through disciplined execution [3][22] - The outlook for 2026 includes expectations for continued strong operational performance and investment for growth, with total company revenue projected to increase by 10%-14% [14][22] Other Important Information - The company returned $78 million to shareholders in 2025, consisting of $61 million in share buybacks and $17 million in dividends [5] - The company has $69 million remaining on its share repurchase authorization and expects to repurchase $20-$40 million in 2026 [5] Q&A Session Summary Question: Update on Koch Filter acquisition and data center growth - Management indicated that 8% of revenue is tied to data centers, with growth in that market expected to be in the high-teens rate [24][27] Question: Impact of tariffs on pricing - Management clarified that the 1% pricing expectation is core pricing, not directly related to tariffs, and adjustments will be made if tariff costs change [28][29] Question: Opportunities for insourcing filtration media at Koch - Management highlighted that synergies from the acquisition will primarily come from procurement and innovation workshops to enhance product offerings [33][36] Question: Outlook for off-highway markets - Management expects the off-highway markets to remain flat year-over-year, with more impact seen in the aftermarket business [37][38] Question: Adjusted EBITDA guidance and self-help levers - Management noted that the flat year-over-year adjusted EBITDA reflects strong incremental growth and ongoing evaluations for cost reductions [48][50]

Financial Data and Key Metrics Changes - In Q4 2025, sales increased to $447 million, up 9.8% from $407 million in Q4 2024, driven by a 5% increase in pricing, 4% higher volumes, and 1% favorable foreign exchange [10][16] - For the full year 2025, sales reached $1.764 billion, a 5.7% increase from $1.67 billion in 2024, with adjusted EBITDA of $354 million, up from $330 million, resulting in an adjusted EBITDA margin of 20% [11][20] - Adjusted earnings per share for Q4 2025 was $0.66, compared to $0.58 in Q4 2024, while full-year adjusted EPS was $2.73, up from $2.50 in 2024 [11][20] Business Line Data and Key Metrics Changes - The company will report on two business segments in 2026: Power Solutions and Industrial Solutions, following the acquisition of Koch Filter [4] - The Power Solutions segment is expected to generate revenue between $1.79 billion and $1.85 billion in 2026, while Industrial Solutions is projected to contribute between $155 million and $165 million [14] Market Data and Key Metrics Changes - The heavy-duty market is expected to be flat to up 10% in 2026, while the Industrial Solutions segment anticipates a growth contribution of 1%-4% [12][14] - The company expects overall pricing to provide approximately 1% of revenue growth in 2026, with a weaker U.S. dollar expected to offer a 1% revenue tailwind [13] Company Strategy and Development Direction - The company is focused on a four-pillar growth strategy: growing share in first fit, accelerating profitable growth in the aftermarket, transforming the supply chain, and expanding into industrial filtration markets [7][9] - The acquisition of Koch Filter is seen as a strategic move to enhance the industrial air filtration platform and drive growth [4] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenging global market conditions but expressed confidence in the company's ability to unlock growth potential through disciplined execution and cultural strength [3][7] - The outlook for 2026 includes expectations for total company revenue to be in the range of $1.945 billion to $2.015 billion, reflecting a 10%-14% increase compared to 2025 [14] Other Important Information - The company returned $78 million to shareholders in 2025, consisting of $61 million in share buybacks and $17 million in dividends, with $69 million remaining on the share repurchase authorization [5] - The company has a strong liquidity position with an estimated $701 million available after financing the Koch Filter acquisition [21] Q&A Session Summary Question: Update on Koch Filter acquisition and data center revenue - Management indicated that 8% of revenue is tied to data centers, growing at a high-teens rate, with a focus on commercial and industrial HVAC markets [24][27] Question: Impact of tariffs on pricing - Management clarified that the 1% pricing guidance is core pricing, not directly related to tariffs, and they aim to remain price-cost neutral [28][30] Question: Opportunities for insourcing filtration media at Koch - Management highlighted that synergies from the acquisition include procurement synergies and innovation workshops to enhance product development [33][36] Question: Outlook for off-highway markets - Management expects off-highway markets to remain flat year-over-year, with more significant impacts seen in the aftermarket [37] Question: Sales guidance for Industrial Solutions - Management provided a conservative sales guidance for Industrial Solutions, emphasizing transparency and the potential for growth based on market conditions [40][42] Question: Customer response to emissions regulation changes - Management noted that while recent regulatory changes may impact the market, they expect NOx standards to hold for the 2027 engine launch [44][46] Question: Adjusted EBITDA guidance - Management indicated that the flat year-over-year adjusted EBITDA reflects strong incrementals and ongoing investments to fuel top-line growth [48][50]

Financial Data and Key Metrics Changes - In Q4 2025, sales increased to $447 million, up 9.8% from $407 million in Q4 2024, driven by pricing, higher volumes, and favorable foreign exchange [10][16] - For the full year 2025, sales reached $1.764 billion, a 5.7% increase from $1.67 billion in 2024, supported by higher volumes and pricing actions [11][18] - Adjusted EBITDA for Q4 was $85 million, maintaining a margin of 19.1%, compared to $78 million in Q4 2024 [10][18] - Full year adjusted EBITDA was $354 million, up from $330 million in 2024, resulting in a margin of 20% [11][20] - Adjusted earnings per share for Q4 was $0.66, compared to $0.58 in the prior year [10][18] - Adjusted free cash flow for the full year was $158 million, an increase from $115 million in 2024 [11][20] Business Line Data and Key Metrics Changes - The company will report on two business segments in 2026: Power Solutions and Industrial Solutions, following the acquisition of Koch Filter [4] - The Power Solutions segment is expected to generate total revenue between $1.79 billion and $1.85 billion, reflecting a 3% increase year-over-year [12][14] - The Industrial Solutions segment is projected to contribute revenue between $155 million and $165 million, including one week of sales from Koch Filter [12][14] Market Data and Key Metrics Changes - The heavy-duty market is expected to be flat to up 10% compared to 2025, while the Industrial Solutions segment anticipates growth of 1%-4% in 2026 [12][14] - Overall pricing is expected to contribute approximately 1% to revenue growth, with the U.S. dollar anticipated to weaken, providing a 1% revenue tailwind [13][14] Company Strategy and Development Direction - The company is focused on a four-pillar growth strategy: growing share in first fit, accelerating profitable growth in the aftermarket, transforming the supply chain, and expanding into industrial filtration markets [6][9] - The acquisition of Koch Filter is expected to enhance the company's industrial air filtration platform and provide opportunities for organic and inorganic growth [4][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate challenging global markets and achieve growth through disciplined execution [3][5] - The outlook for 2026 includes expectations of strong operational performance and continued investment for growth, with total company revenue projected to be between $1.945 billion and $2.015 billion [14][15] Other Important Information - The company returned $78 million to shareholders in 2025 through share buybacks and dividends, with $69 million remaining on its share repurchase authorization [5] - The company has entered into a $1 billion term loan and a $500 million revolving credit facility to support the acquisition of Koch Filter [21] Q&A Session Summary Question: Update on Koch Filter acquisition and data center market growth - Management indicated that 8% of revenue is tied to data centers, which are growing at a high-teens rate, with a focus on product development to support this market [25][28] Question: Impact of tariffs on pricing - Management clarified that the 1% pricing expectation is core pricing, not directly related to tariffs, and they aim to be price-cost neutral [29][30] Question: Opportunities for insourcing filtration media at Koch - Management highlighted the focus on integration and identified procurement synergies, with plans for innovation workshops to leverage combined expertise [33][36] Question: Sales guidance for industrial solutions - Management provided a conservative sales guidance for industrial solutions, emphasizing transparency and the potential for growth based on market conditions [40][42] Question: Customer response to emissions regulation changes - Management noted that while recent regulatory changes may impact the market, they expect NOx standards to hold for the 2027 engine launch, with no immediate changes to product development [44][46] Question: Adjusted EBITDA guidance and self-help levers - Management acknowledged that the adjusted EBITDA guidance is flat year-over-year, reflecting strong incrementals and ongoing cost reduction strategies [48][50]

February 13, 2026 Fourth Quarter and Full Year 2025 Earnings Call Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995, including, without limitation, the slide entitled "2026 Outlook" and those that are based on current expectations, estimates and projections about the industries in which we operate and management's views, plans, objectives, projections, beliefs ...

Core Viewpoint - Atmus Filtration Technologies (ATMU) reported quarterly earnings of $0.66 per share, exceeding the Zacks Consensus Estimate of $0.57 per share, and showing an increase from $0.58 per share a year ago [1] Financial Performance - The earnings surprise for the quarter was +16.46%, with the company previously expected to post earnings of $0.61 per share but actually achieving $0.69, resulting in a surprise of +13.11% [2] - Atmus Filtration's revenues for the quarter reached $446.6 million, surpassing the Zacks Consensus Estimate by 5.75%, compared to $406.7 million in the same quarter last year [3] - The company has exceeded consensus revenue estimates three times in the last four quarters [3] Stock Performance - Atmus Filtration shares have increased approximately 19.7% since the beginning of the year, while the S&P 500 has declined by 0.2% [4] Future Outlook - The company's earnings outlook is crucial for investors, including current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [5] - The current consensus EPS estimate for the next quarter is $0.62 on revenues of $459.88 million, and for the current fiscal year, it is $2.80 on revenues of $1.89 billion [8] Industry Context - The Automotive - Original Equipment industry, to which Atmus Filtration belongs, is currently ranked in the bottom 43% of over 250 Zacks industries, indicating potential challenges ahead [9]