Is Modine Stock Still Worth Buying After a 63% YTD Rally?

Shares of Modine Manufacturing MOD have been on a tear. The stock is up nearly 63% year to date, outperforming the industry as well as peers, including Vertiv Holdings VRT and Johnson Controls JCI. After such a strong run, investors are wondering if all the good news has already been priced in.

YTD Price Performance

In Modine’s case, the rally is backed by real earnings momentum, strong demand visibility, and a major business transformation. With a Zacks Rank #1 (Strong Buy) and rising estimates, the story still looks compelling—even after the surge. You can see the complete list of today’s Zacks #1 Rank stocks here.

Riding the AI-Driven Data Center Boom

Modine has rapidly evolved into a key player in data center cooling, a market benefiting from the explosive growth of AI and cloud infrastructure. In its last reported quarter, revenues rose 31% year over year to $805 million, while adjusted EPS jumped 29% to $1.19, comfortably beating estimates. The strong performance was primarily driven by Climate Solutions unit, particularly data center cooling.

Within Climate Solutions, data center sales surged 78% year over year. Management expects data center revenues to grow 50-70% annually over the next two fiscal years. That reflects structural demand tied to hyperscalers building AI capacity.

Importantly, Modine now has roughly five years of pipeline visibility, supported by record order intake and long-term capacity agreements. In the fourth quarter, implied data center revenues are expected to exceed $400 million, which translates into a $1.6 billion annualized run rate.

Margins Expanding as Scale Improves

Climate Solutions margins are steadily improving. In the latest quarter, segment adjusted EBITDA margin came in at 17.9%. For the fiscal fourth-quarter 2026, management expects margins in the 20-21% range and aims to reach 20-23% in fiscal 2027.

As production scales and new chiller lines ramp up, earlier expansion inefficiencies are being absorbed. Modine is targeting eight chiller lines by the end of fiscal 2026 and about 20 lines by early fiscal 2028—representing roughly 125% cumulative capacity expansion in two years.

At the same time, the company is applying its 80/20 operating discipline—focusing on high-return products and simplifying operations. This is helping improve mix and execution.

For fiscal 2026, MOD raised guidance and now expects total revenue growth of 20-25% and adjusted EBITDA of $455-$475 million.

Portfolio Simplification Unlocks Value

Another major catalyst is Modine’s planned spin-off of its Performance Technologies business via a Reverse Morris Trust transaction with Gentherm THRM. After the deal closes (expected in late calendar 2026), Modine will emerge as a pure-play Climate Solutions company focused on data centers and commercial HVAC. This move should improve overall margin profile and sharpen capital allocation toward higher-growth businesses

Currently, Performance Technologies segment remains somewhat soft, with sales guided flat to down 7% for fiscal 2026. While this segment has shown cost discipline, it still carries cyclicality. Once separated, Modine’s growth story becomes stronger.

Valuation & EPS Estimates

Modine trades at around 31X forward earnings, above its sub-industry average as well as its own five-year average. But the company’s strong fundamentals support premium valuation.

MOD Valuation Vs. Industry

The Zacks Consensus estimate implies EPS growth of 19% in fiscal 2026 and 50% in fiscal 2027. The consensus mark for fiscal 2026 and 2027 EPS has moved upward by 18 cents and 85 cents, respectively, over the past 30 days.

Wrapping Up

Modine’s 63% year-to-date rally is driven by real fundamentals—not hype. The company is benefiting from a structural AI and data center cooling tailwind, expanding margins through scale, and simplifying its portfolio to become a higher-quality Climate Solutions pure play.

While valuation is elevated, earnings growth, multi-year demand visibility, and upward estimate revisions justify the premium.

With strong guidance and rising profitability, Modine still looks like a buy for investors willing to ride the data center cooling wave.

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This article originally published on Zacks Investment Research (zacks.com).

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