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Regal Rexnord (RRX)
NYSE:RRX
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Regal Rexnord
(NYSE:RRX)
66Neutral
Positive Factors
Growth and Margins
The improved portfolio with an enhanced growth/margin profile indicates potential for outperformance regardless of the cyclical backdrop.
Market Recovery
There is a clearer path for the stock to work from here as estimates reacceleration with an end market recovery.
Order Growth
Daily order growth inflected positive for the first time since 2Q22, aided by easier comps.
Negative Factors
Revenue Pressure
RRX missed 3Q operationally and 2024 guidance was reset lower due to incremental revenue pressure.
Sales Growth Outlook
Management sees limited organic sales growth in 2025, with ongoing demand headwinds.
Regal Rexnord (RRX) vs. S&P 500 (SPY)
Market Cap
$7.05B
Dividend Yield1.32%
Average Volume (3M)884.58K
Price to Earnings (P/E)36.2
Beta (1Y)1.27
Revenue Growth-3.47%
EPS GrowthN/A
CountryUS
Employees30,300
SectorIndustrials
Sector Strength70
IndustryIndustrial - Machinery
Share Statistics
EPS (TTM)2.95
Shares Outstanding66,330,770
10 Day Avg. Volume915,193
30 Day Avg. Volume884,578
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)1.33
Price to Cash Flow (P/CF)9.40
P/FCF Ratio7.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$149.00Price Target Upside39.23% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering5
Regal Rexnord Business Overview & Revenue Model
Company DescriptionRegal Rexnord Corporation is a diversified global manufacturer specializing in engineering and manufacturing a wide array of industrial systems and components. The company operates through four main segments: Climate Solutions, Commercial Systems, Industrial Systems, and Motion Control Solutions. Regal Rexnord provides products and services that enhance energy efficiency, reliability, and productivity for its clients, offering electric motors, electrical motion controls, power transmission components, and specialty electrical components across various industries.
How the Company Makes MoneyRegal Rexnord makes money primarily through the design, manufacture, and sale of a diverse range of industrial systems and components. Its revenue streams are largely segmented into Climate Solutions, Commercial Systems, Industrial Systems, and Motion Control Solutions, each contributing to the company's overall financial performance. These segments cater to a broad range of industries including HVAC, commercial refrigeration, industrial automation, and power transmission. The company generates revenue by providing high-efficiency electric motors, controls, power transmission products, and other engineered solutions. Regal Rexnord's financial success is driven by its ability to innovate and provide reliable, energy-efficient products that meet the evolving needs of its industrial clients, as well as through strategic partnerships and acquisitions that enhance its market reach and technological capabilities.
Regal Rexnord Financial Statement Overview
Summary
Regal Rexnord demonstrates solid profitability and operational efficiency, with improvements in net profit margins and ROE. The balance sheet is stable with a moderate leverage level, though reduced cash reserves could pose a risk. The cash flow statement reveals strong operational cash flow but highlights a need to control capital expenditures to maintain financial flexibility. Overall, the company is on a positive financial trajectory but should focus on enhancing revenue growth and cash reserves.Income Statement
Regal Rexnord shows a robust gross profit margin of approximately 36.3% for the TTM period, indicating efficient cost management. The net profit margin has improved to around 3.25% from a negative position previously, showcasing a positive turnaround in profitability. However, the revenue has slightly decreased by 3.5% compared to the previous year, signaling a potential concern in top-line growth. The EBIT and EBITDA margins remain strong at 10.4% and 17.1% respectively, reflecting solid operational efficiency.75
Positive
Balance Sheet
The debt-to-equity ratio stands at 0.90, indicating a moderate level of leverage. The return on equity (ROE) is positive at 3.13%, showing a recovery in profitability. The equity ratio is approximately 44.6%, implying a stable financial foundation with a significant portion of the assets financed by equity. However, the company has seen a reduction in cash reserves, which might limit financial flexibility.68
Positive
Cash Flow
Operating cash flow is strong, with an adequate operating cash flow to net income ratio, reflecting good cash generation capability. However, free cash flow has decreased by 16.1% year-over-year, indicating pressure on cash reserves. The free cash flow to net income ratio is favorable, showing efficient cash flow conversion. Nonetheless, the company needs to monitor its capital expenditures closely.60
Neutral
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Mar 2022 | Mar 2021 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 6.03B | 6.25B | 5.22B | 3.81B | 2.91B | Gross Profit |
| 2.19B | 2.11B | 1.67B | 1.09B | 808.70M | EBIT |
| 630.00M | 601.70M | 690.40M | 332.40M | 280.10M | EBITDA |
| 630.00M | 971.00M | 1.04B | 573.00M | 447.20M | Net Income Common Stockholders |
| 196.20M | -57.40M | 488.90M | 229.60M | 187.70M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 393.50M | 574.00M | 688.50M | 672.80M | 611.30M | Total Assets |
| 14.03B | 15.43B | 10.27B | 10.28B | 4.59B | Total Debt |
| 5.61B | 6.55B | 2.02B | 1.92B | 1.07B | Net Debt |
| 5.21B | 5.98B | 1.33B | 1.25B | 460.10M | Total Liabilities |
| 7.77B | 9.07B | 3.85B | 3.93B | 2.01B | Stockholders Equity |
| 6.26B | 6.34B | 6.39B | 6.31B | 2.54B |
| Cash Flow | Free Cash Flow | |||
| 499.90M | 596.20M | 352.40M | 303.20M | 387.90M | Operating Cash Flow |
| 609.40M | 715.30M | 436.20M | 357.70M | 435.40M | Investing Cash Flow |
| 275.40M | -4.98B | -113.30M | -175.70M | -37.00M | Financing Cash Flow |
| -1.10B | 4.20B | -274.20M | -117.60M | -147.60M |
Regal Rexnord Technical Analysis
Neutral
107.02
Price Trends
116.70
Negative
137.51
Negative
149.63
Negative
Market Momentum
-4.44
Negative
49.07
Neutral
74.84
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RRX, the sentiment is Neutral. The current price of 107.02 is above the 20-day moving average (MA) of 103.56, below the 50-day MA of 116.70, and below the 200-day MA of 149.63, indicating a neutral trend. The MACD of -4.44 indicates Negative momentum. The RSI at 49.07 is Neutral, neither overbought nor oversold. The STOCH value of 74.84 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for RRX.
Regal Rexnord Risk Analysis
Regal Rexnord disclosed 36 risk factors in its most recent earnings report. Regal Rexnord reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Regal Rexnord Peers Comparison
Overall Rating
UnderperformOutperform
Sector (63)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $6.24B | 31.18 | 15.65% | ― | 13.94% | 37.49% | |
72 Outperform | $7.09B | 16.72 | 12.44% | ― | -4.00% | 6.53% | |
70 Outperform | $7.86B | 19.23 | 28.63% | 1.69% | 4.46% | 11.90% | |
70 Neutral | $5.87B | 20.89 | 14.34% | 1.98% | 5.49% | 51.02% | |
66 Neutral | $7.05B | 36.15 | 3.11% | 1.32% | -3.47% | ― | |
66 Neutral | $6.78B | 21.09 | 13.46% | ― | 6.79% | 64.30% | |
63 Neutral | $4.28B | 11.33 | 5.43% | 214.99% | 4.12% | -8.67% |
* Industrials Sector Average
Performance Comparison
RRX
Regal Rexnord
107.02
-55.47
-34.14%
DCI
Donaldson Company
65.58
-5.60
-7.87%
FLS
Flowserve
44.82
-1.19
-2.59%
GNRC
Generac Holdings
112.89
-27.23
-19.43%
SPXC
SPX
133.82
12.30
10.12%
MIDD
The Middleby
130.82
-10.43
-7.38%
Regal Rexnord Earnings Call Summary
Earnings Call Date: Feb 5, 2025 | % Change Since: -30.78% | Next Earnings Date: May 5, 2025
Earnings Call Sentiment Neutral
The earnings call presented a mixed view of Regal Rexnord Corporation's performance. While there was strong order growth, gross margin expansion, significant debt reduction, and a promising partnership with Honeywell Aerospace, the company faced challenging market conditions, a decline in EBITDA margin, and FX headwinds. Despite the headwinds, the company remains cautiously optimistic about future growth prospects.Highlights
Strong Order Growth
Orders in the fourth quarter increased 4.4% on a daily basis, with AMC orders up nearly 9% and IPS orders up nearly 4%.
Gross Margin Expansion
Adjusted gross margin for the full fiscal year was 37.8%, up 210 basis points versus the prior year, excluding industrial.
Debt Reduction
Regal Rexnord Corporation paid down $205 million of debt in the fourth quarter and $938 million for the full year, exceeding their goal.
Partnership with Honeywell Aerospace
Announced a partnership with Honeywell Aerospace to provide solutions for the advanced air mobility market, positioning Regal Rexnord Corporation for potential growth.
Positive Project Wins in IPS
IPS achieved an adjusted EBITDA margin of 26% in the quarter, up two points versus the prior year, aided by synergy realization.
Lowlights
Challenging Market Conditions
Global general industrial markets remained challenged, with significant incremental pressure in China affecting performance.
EBITDA Margin Decline
Adjusted EBITDA margin was 21.7%, down 80 basis points versus the prior year due to lower volumes, weaker mix, FX pressure, and growth investments.
Decline in Industrial Powertrain Solutions
Net sales in the fourth quarter for IPS were down 1.9% versus the prior year on an organic basis, reflecting weakness in machinery off-highway and metals and mining.
FX Headwinds
Larger than expected foreign exchange pressures negatively affected AMC's adjusted EBITDA margin.
Company Guidance
During the Regal Rexnord Corporation's fourth quarter 2024 earnings call, the company provided guidance for 2025 with several key metrics. The company anticipates flat organic sales growth from 2024's $5.88 billion, with a modest foreign exchange headwind. They project an adjusted EBITDA margin of 23% for 2025, driven by $54 million in incremental synergies and productivity initiatives despite a $20 million FX headwind. Regal Rexnord expects adjusted earnings per share (EPS) to range from $9.60 to $10.40, representing about 10% growth compared to the prior year. Additionally, they forecast generating approximately $700 million in adjusted free cash flow and aim to reduce net leverage to roughly three times by year-end, as all available free cash flow will be prioritized towards debt reduction. The guidance is cautiously optimistic, considering the stronger book-to-bill ratio compared to the previous year and improving orders momentum, especially in segments like Automation and Motion Control (AMC) and Industrial Powertrain Solutions (IPS).Regal Rexnord Corporate Events
Executive/Board ChangesBusiness Operations and Strategy
Regal Rexnord Appoints New Board Members for Strategic Growth
Positive
Feb 19, 2025
On February 17, 2025, Regal Rexnord Corporation announced the appointment of Rashida A. Hodge from Microsoft and Gerben W. Bakker from Hubbell to its Board of Directors, with terms extending until the 2025 annual meeting of shareholders. This strategic move, coinciding with the retirement of long-serving director Anesa T. Chaibi, is seen as a step to bolster the company’s strategic direction and long-term success by integrating diverse expertise in technology, AI, and global manufacturing leadership.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.