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Regal Rexnord (RRX)
NYSE:RRX
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Regal Rexnord
(NYSE:RRX)
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Rating:61Neutral
Price Target:
$196.00
▲(5.71% Upside)
Action:ReiteratedDate:02/06/26
The score is driven mainly by solid financial performance led by strong free cash flow and improving profitability, plus a constructive earnings outlook with strong order/backlog visibility. These positives are tempered by stretched technical conditions (overbought readings) and a demanding valuation (high P/E, low yield), which increase downside risk if execution or macro/tariff pressures disrupt guidance.
Positive Factors
Strong cash generation
Consistently high operating and free cash flow gives Regal Rexnord durable financial flexibility to fund capex, pay down debt, and invest in strategic growth (data‑center e‑Pod scale-up). Strong cash conversion supports execution of secular initiatives and cushions cyclical pressures over months.
Exceptionally strong backlog/orders
A ~50% backlog increase and outsized Q4 orders provide multi‑quarter revenue visibility and production cadence planning. The large $735M e‑Pod win creates multi‑year, high‑margin revenue potential and improves utilization and working capital planning as projects ship.
Margin resilience and improvement
Stable high gross and EBITDA margins despite tariff and supply headwinds indicate structural pricing power, operational scale, and product mix strength. Management's guidance to ~22.5% EBITDA margin for 2026 signals durable margin floor and pathway to modest expansion with execution.
Negative Factors
Material absolute debt level
Although leverage has improved through paydowns, nearly $5B of debt remains material and constrains capital allocation. Servicing and maturities can limit flexibility for M&A, dividends, or further organic investment until net leverage targets (~2.7x) are achieved, risking execution if cash weakens.
Tariff and rare-earth supply headwinds
Sustained tariff exposure and constrained rare‑earth magnet supply are structural cost and supply risks that can compress margins and delay deliveries. Management expects pass‑through neutrality by mid‑2026, but execution risk and validation of alternate sources may prolong margin pressure and project timelines.
PES weakness and muted organic growth
Significant PES destocking from regulatory transitions and an exposed residential HVAC channel reduce recurring aftermarket demand and slow topline momentum. Combined with TTM revenue growth near +1.1%, this suggests constrained organic growth absent successful recovery or new end‑market expansion.
Regal Rexnord (RRX) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$12.33B
Dividend Yield0.97%
Average Volume (3M)1.28M
Price to Earnings (P/E)33.3
Beta (1Y)1.36
Revenue Growth-4.99%
EPS Growth22.16%
CountryUS
Employees30,000
SectorIndustrials
Sector Strength72
IndustryIndustrial - Machinery
Share Statistics
EPS (TTM)2.51
Shares Outstanding66,499,580
10 Day Avg. Volume1,327,856
30 Day Avg. Volume1,280,799
Financial Highlights & Ratios
PEG Ratio0.77
Price to Book (P/B)1.36
Price to Sales (P/S)1.57
P/FCF Ratio10.42
Enterprise Value/Market Cap1.33
Enterprise Value/Revenue2.77
Enterprise Value/Gross Profit7.35
Enterprise Value/Ebitda13.65
Forecast
1Y Price Target
$237.14Price Target Upside27.90% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering7
EPS Forecast (FY)10.66
Revenue Forecast (FY)$6.12B
Regal Rexnord Business Overview & Revenue Model
Company DescriptionRegal Rexnord Corporation, together with its subsidiaries, designs, manufactures, and sells industrial powertrain solutions, power transmission components, electric motors and electronic controls, air moving products, and specialty electrical components and systems worldwide. It operates through four segments: Commercial Systems, Industrial Systems, Climate Solutions, and Motion Control Solutions. The Commercial Systems segment provides AC and DC motors, electronic variable speed controls, fans, blowers, and precision stator and rotor kits. The Industrial Systems segment offers AC motors for industrial applications; electric alternators for prime and standby power applications to data centers, distributed energy, microgrid, rental marine, agriculture, healthcare, mobile, and defense markets; and switchgear for healthcare, government, and waste water applications, as well as residential, commercial, and industrial applications. The Climate Solutions segment provides fractional motors, electronic variable speed controls, and blowers for use in a residential and light commercial air moving applications; and fractional horsepower motors and blowers for white goods, water heating equipment, small pumps, compressors, and fans. The Motion Control Solutions segment offers bearings; conveyors; disc, gear, grid, elastomeric, and torsionally soft couplings; mechanical power transmission drives and components; worm gearing, shaft configuration, helical, bevel, helical bevel, worm, hypoid, and spur gearing products; and aerospace components. This segment serves beverage, bulk handling, metal, special machinery, energy, and aerospace and general industrial markets. The company sells its products directly to original equipment manufacturers and end-users through a network of direct and independent sales representatives, and distributors. The company was formerly known as Regal Beloit Corporation. The company was founded in 1955 and is headquartered in Beloit, Wisconsin.
How the Company Makes MoneyRegal Rexnord makes money primarily by selling engineered, branded industrial components and systems that transmit power, control motion, and improve equipment efficiency and reliability. Revenue is generated through (1) original equipment manufacturer (OEM) sales, where Regal Rexnord supplies components (e.g., motors, drives, gear motors, bearings, couplings, and conveyor/power transmission parts) that are integrated into new customer equipment; and (2) aftermarket/repair-and-replace sales, where customers purchase replacement parts and components to maintain existing installed equipment. The company typically earns revenue per unit shipped or per system delivered, with pricing influenced by product specifications, performance requirements (e.g., energy efficiency, torque/speed control), customization/engineering content, and order volume. In addition to hardware sales, the company can generate revenue from value-added services associated with its products—such as application engineering support, system integration assistance, and maintenance-related support—when such services are bundled into customer solutions or provided alongside product sales. Distribution channels commonly include direct sales to large OEMs and end users as well as sales through industrial distributors and partners that extend market reach, support smaller accounts, and facilitate aftermarket availability. Key factors supporting earnings include the breadth of the installed base (driving recurring replacement demand), brand and specification positioning in customers’ designs, exposure to maintenance-driven aftermarket demand, and operational execution (manufacturing scale, procurement, and pricing discipline) that affects margins.
Regal Rexnord Earnings Call Summary
Earnings Call Date:Feb 04, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:May 11, 2026
Earnings Call Sentiment Positive
The call conveyed strong positive momentum driven by exceptional order intake (notably a $735M e‑Pod win), a 50% year‑over‑year backlog increase, improving organic sales and double-digit EPS growth guidance. The company demonstrated margin resilience, meaningful free cash flow generation in 2025, substantial debt paydown and clear secular-market growth plans (data center, robotics, eVTOL, Kollmorgen Essentials). Significant near‑term risks remain — primarily PES channel destocking, rare earth magnet supply constraints, tariff impacts (~$155M annualized) and a reduced 2026 free cash flow guide due to working capital investments to support data center expansion. On balance the highlights (large, high‑visibility orders and backlog, revenue and EPS growth, strategic progress) outweigh the lowlights (segment weakness and near‑term supply/tariff pressures), supporting a positive outlook while acknowledging execution and macro risks that management is actively managing.Q4-2025 Updates
Positive Updates
Exceptionally Strong Order Intake and Backlog Growth
Q4 orders on a daily basis were up 53.8% year-over-year and book-to-bill was 1.48. Backlog exiting 2025 was up ~50% versus prior year, providing significant revenue visibility into 2026 and beyond.
Large Data Center e-Pod Win
Booked approximately $735 million of e‑Pod orders in Q4 (base value). Management expects these turnkey power management orders to ship primarily in 2027 (15–18 month cadence possible) and anticipates adjusted EBITDA margins on e‑Pods in the '20%+' range with upside as productivity improves.
Segment Strength — AMC and IPS Outperformance
Automation & Motion Control (AMC) sales were up ~15.2% organic in Q4 with AMC orders up 190% (driven by e‑Pods) and ex‑e‑Pods AMC orders up ~19.2% on a daily basis. Industrial Powertrain Solutions (IPS) sales were up ~3.7% organic in Q4, IPS orders up ~3.3% daily and IPS backlog up ~6% year-over-year.
Revenue and Earnings Growth
Q4 organic sales were up 2.9% year-over-year. Adjusted EPS in Q4 was $2.51, up 7.3% year-over-year. Full-year 2025 adjusted EPS was $9.65, up ~6% versus prior year.
Margin Resilience
Q4 adjusted gross margin was 37.6%, up 50 basis points year-over-year. Enterprise adjusted EBITDA margin for Q4 was 21.6% (roughly flat YoY) and full-year 2025 adjusted EBITDA margin was ~22%, roughly flat to prior year despite tariff, magnet and mix headwinds.
Strong Cash Flow and Balance Sheet Improvement in 2025
Generated $141 million of free cash flow in Q4 and $893 million of adjusted free cash flow for full-year 2025 (including the ARS program). Paid down over $700 million of debt in 2025 and net leverage improved to ~3.1x exiting the year.
Guidance and Financial Targets for 2026
2026 guidance: sales growth of roughly 3% (including ~1–1.5 pts from data center and ~1.5 pts from price/tariff passthrough), adjusted EBITDA margin to rise ~50 bps to 22.5%, adjusted EPS guidance $10.20–$11.00 (midpoint $10.60, ~10% EPS growth), cash flow guidance of ~ $650 million. Management expects tariff dollar cost neutrality by mid‑2026 and margin neutrality by year-end.
Progress on Strategic Secular Market Initiatives
Management reiterated secular market focus and targets: path for power management business from $120M to roughly $1B in ~2 years (data center/ e‑Pods), Kollmorgen Essentials target of $50M by 2028, robotics actuation opportunity funnel in excess of $200M, eVTOL chipset opportunity noted (> $200k potential per plane).
Synergy Realization
Executed $54 million of synergies in 2025 and expects to realize $40 million of additional cost synergies in 2026 (being treated conservatively as contingency).
Negative Updates
Power Efficiency Solutions (PES) Weakness and Channel Destocking
PES organic sales in Q4 were down 10.7% year-over-year and orders in PES were down 15.9% on a daily basis (book-to-bill 0.91). Management attributes the shortfall primarily to severe channel destocking after the A2L regulatory transition and expects residential HVAC to be down high-single-digits in 2026 with first-half pressure.
Margin Pressure in AMC and Supply Constraints
AMC adjusted EBITDA margin was 20.5% in Q4, down roughly 100 basis points versus prior year due to mix (incremental OEM/project volume vs. distribution) and rare earth magnet availability. Management expects rare earth headwinds to persist into mid‑2026 (roughly a 50 bps headwind in 2025) until alternate sourcing and validations complete.
Tariff-Related Headwinds
Annualized unmitigated tariff impact is approximately $155 million following recent India tariff updates. Management expects to be dollar cost neutral on current tariffs by mid‑2026 and margin neutral by year‑end, but tariffs remain a material near‑term headwind.
Reduced Free Cash Flow Guidance vs Prior Expectations
Management reduced cash flow guidance from earlier internal expectations (~$900M area referenced previously) to ~$650M for 2026. The reduction is driven mainly by $50–$100M of working capital / inventory investments to support data center growth and a lower working capital benefit assumed (roughly half of prior working capital improvement).
Mixed Near-Term Order Signals Outside Data Center
January order trends were mixed: AMC January orders up 3.9% daily, IPS down 0.5% daily and PES up 3.8% daily. Guidance assumes volume outside of data center roughly flat in 2026 and management is intentionally conservative pending sustained improvement in ISM and distribution channels.
Book-to-Bill Below 1 in IPS and PES
IPS book-to-bill in Q4 was $0.96 and PES book-to-bill was $0.91, indicating some segments were not yet in full demand recovery during the quarter.
Company Guidance
For 2026 management guided to roughly 3% sales growth (about 1–1.5 points from the large data‑center project and ~1.5 points from price largely tied to tariffs), adjusted EBITDA margin of 22.5 (up 50 bps), adjusted EPS of $10.20–$11.00 (midpoint $10.60, ≈10% growth), and adjusted free cash flow of ~ $650M (with CapEx ~ $120M); they expect to realize $40M of cost synergies (treated as contingency), embedded tariffs causing an annualized unmitigated impact of ~$155M but expect to be dollar cost neutral on tariffs by mid‑2026 and margin neutral by year‑end, assume volume broadly flat outside data centers, plan $50–$100M of working‑capital/inventory support for data center growth, see Q1 as the EPS low point with enterprise adjusted EBITDA ~21% in Q1 and sales weighted ~49%/51% H1/H2 (EPS ~48%/52% H1/H2), and target net leverage of about 2.7x by year‑end (≈3.0x midyear from 3.1x starting).Regal Rexnord Financial Statement Overview
Summary
Strong cash generation (TTM operating cash flow ~$991M; free cash flow ~$893M) supports the business, and profitability has recovered from a 2023 net loss to positive net income. Offsetting this, revenue growth is muted (TTM ~+1.1%), net margin is modest (~4.7% TTM), ROE is low (~3.9% TTM), and debt remains material even with improving leverage trends.Income Statement
RRX shows solid scale and generally healthy operating profitability, with TTM (Trailing-Twelve-Months) gross margin ~37.6% and EBITDA margin ~18.1%. Profitability has improved versus 2023 (net loss) to positive net income in 2024 and TTM, but net margin remains modest (~4.7% TTM) and below the stronger 2022 level (~9.4%). Revenue growth has cooled—TTM is slightly up (~1.1%) after a small decline in 2024—suggesting a steadier, less growth-driven earnings profile.63
Positive
Balance Sheet
Leverage is manageable but elevated for comfort: total debt remains high (TTM ~$4.94B) with debt-to-equity ~0.72, an improvement from 2023 (~1.03) and 2024 (~0.90). Equity is sizable (TTM ~$6.84B), supporting the capital structure, but returns on equity are currently low (~3.9% TTM) following weak 2023 performance, indicating the balance sheet is not yet translating into strong shareholder returns.54
Neutral
Cash Flow
Cash generation is a key strength. TTM (Trailing-Twelve-Months) operating cash flow is strong (~$991M) with robust free cash flow (~$893M), both well above 2024 levels. Free cash flow remains high relative to earnings (free cash flow to net income ~0.90 TTM), indicating good cash conversion. The main caution is that TTM free cash flow growth is negative (a step down versus the prior period), even though absolute free cash flow remains solid.71
Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 5.93B | 6.03B | 6.25B | 5.22B | 3.81B |
| Gross Profit | 2.22B | 2.20B | 2.11B | 1.70B | 1.07B |
| EBITDA | 1.20B | 1.17B | 971.00M | 1.04B | 573.00M |
| Net Income | 279.50M | 196.20M | -57.40M | 488.90M | 229.60M |
Balance Sheet | |||||
| Total Assets | 13.92B | 14.03B | 15.43B | 10.27B | 10.37B |
| Cash, Cash Equivalents and Short-Term Investments | 521.70M | 393.50M | 574.00M | 688.50M | 672.80M |
| Total Debt | 5.06B | 5.61B | 6.55B | 2.14B | 2.04B |
| Total Liabilities | 7.07B | 7.77B | 9.07B | 3.85B | 3.96B |
| Stockholders Equity | 6.84B | 6.26B | 6.34B | 6.39B | 6.37B |
Cash Flow | |||||
| Free Cash Flow | 893.10M | 499.90M | 596.20M | 352.40M | 303.20M |
| Operating Cash Flow | 990.80M | 609.40M | 715.30M | 436.20M | 357.70M |
| Investing Cash Flow | -71.00M | 275.40M | -4.98B | -113.30M | -175.70M |
| Financing Cash Flow | -814.10M | -1.10B | 4.20B | -274.20M | -117.60M |
Regal Rexnord Technical Analysis
Neutral
185.41
Price Trends
188.10
Negative
165.15
Positive
155.25
Positive
Market Momentum
-2.54
Positive
41.17
Neutral
29.04
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 185.41 is below the 20-day moving average (MA) of 203.72, below the 50-day MA of 188.10, and above the 200-day MA of 155.25, indicating a neutral trend. The MACD of -2.54 indicates Positive momentum. The RSI at 41.17 is Neutral, neither overbought nor oversold. The STOCH value of 29.04 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 "Production" 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
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $9.78B | 27.54 | 17.82% | 0.70% | 4.18% | 16.05% | |
77 Outperform | $8.93B | 17.13 | 29.51% | 2.04% | -1.64% | -2.50% | |
76 Outperform | $10.09B | 30.59 | 13.29% | ― | 12.60% | 24.02% | |
67 Neutral | $9.74B | 31.85 | 25.19% | 1.28% | 2.37% | -6.93% | |
65 Neutral | $10.05B | 28.93 | 19.12% | 0.49% | -0.37% | 21.77% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
61 Neutral | $12.33B | 33.29 | 4.18% | 0.97% | -4.99% | 22.16% |
* Industrials Sector Average
RRX
Regal Rexnord
185.41
65.61
54.76%
DCI
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84.10
17.85
26.95%
AOS
A. O. Smith Corporation
64.54
-0.63
-0.96%
SPXC
SPX
202.36
68.09
50.71%
WTS
Watts Water Technologies
293.40
87.99
42.83%
CR
Crane Company
174.28
22.32
14.69%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
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.