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Rexnord Corporation (RXN - Analyst Report) reported earnings per share, adjusted for one-time items, of 31 cents for the second quarter of fiscal 2014 (ended Sep 28, 2013). Results were 7 cents above 24 cents earned in the year-ago quarter and also surpassed the Zacks Consensus Estimate of 26 cents per share.

Including one-time adjustments, the company reported loss per share of 54 cents compared with earnings per share of 19 cents reported in the year-ago quarter.

Revenue

Rexnord’s net sales increased 3.0% year over year to $514.5 million in the second quarter. The increase can be attributed to healthy performance at the company’s business segments.

Process & Motion Control sales in the quarter increased 0.9% to $311.8 million while sales at Water Management business were $202.7 million, up 6.5% year over year.  

Margins

Cost of sales in the second quarter increased 3.1% year over year and represented 62.7% of total revenue; up from 62.6% in the year-ago quarter. Gross margin came in at 37.3%. Selling, general and administrative expenses, as a percentage of total revenue, stood at 20.5%.

Balance Sheet

Exiting the second quarter of fiscal 2014, Rexnord’s cash and cash equivalents stood at $206.4 million, down compared with $334.9 million in the previous quarter. Long-term debt registered a slight sequential decline and came in at $1,952.2 million at the end of the quarter.
 
Cash Flow

In the second quarter of fiscal 2014, Rexnord generated $36.4 million cash from operating activities as compared with $46.4 million generated in the year-ago quarter. Capital spending compared with the year-ago quarter declined and totaled $11.4 million in the quarter.

Outlook

For full fiscal year 2014, management of Rexnord has raised its earnings per share guidance to $1.32-$1.38 from $1.12-$1.18 expected earlier.

For the third quarter of fiscal 2014, sales are anticipated to be within $495-$505 million and adjusted earnings per share within 29-32 cents range.

Rexnord Corporation is a well-known mechanical components manufacturer and currently has a $2.1 billion market capitalization. The stock currently has a Zacks Rank #2 (Buy). Other stocks to watch out for are AO Smith Corp. (AOS - Snapshot Report) and Nidec Corporation (NJ - Snapshot Report), each with a Zacks Rank #1 (Strong Buy) while EnerSys (ENS - Snapshot Report) carries a Zacks Rank #2 (Buy).

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