A month has gone by since the last earnings report for Rexnord . Shares have added about 4.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Rexnord due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Rexnord December-End Quarter Earnings Beat, Decline Y/Y
Rexnord reported better-than-expected results for the quarter ended Dec 31, 2020. Its earnings beat estimates by 2.6%, while sales exceeded the same by 4.8%.
The machinery company’s adjusted earnings in the reported quarter were 39 cents per share, surpassing the Zacks Consensus Estimate of 38 cents. However, the bottom line decreased 18.8% from the year-ago quarter number of 48 cents due mainly to lower sales generation and a fall in margins.
For calendar 2020, the company’s adjusted earnings were $1.77 per share, surpassing the Zacks Consensus Estimate of $1.76. However, the bottom line decreased 10.6% from the previous year.
Sales Details
In the reported quarter, Rexnord’s net sales were $490.4 million, decreasing 0.3% from the year-ago quarter. The results suffered from a 2% decline in core sales, partially offset by a 1% positive impact of foreign currency translations and a 1% gain from acquired assets.
However, the company’s net sales surpassed the Zacks Consensus Estimate of $468 million.
The company reports results under two segments — Process & Motion Control, and Water Management. The quarterly segmental results are briefly discussed below:
Revenues from Process & Motion Control totaled $302 million, down 7.9% year over year. It represented 61.6% of the company’s quarterly net sales. Core sales in the quarter decreased 8% year over year due mainly to weakness in the aerospace business. Also, divestiture had an adverse impact of 1%, while foreign currency translations benefited the company by 1%.
Water Management’s revenues, representing 38.4% of net sales, were $188 million, up 14.6% year over year. Core sales in the quarter increased 10%, while acquired assets (Hadrian and Just Manufacturing) contributed 5% to sales growth. The rise in core sales was driven by high demand for hygienic and touchless solutions.
For calendar 2020, the company’s net sales were $1.98 billion, down 3.8% from the previous year. However, the top line surpassed the Zacks Consensus Estimate of $1.96 billion.
Margin Profile
In the reported quarter, Rexnord’s cost of sales increased 2.9% year over year to $308.7 million. It represented 63% of net sales versus 61% recorded in the year-ago quarter. Gross margin decreased 190 bps to 37.1%. Selling, general and administrative expenses of $116.4 million increased 14.5% year over year and represented 23.7% of net sales versus 20.7% in the year-ago quarter.
Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $95.9 million, down 10.4% year over year. Adjusted EBITDA margin was 19.6%, down 220 bps from the prior-year quarter. For the Process & Motion Control segment, adjusted EBITDA margin decreased 260 bps to 20.1%, while that for the Water Management segment fell 150 bps to 24.5%.
Adjusted operating income declined 15% year over year to $73.1 million, while margin fell 260 bps to 14.9%. Interest expenses, net, in the quarter were $11.7 million, down 18.8% year over year.
Balance Sheet and Cash Flow
Exiting the December-end quarter, Rexnord had cash and cash equivalents of $255.6 million, reflecting a 21.7% decline from $326.6 million recorded in the last reported quarter. Long-term debt decreased 0.3% sequentially to $1,189.2 million.
In calendar 2020, it generated net cash of $320.2 million from operating activities, increasing 11.4% year over year. Capital investment for purchasing property, plant and equipment rose 0.7% to $44.2 million. Free cash flow was $276 million, increasing from $243.6 million in the previous year. During the nine months ended December 2020, the company paid out dividends amounting to $28.8 million. It also repurchased shares worth 59.3 million during the same period.
Outlook
Rexnord anticipates sales growth, margin improvement (on the back of cost-control actions) and healthy free cash flow generation for 2021. For the year, the company expects sales growth in the mid-single-digit range and modest margin expansion.
For the first quarter of 2021, the company expects high-single-digit growth on a year-over-year basis for Water Management sales and adjusted EBITDA margin of 25-26%. Then again, sales for Process & Motion Control are expected to decline in the low-double-digit range and adjusted EBITDA margin is anticipated to be 22.5-23.5%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -11.56% due to these changes.
VGM Scores
Currently, Rexnord has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Rexnord has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Rexnord (RXN) Up 4.7% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Rexnord . Shares have added about 4.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Rexnord due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Rexnord December-End Quarter Earnings Beat, Decline Y/Y
Rexnord reported better-than-expected results for the quarter ended Dec 31, 2020. Its earnings beat estimates by 2.6%, while sales exceeded the same by 4.8%.
The machinery company’s adjusted earnings in the reported quarter were 39 cents per share, surpassing the Zacks Consensus Estimate of 38 cents. However, the bottom line decreased 18.8% from the year-ago quarter number of 48 cents due mainly to lower sales generation and a fall in margins.
For calendar 2020, the company’s adjusted earnings were $1.77 per share, surpassing the Zacks Consensus Estimate of $1.76. However, the bottom line decreased 10.6% from the previous year.
Sales Details
In the reported quarter, Rexnord’s net sales were $490.4 million, decreasing 0.3% from the year-ago quarter. The results suffered from a 2% decline in core sales, partially offset by a 1% positive impact of foreign currency translations and a 1% gain from acquired assets.
However, the company’s net sales surpassed the Zacks Consensus Estimate of $468 million.
The company reports results under two segments — Process & Motion Control, and Water Management. The quarterly segmental results are briefly discussed below:
Revenues from Process & Motion Control totaled $302 million, down 7.9% year over year. It represented 61.6% of the company’s quarterly net sales. Core sales in the quarter decreased 8% year over year due mainly to weakness in the aerospace business. Also, divestiture had an adverse impact of 1%, while foreign currency translations benefited the company by 1%.
Water Management’s revenues, representing 38.4% of net sales, were $188 million, up 14.6% year over year. Core sales in the quarter increased 10%, while acquired assets (Hadrian and Just Manufacturing) contributed 5% to sales growth. The rise in core sales was driven by high demand for hygienic and touchless solutions.
For calendar 2020, the company’s net sales were $1.98 billion, down 3.8% from the previous year. However, the top line surpassed the Zacks Consensus Estimate of $1.96 billion.
Margin Profile
In the reported quarter, Rexnord’s cost of sales increased 2.9% year over year to $308.7 million. It represented 63% of net sales versus 61% recorded in the year-ago quarter. Gross margin decreased 190 bps to 37.1%. Selling, general and administrative expenses of $116.4 million increased 14.5% year over year and represented 23.7% of net sales versus 20.7% in the year-ago quarter.
Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $95.9 million, down 10.4% year over year. Adjusted EBITDA margin was 19.6%, down 220 bps from the prior-year quarter. For the Process & Motion Control segment, adjusted EBITDA margin decreased 260 bps to 20.1%, while that for the Water Management segment fell 150 bps to 24.5%.
Adjusted operating income declined 15% year over year to $73.1 million, while margin fell 260 bps to 14.9%. Interest expenses, net, in the quarter were $11.7 million, down 18.8% year over year.
Balance Sheet and Cash Flow
Exiting the December-end quarter, Rexnord had cash and cash equivalents of $255.6 million, reflecting a 21.7% decline from $326.6 million recorded in the last reported quarter. Long-term debt decreased 0.3% sequentially to $1,189.2 million.
In calendar 2020, it generated net cash of $320.2 million from operating activities, increasing 11.4% year over year. Capital investment for purchasing property, plant and equipment rose 0.7% to $44.2 million. Free cash flow was $276 million, increasing from $243.6 million in the previous year. During the nine months ended December 2020, the company paid out dividends amounting to $28.8 million. It also repurchased shares worth 59.3 million during the same period.
Outlook
Rexnord anticipates sales growth, margin improvement (on the back of cost-control actions) and healthy free cash flow generation for 2021. For the year, the company expects sales growth in the mid-single-digit range and modest margin expansion.
For the first quarter of 2021, the company expects high-single-digit growth on a year-over-year basis for Water Management sales and adjusted EBITDA margin of 25-26%. Then again, sales for Process & Motion Control are expected to decline in the low-double-digit range and adjusted EBITDA margin is anticipated to be 22.5-23.5%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -11.56% due to these changes.
VGM Scores
Currently, Rexnord has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Rexnord has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.