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Regal Beloit (RBC) Misses on Q2 Earnings, Lowers Guidance

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Industrial goods manufacturer Regal Beloit Corporation (RBC - Free Report) reported lackluster second-quarter 2016 results with a significant year-over-year decline in net sales and adjusted earnings owing to macroeconomic woes. Adjusted earnings for the quarter were $1.14 per share compared with $1.53 per share in the year-ago quarter and well behind the Zacks Consensus Estimate of $1.26.

Regal Beloit Corporation (RBC - Free Report) Street EPS & Surprise Percent - Last 5 Quarters | FindTheCompany

On a GAAP basis, the company reported a net income of $56.6 million or $1.26 per share compared with $62.8 million or $1.39 per share in the year-earlier quarter. The year-over-year decline in GAAP earnings was due to lower revenues.

Net sales fell to $838.6 million from $942.2 million in the year-earlier quarter owing to adverse foreign currency translation and an adverse impact due to divestiture. Quarterly revenues missed the Zacks Consensus Estimate of $860 million.

Lower volumes were a drag on adjusted operating profit, which declined 27.5% year over year to $81.5 million in the reported quarter.

Segment Analysis

Revenues from the Power Transmission segment decreased 11.9% year over year to $189.4 million. Sales were affected by headwinds in the oil & gas and agricultural markets, and negative foreign currency translation effect, which more than offset inorganic growth.

Net sales in the Commercial and Industrial System segment were $394.7 million, down 10.5% year over year. The decline in segment revenue was due to sluggishness in the oil & gas sector, a slowdown in the industrial markets of China, and a negative foreign currency translation effect of 1.6%.

Net sales from the Climate Solutions segment were $254.5 million, down 11.0% year over year due to a downturn in the Middle East HVAC (heating, ventilation, air conditioning) market, lower demand in the residential North American HVAC and water heating markets, and a negative 0.7% foreign currency translation effect.

Balance Sheet and Cash Flow

At quarter end, Regal Beloit’s cash and cash equivalents were $271.5 million, while long-term debt was $1,610.5 million.

Net cash from operating activities during the quarter totaled $116.1 million, down from $118.2 million in the year-ago period. Free cash flow was 175.4% of net income or $99.3 million during the reported quarter.

REGAL BELOIT Price, Consensus and EPS Surprise

REGAL BELOIT Price, Consensus and EPS Surprise | REGAL BELOIT Quote

Guidance Revised

Regal Beloit’s second-quarter results were severely impacted by the fragilities in the oil & gas sector and the overall industrial end markets. The company expects its sales to be affected by the continued weakness in industrial markets. Consequently, the company revised its guidance for 2016 and currently anticipates adjusted earnings per share to be in the range of $4.35 to $4.55 per share, significantly down from the earlier projection of $4.40 to $4.80. Regal Beloit continues to focus on simplification initiatives to lower operating costs and improve margins in the future.

Regal Beloit currently has a Zacks Rank #4 (Sell). Some better-ranked stocks that look promising in the industry include RPX Corporation , AO Smith Corp. (AOS - Free Report) and Franklin Electric Co., Inc. (FELE - Free Report) , each carrying a Zacks Rank #2 (Buy).

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