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Regal Beloit (RBC) Plagued by Oil & Gas Sector Frailties
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On Aug 23, Zacks Investment Research updated the research report on industrial goods manufacturer Regal Beloit Corporation (RBC - Free Report) .
Headquartered in Beloit, WI, Regal Beloit is a leading manufacturer of electrical and mechanical motion control products. The company offers a wide array of stock model and customized electric motors, blowers, electric generators, transfer switches, switchgear, valves, gearboxes, power generation components and controls. Regal Beloit has manufacturing, sales and service facilities throughout the U.S., Canada, Mexico, Europe and Asia. The company markets its products to a diversified customer base across the globe including OEMs, distributors and end users.
Macroeconomic Woes
Regal Beloit 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.
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 divestitures. Quarterly revenues missed the Zacks Consensus Estimate of $860 million.
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 anticipates adjusted earnings per share to be in the range of $4.35 to $4.55, significantly down from the earlier projection of $4.40 to $4.80.
Electric motor manufacturing is a highly competitive and fragmented industry. With intensifying competition, Regal Beloit is witnessing a decline in its product prices, which is denting its overall margin. Moreover, the company has to continually invest heavily in R&D to introduce newer value-added products to cushion itself from competition. All these limit the company’s profitability to some extent.
Regal Beloit also faces increased concentration risks as a significant amount of its revenue is obtained from a handful of customers. Loss of any of these customers could adversely impact the company’s top line.
Nevertheless, Regal Beloit continues to focus on prudent investment decisions for disciplined capital allocation, strong and flexible balance sheet position and cash flow enhancement to support dividend growth. We believe that such moves along with its robust operating platform and an efficient management team will help in the execution of its strategic priorities and drive net asset value and dividend growth in the future.
Other Stocks to Consider
Regal Beloit currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Franklin Electric Co., Inc. (FELE - Free Report) , EnerSys (ENS - Free Report) and AO Smith Corp. (AOS - Free Report) , each holding a Zacks Rank #2 (Buy).
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Regal Beloit (RBC) Plagued by Oil & Gas Sector Frailties
On Aug 23, Zacks Investment Research updated the research report on industrial goods manufacturer Regal Beloit Corporation (RBC - Free Report) .
Headquartered in Beloit, WI, Regal Beloit is a leading manufacturer of electrical and mechanical motion control products. The company offers a wide array of stock model and customized electric motors, blowers, electric generators, transfer switches, switchgear, valves, gearboxes, power generation components and controls. Regal Beloit has manufacturing, sales and service facilities throughout the U.S., Canada, Mexico, Europe and Asia. The company markets its products to a diversified customer base across the globe including OEMs, distributors and end users.
Macroeconomic Woes
Regal Beloit 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.
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 divestitures. Quarterly revenues missed the Zacks Consensus Estimate of $860 million.
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 anticipates adjusted earnings per share to be in the range of $4.35 to $4.55, significantly down from the earlier projection of $4.40 to $4.80.
Electric motor manufacturing is a highly competitive and fragmented industry. With intensifying competition, Regal Beloit is witnessing a decline in its product prices, which is denting its overall margin. Moreover, the company has to continually invest heavily in R&D to introduce newer value-added products to cushion itself from competition. All these limit the company’s profitability to some extent.
Regal Beloit also faces increased concentration risks as a significant amount of its revenue is obtained from a handful of customers. Loss of any of these customers could adversely impact the company’s top line.
Nevertheless, Regal Beloit continues to focus on prudent investment decisions for disciplined capital allocation, strong and flexible balance sheet position and cash flow enhancement to support dividend growth. We believe that such moves along with its robust operating platform and an efficient management team will help in the execution of its strategic priorities and drive net asset value and dividend growth in the future.
Other Stocks to Consider
Regal Beloit currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Franklin Electric Co., Inc. (FELE - Free Report) , EnerSys (ENS - Free Report) and AO Smith Corp. (AOS - Free Report) , each holding a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>