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Rexnord (RXN) Prices Convertible Preferred Shares Offering

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Machinery company Rexnord Corporation recently announced the pricing of public offering of its mandatory convertible preferred shares. The company will likely use the net proceeds of approximately $339.1 million after deducting relevant expenses, for partially repaying its debt and funding general corporate purposes.      
 
Over the last 30 days, Rexnord’s shares recorded an average return of 15.8% − outperforming 6.8% provided by the Zacks categorized Electrical Market industry.



As revealed, Rexnord has offered roughly 7 million depository shares, each representing 1/20th interest in a share of its 5.75% Series A Mandatory Convertible Preferred Stock, at the rate of $50.00 per share. Also, underwriters have the option of buying additional 1.05 million depository shares.  

Before conversion of preferred stock, each holder of depository shares will have rights and preferences, including conversion, dividend, liquidation and voting rights of a mandatory convertible preferred share. However, the rights and preferences will be restricted. Rexnord anticipates the conversion of preferred shares into common shares will be done on or around Nov 15, 2019. Each mandatory convertible preferred share will be converted into 47.6420 to 39.7020 shares of the company’s common stock.

Subject to customary closing conditions, Rexnord's offering will close on Dec 7.

We believe that Rexnord has strong long-term growth prospects based on its potential to leverage the rising demand trends in the U.S. non-residential construction markets. However, exiting second-quarter fiscal 2017 (ended Sep 30, 2016), Rexnord had huge debt levels of around $1.8 billion. Such high leverage, if unchecked, will inflate the company’s financial obligations and hence, adversely impact profitability.

With a market capitalization of $2.08 billion, Rexnord Corporation currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for the stock is pegged at $1.38 per share for fiscal 2017 and $1.60 per share for fiscal 2018.

REXNORD CORP Price and Consensus

 

REXNORD CORP Price and Consensus | REXNORD CORP Quote

Some better-ranked stocks in the machinery industry include Enersys Inc. (ENS - Free Report) , II-VI Incorporated and Applied Industrial Technologies, Inc. (AIT - Free Report) . While Enersys and II-VI Incorporated sport a Zacks Rank #1 (Strong Buy), Applied Industrial Technologies carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Enersys Inc’s earnings estimates for fiscal 2017 improved over the last 60 days. It has an average positive earnings surprise of 3.01% for the trailing four quarters.

II-VI Incorporated reported better-than-expected results in the last four quarters, with a positive average earnings surprise of 39.80%. Also, bottom-line expectations for fiscal 2017 and fiscal 2018 have improved over the past 60 days.

Applied Industrial Technologies’ earnings estimates for fiscal 2017 and fiscal 2018 have been revised upward over the last 60 days. Average earnings surprise for the last four quarters is a positive 4.93%.
 
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