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Machinery company Rexnord Corporation reported better-than-expected bottom-line results for third-quarter fiscal 2017 (ended Dec 31, 2016). Adjusted earnings came in at 25 cents per share, roughly 4.2% above the Zacks Consensus Estimate of 24 cents. However, the bottom line fell nearly 40.5% from the year-ago tally of 42 cents.
Net sales in the quarter were $451.8 million, below the Zacks Consensus Estimate of $458.5 million. Also, the results fell nearly 1.8% year over year due to core sales decline of 5% and 1% adverse impact of unfavorable foreign currency translations. This was partially offset by 4% positive impacts of acquisition/divestiture gains.
In fourth-quarter fiscal 2016, the company announced its decision to exit its non-strategic RHF product line. The operations of the RHF product line were included within Rexnord’s Water Management platform. Excluding revenues of $2.4 million generated from this business, the quarter’s adjusted revenues were $449.4 million.
Segmental Revenues
Rexnord reports its top-line results under two heads, Process & Motion Control and Water Management. The segmental quarterly results are briefly discussed below:
Revenues from Process & Motion Control totaled $270.3 million, up 1.7% year over year. It represented 59.8% of total revenue.
Water Management revenues, representing 40.2% of total revenue, were $181.5 million, down 6.6% year over year.
Adjusted revenues (revenues excluding the contribution from the RHF product line) were $179.1 million.
Margins
In the quarter, Rexnord’s cost of sales decreased 1% year over year, representing 66.1% of net sales, up from 65.6% in the year-ago quarter. Gross margin inched down 50 basis points (bps) year over year to 33.9%.
Selling, general and administrative expenses, as a percentage of revenues, increased 270 bps year over year to 22.1%. Adjusted earnings before interest, tax, depreciation and amortization in the quarter were $79.2 million, down 14% year over year.
Balance Sheet and Cash Flow
Exiting the third quarter of the fiscal year, Rexnord had cash and cash equivalents of $429.3 million, above $208.5 million recorded in the preceding quarter. Long-term debt was at $1,610.1 million, down 11.6% sequentially.
In the first nine months of fiscal 2017, Rexnord generated cash of $122.1 million from its operating activities, down from $150.2 million recorded in the year-ago period. Spending on property, plant and equipment increased 66.7% year over year to $44 million. During the period, the company repaid long-term debts of $1,881.8 million.
Outlook
For fiscal 2017, Rexnord has lowered its adjusted earnings guidance to $1.27–$1.33 per share from the previous projection of $1.32−$1.38 due to the adverse impacts of capital market transactions. Core sales are predicted to decline roughly 3% (unchanged). The effective tax rate is expected to be around 25% (unchanged), while capital expenditure is anticipated to be approximately $58 million. Free cash will exceed net income.
Rexnord expects to realize $30 million in annual cost-savings from its supply-chain optimization and footprint-repositioning programs by the end of fiscal 2017.
With a market capitalization of $2.3 billion, Rexnord Corporation presently carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the machinery industry include ABB Ltd. , II-VI Incorporated and Pioneer Power Solutions, Inc. (PPSI - Free Report) . While both ABB Ltd. and II-VI Incorporated sport a Zacks Rank #1 (Strong Buy), Pioneer Power Solutions, Inc. carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ABB Ltd.’s earnings estimates for 2017 have been revised upward over the last 60 days. Average earnings surprise for the last four quarters is a positive 23.50%.
II-VI Incorporated reported better-than-expected results in the last four quarters, with a positive average earnings surprise of 59.23%. Also, bottom-line expectations for fiscal 2017 and fiscal 2018 have improved over the past 60 days.
Pioneer Power Solutions, Inc.’s earnings estimates for 2017 improved over the last 60 days.
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Rexnord (RXN) Beats Q3 Earnings, Lags Sales; Cuts '17 View
Machinery company Rexnord Corporation reported better-than-expected bottom-line results for third-quarter fiscal 2017 (ended Dec 31, 2016). Adjusted earnings came in at 25 cents per share, roughly 4.2% above the Zacks Consensus Estimate of 24 cents. However, the bottom line fell nearly 40.5% from the year-ago tally of 42 cents.
Net sales in the quarter were $451.8 million, below the Zacks Consensus Estimate of $458.5 million. Also, the results fell nearly 1.8% year over year due to core sales decline of 5% and 1% adverse impact of unfavorable foreign currency translations. This was partially offset by 4% positive impacts of acquisition/divestiture gains.
In fourth-quarter fiscal 2016, the company announced its decision to exit its non-strategic RHF product line. The operations of the RHF product line were included within Rexnord’s Water Management platform. Excluding revenues of $2.4 million generated from this business, the quarter’s adjusted revenues were $449.4 million.
Segmental Revenues
Rexnord reports its top-line results under two heads, Process & Motion Control and Water Management. The segmental quarterly results are briefly discussed below:
Revenues from Process & Motion Control totaled $270.3 million, up 1.7% year over year. It represented 59.8% of total revenue.
Water Management revenues, representing 40.2% of total revenue, were $181.5 million, down 6.6% year over year.
Adjusted revenues (revenues excluding the contribution from the RHF product line) were $179.1 million.
Margins
In the quarter, Rexnord’s cost of sales decreased 1% year over year, representing 66.1% of net sales, up from 65.6% in the year-ago quarter. Gross margin inched down 50 basis points (bps) year over year to 33.9%.
Selling, general and administrative expenses, as a percentage of revenues, increased 270 bps year over year to 22.1%. Adjusted earnings before interest, tax, depreciation and amortization in the quarter were $79.2 million, down 14% year over year.
Balance Sheet and Cash Flow
Exiting the third quarter of the fiscal year, Rexnord had cash and cash equivalents of $429.3 million, above $208.5 million recorded in the preceding quarter. Long-term debt was at $1,610.1 million, down 11.6% sequentially.
In the first nine months of fiscal 2017, Rexnord generated cash of $122.1 million from its operating activities, down from $150.2 million recorded in the year-ago period. Spending on property, plant and equipment increased 66.7% year over year to $44 million. During the period, the company repaid long-term debts of $1,881.8 million.
Outlook
For fiscal 2017, Rexnord has lowered its adjusted earnings guidance to $1.27–$1.33 per share from the previous projection of $1.32−$1.38 due to the adverse impacts of capital market transactions. Core sales are predicted to decline roughly 3% (unchanged). The effective tax rate is expected to be around 25% (unchanged), while capital expenditure is anticipated to be approximately $58 million. Free cash will exceed net income.
Rexnord expects to realize $30 million in annual cost-savings from its supply-chain optimization and footprint-repositioning programs by the end of fiscal 2017.
Rexnord Corporation Price and Consensus
Rexnord Corporation Price and Consensus | Rexnord Corporation Quote
Zacks Rank & Stocks to Consider
With a market capitalization of $2.3 billion, Rexnord Corporation presently carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the machinery industry include ABB Ltd. , II-VI Incorporated and Pioneer Power Solutions, Inc. (PPSI - Free Report) . While both ABB Ltd. and II-VI Incorporated sport a Zacks Rank #1 (Strong Buy), Pioneer Power Solutions, Inc. carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ABB Ltd.’s earnings estimates for 2017 have been revised upward over the last 60 days. Average earnings surprise for the last four quarters is a positive 23.50%.
II-VI Incorporated reported better-than-expected results in the last four quarters, with a positive average earnings surprise of 59.23%. Also, bottom-line expectations for fiscal 2017 and fiscal 2018 have improved over the past 60 days.
Pioneer Power Solutions, Inc.’s earnings estimates for 2017 improved over the last 60 days.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>