Back to top

Image: Bigstock

Rexnord (RXN) Tops Q4 Earnings & Sales, Provides FY18 View

Read MoreHide Full Article

Machinery company Rexnord Corporation reported better-than-expected fourth-quarter fiscal 2017 (ended Mar 31, 2017) results, with earnings and sales topping estimates by 6.1% and 1.8%, respectively.

Adjusted earnings in the quarter were 35 cents per share, above the Zacks Consensus Estimate of 33 cents. However, the bottom line declined 5.4% from the year-ago tally of 37 cents.

 

For fiscal 2017, the company’s adjusted earnings came in at $1.32 per share, surpassing the Zacks Consensus Estimate of $1.30 but below the year-ago tally of $1.47.

Revenues

In the quarter, Rexnord’s net sales totaled $503.6 million, beating the Zacks Consensus Estimate of $494.5 million. Also, the results grew 2.2% year over year on the back of 2% acquisition/divestiture gains. Organic revenues in the quarter were flat.  

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 $0.3 million generated from this business, the quarter’s adjusted revenues were $503.3 million.

The company 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 $313.8 million, up 6.7% year over year. It represented 62.3% of total revenue.
 
Water Management revenues, representing 37.7% of total revenue, were $189.8 million, down 4.4% year over year.

Adjusted revenues (revenues excluding the contribution of $0.3 million from the RHF product line) were $189.5 million.

For fiscal 2017, the company’s net revenue was $1,918.2 million, roughly in line with the Zacks Consensus Estimate of $1.91 billion.

Margins

In the quarter, Rexnord’s cost of sales increased 1% year over year, representing 65.1% of net sales, down from 65.9% in the year-ago quarter. Gross margin inched up 80 basis points (bps) year over year to 34.9%.

Selling, general and administrative expenses, as a percentage of revenues, decreased 30 bps year over year to 19.9%. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter were $98 million, up 5.2% year over year.

Balance Sheet and Cash Flow

Exiting the fourth quarter of the fiscal year, Rexnord had cash and cash equivalents of $490.1 million, up from $429.3 million in the preceding quarter. Long-term debt dipped 0.2% sequentially to $1,606.2 million.

In fiscal 2017, the company generated cash of $195.1 million from its operating activities, down 10.9% from $219 million recorded in the previous year. Spending on property, plant and equipment increased 4.6% to $54.5 million. During the year, the company repaid long-term debts of $1,885.8 million.

Outlook

For fiscal 2018, Rexnord anticipates benefiting from innovation of new products, cost-control measures and strengthening consumer driven end markets. Core sales growth will likely be in low single-digit in the fiscal year. Adjusted EBITDA will range within $365−$385 million, while GAAP net income will be $87−$107 million. The effective tax rate is expected to be around 32%, while capital expenditure is anticipated to be approximately 2−2.5% of sales. Free cash will exceed net income.  

Also, the company is on track to complete its supply-chain optimization and footprint-repositioning programs in first-quarter fiscal 2018, realizing annualized cost-savings of $30 million.

Rexnord Corporation Price and Consensus

 

Rexnord Corporation Price and Consensus | Rexnord Corporation Quote

Zacks Rank & Key Picks

With a market capitalization of $2.36 billion, Rexnord presently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the machinery industry include Kennametal Inc. (KMT - Free Report) , Eaton Corporation, PLC (ETN - Free Report) and Regal Beloit Corporation (RBC - Free Report) . While Kennametal sports a Zacks Rank #1 (Strong Buy), both Eaton Corporation and Regal Beloit Corporation carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kennametal’s earnings estimates for fiscal 2017 and fiscal 2018 were revised upward in the last 60 days. Also, the company’s average earnings surprise for the last four quarters was a positive 6.24%.
 
Eaton Corporation pulled off an average positive earnings surprise of 3.26% for the last four quarters. Also, earnings expectations for 2017 and 2018 improved over the past 60 days.

Regal Beloit Corporation’s earnings estimates for 2017 and 2018 improved over the last 60 days. Also, it delivered an average positive earnings surprise of 1.48%.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Eaton Corporation, PLC (ETN) - free report >>

RBC Bearings Incorporated (RBC) - free report >>

Kennametal Inc. (KMT) - free report >>

Published in