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Regal Beloit (RBC) Up 2.2% Since Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Regal Beloit Corporation (RBC - Free Report) . Shares have added about 2.2% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Regal Beloit reported decent first-quarter 2017 results despite a challenging macroeconomic environment. On a GAAP basis, the company reported earnings of $1.02 per share compared with $0.93 in the year-earlier quarter. The significant year-over-year improvement in GAAP earnings despite lower revenues was primarily due to a fall in operating expenses.
Adjusted earnings for the quarter were $1.07 per share compared with $0.95 in the year-ago quarter. Adjusted earnings beat the Zacks Consensus Estimate of $0.96.
Net sales fell to $813.5 million from $818.2 million in the year-earlier quarter owing to adverse foreign currency translation impact and divestitures. However, quarterly revenues beat the Zacks Consensus Estimate of $810 million.
Gross profit for the reported quarter decreased to $215.6 million from $217.4 million a year ago, due to lower revenues. GAAP operating income decreased to $140.8 million from 148.1 million in prior-year quarter. Adjusted operating income was $27.4 million compared with $21.8 million in the year-ago quarter for respective adjusted operating margins of 7.2% and 5.8%.
Segmental Analysis
Revenues from the Power Transmission Solutions segment decreased 8.1% year over year to $184.6 million. Sales were affected by foreign currency translation and the Mastergear divestiture along with softness in the oil & gas end market. Operating margin (GAAP) improved to 13.0% from 8.7% in the prior-year quarter, primarily owing to lower operating expenses.
Net sales in the Commercial and Industrial System segment were $381.2 million, flat year over year. Operating margin improved to 6.8% from 5.7%, driven by simplification initiatives and right-sizing of oil & gas business.
Net sales from the Climate Solutions segment were $247.7 million, up 3.3% year over year due to strength in the North American residential HVAC (heating, ventilation, air conditioning) market, partially offset by softness in the Middle East. Operating margin increased to 12.6% from 10.3%.
Balance Sheet and Cash Flow
As of Mar 31, 2017, Regal Beloit’s cash and cash equivalents were $262.3 million while long-term debt was $1,269.1 million. The company paid down $50.1 million of debt during the quarter.
Net cash from operating activities for the quarter totaled $50.5 million, down from $58.6 million in the year-ago period. Free cash flow was 72.4% of net income or $33.5 million compared with the respective tallies of 105% and $43.7 million in first-quarter 2016.
Guidance
Although Regal Beloit expects sales to be affected by the continued weakness in industrial markets, organic growth is anticipated to be positive. For 2017, the company revised its adjusted earnings per share guidance in the range of $4.55–$4.95 (up from the earlier expectation of $4.50–$4.90) while GAAP earnings are expected in the range of $4.40–$4.80 (up from $4.35–$4.75). Regal Beloit continues to focus on simplification initiatives to lower operating costs and improve margins in the future.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimate flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.
At this time, the stock has an average Growth Score of 'C', though it is lagging a bit on the momentum front with a 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.
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Regal Beloit (RBC) Up 2.2% Since Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Regal Beloit Corporation (RBC - Free Report) . Shares have added about 2.2% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Regal Beloit Beats Q1 Earnings & Revenue Estimates
Regal Beloit reported decent first-quarter 2017 results despite a challenging macroeconomic environment. On a GAAP basis, the company reported earnings of $1.02 per share compared with $0.93 in the year-earlier quarter. The significant year-over-year improvement in GAAP earnings despite lower revenues was primarily due to a fall in operating expenses.
Adjusted earnings for the quarter were $1.07 per share compared with $0.95 in the year-ago quarter. Adjusted earnings beat the Zacks Consensus Estimate of $0.96.
Net sales fell to $813.5 million from $818.2 million in the year-earlier quarter owing to adverse foreign currency translation impact and divestitures. However, quarterly revenues beat the Zacks Consensus Estimate of $810 million.
Gross profit for the reported quarter decreased to $215.6 million from $217.4 million a year ago, due to lower revenues. GAAP operating income decreased to $140.8 million from 148.1 million in prior-year quarter. Adjusted operating income was $27.4 million compared with $21.8 million in the year-ago quarter for respective adjusted operating margins of 7.2% and 5.8%.
Segmental Analysis
Revenues from the Power Transmission Solutions segment decreased 8.1% year over year to $184.6 million. Sales were affected by foreign currency translation and the Mastergear divestiture along with softness in the oil & gas end market. Operating margin (GAAP) improved to 13.0% from 8.7% in the prior-year quarter, primarily owing to lower operating expenses.
Net sales in the Commercial and Industrial System segment were $381.2 million, flat year over year. Operating margin improved to 6.8% from 5.7%, driven by simplification initiatives and right-sizing of oil & gas business.
Net sales from the Climate Solutions segment were $247.7 million, up 3.3% year over year due to strength in the North American residential HVAC (heating, ventilation, air conditioning) market, partially offset by softness in the Middle East. Operating margin increased to 12.6% from 10.3%.
Balance Sheet and Cash Flow
As of Mar 31, 2017, Regal Beloit’s cash and cash equivalents were $262.3 million while long-term debt was $1,269.1 million. The company paid down $50.1 million of debt during the quarter.
Net cash from operating activities for the quarter totaled $50.5 million, down from $58.6 million in the year-ago period. Free cash flow was 72.4% of net income or $33.5 million compared with the respective tallies of 105% and $43.7 million in first-quarter 2016.
Guidance
Although Regal Beloit expects sales to be affected by the continued weakness in industrial markets, organic growth is anticipated to be positive. For 2017, the company revised its adjusted earnings per share guidance in the range of $4.55–$4.95 (up from the earlier expectation of $4.50–$4.90) while GAAP earnings are expected in the range of $4.40–$4.80 (up from $4.35–$4.75). Regal Beloit continues to focus on simplification initiatives to lower operating costs and improve margins in the future.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimate flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.
Regal Beloit Corporation Price and Consensus
Regal Beloit Corporation Price and Consensus | Regal Beloit Corporation Quote
VGM Scores
At this time, the stock has an average Growth Score of 'C', though it is lagging a bit on the momentum front with a 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.