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Regal Beloit (RBC) Hits 52-Week High on Holistic Growth

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Shares of industrial goods manufacturer, Regal Beloit Corporation (RBC - Free Report) scaled a new 52-week high of $84.60 during yesterday’s trading session, before closing a tad lower at $84.15 for a healthy year-to-date return of 21.5%. This Zacks Rank #2 (Buy) stock has the potential for further price appreciation with long-term earnings growth expectations of 9%.

Growth Drivers

Over the years, Regal Beloit has consolidated its product lines and streamlined brands to evolve as a dynamic enterprise. In order to drive continuous improvement, the company strictly followed ‘Compass Operating System’ that encompasses a common set of business processes, disciplines and lean Six Sigma tools. Backed by an “open-door” management style, this has helped Regal Beloit gain a competitive advantage and reach more people in diverse markets around the world.

In addition, the company has continually focused on prudent investment decisions for a disciplined capital allocation, strong and flexible balance sheet position and cash flow enhancement to support dividend growth. Regal Beloit recently increased its quarterly dividend by 8% year over year to 26 cents per share. 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 in the future. The company’s strong free cash generation is another positive, providing it an opportunity to pursue accretive acquisitions and unlock additional value. Going forward, Regal Beloit remains confident of generating robust operating cash flow to fund its organic and inorganic growth as well as to return significant capital to shareholders.

With a diligent execution of operational plans, Regal Beloit has outperformed the Zacks categorized Machinery-Electrical industry with an average year-to-date return of 21.5% compared with an 12.4% gain for the latter. Its long-term strategy involves organic growth through innovative products, broadening customer base, exploitation of new opportunities and tactical investments in emerging markets. The company has also expanded technologically and geographically on the back of its aggressive acquisition policy. Management further indicated that it plans to continue seeking accretive acquisitions as part of the company’s overall growth strategy.



Regal Beloit intends to focus on simplification initiatives to lower operating costs and improve margins. For 2017, the company revised its adjusted earnings per share guidance to the range of $4.55–$4.95 (up from the earlier expectation of $4.50–$4.90). GAAP earnings are expected in the range of $4.40–$4.80 (up from $4.35–$4.75). Such bullish outlook reinforces the favorable growth dynamics and has probably driven the company’s shares to a fresh 52-week high.

Other Stocks to Consider

Some other stocks worth considering in the industry include Eaton Corporation plc (ETN - Free Report) , Capstone Turbine Corporation and A. O. Smith Corporation (AOS - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Eaton has a long-term earnings growth expectation of 10%.  It topped estimates thrice in the trailing four quarters with an average positive earnings surprise of 3.3%.

Capstone Turbine has a long-term earnings growth expectation of 25%.

A. O. Smith has a long-term earnings growth expectation of 12.4%. It surpassed estimates in each of the trailing four quarters with an average positive earnings surprise of 4.9%.

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