It has been about a month since the last earnings report for Rexnord . Shares have added about 19.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Rexnord due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Rexnord Q4 Earnings Surpass Estimates, Improve Y/Y
Rexnord reported results for fourth-quarter fiscal 2020 (ended Mar 31, 2020), wherein earnings surpassed estimates by 7.8% and net sales were line with the same.
The machinery company’s adjusted earnings in the reported quarter were 55 cents per share, surpassing the Zacks Consensus Estimate of 51 cents. Also, the bottom line gained 7.8% from the year-ago quarter number of 51 cents on sales growth.
For fiscal 2020, the company’s adjusted earnings were $2.01, reflecting an increase of 8.6% on a year-over-year basis.
Core Sales and Acquisitions Drive Revenues
In the reported quarter, Rexnord’s net sales were $547 million, increasing 1.8% year over year. The improvement was driven by a 1% contribution from core sales growth and 1% from the net positive impact of acquisitions/divestitures.
For fiscal 2020, net sales were $2,068.3 million, up 0.8% year over year.
The company reports results under two segments — Process & Motion Control, and Water Management. The quarterly segmental results are briefly discussed below:
Revenues from Process & Motion Control totaled $363.6 million, down 2.5% year over year. It represented 66.5% of the company’s quarterly net sales. Core sales in the quarter declined 1% as gains from consumer-facing and aerospace end markets were more than offset by the adverse impacts of soft demand in industrial process markets and product line simplification actions. Unfavorable movements in foreign currencies affected results by 1%.
Water Management’s revenues, representing 33.5% of net sales, were $183.4 million, up 11.4% year over year. Core sales in the quarter grew 7%, backed by demand growth in building construction markets in North America. However, product line simplification actions played spoilsport in the quarter. Also, acquisitions added 4% to sales growth in the quarter.
Margin Improves Y/Y
In the reported quarter, Rexnord’s cost of sales decreased 1.5% year over year to $330.5 million. It represented 60.4% of net sales versus 62.5% recorded in the year-ago quarter. Gross margin increased 210 bps to 39.6%. Selling, general and administrative expenses of $112.8 million increased 3.2% year over year and represented 20.6% of net sales versus 20.3% in the year-ago quarter.
Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $124 million, up 3.3% year over year. Adjusted EBITDA margin was 22.7%, up roughly 40 bps from the prior-year quarter. For the Process & Motion Control segment, adjusted EBITDA margin decreased 40 bps to 23.8%, while that for the Water Management segment expanded 110 bps to 25.6%.
Balance Sheet and Cash Flow
Exiting the fiscal fourth quarter, Rexnord had cash and cash equivalents of $573.4 million, reflecting a 107% increase from $277 million recorded in the last reported quarter. Long-term debt increased 21.8% sequentially to $1,397 million.
Notably, the company repaid $835.6 million of debt in fiscal 2020. Proceeds from the borrowings of debt totaled $1,050 million during the fiscal year.
In fiscal 2020, the company generated net cash of $298.6 million from operating activities, reflecting 15.7% year-over-year growth. It decreased the capital investment for purchasing property, plant and equipment by 7.8% from the previous year to $41.4 million. Free cash flow was $257.2 million, increasing 20.6% from the year-ago figure.
During the period, the company repurchased shares worth $100.7 million.
Outlook
Rexnord noted that the company is transitioning to a Dec 31 fiscal year-end in 2020 to enable investors to better evaluate its operating and financial performance compared with a larger of peers.
Notably, the company has not provided any guidance for the next nine months of 2020 on end-market uncertainties, owing to the coronavirus outbreak. However, based on the recent and anticipated order trends through June, Rexnord expects its sales in the June quarter to fall 18-23%. Also, it expects total segment adjusted EBITDA margin of 21-23%, while corporate expenses are anticipated to be $7 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted -7.59% due to these changes.
VGM Scores
Currently, Rexnord has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Rexnord has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Rexnord (RXN) Up 19.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Rexnord . Shares have added about 19.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Rexnord due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Rexnord Q4 Earnings Surpass Estimates, Improve Y/Y
Rexnord reported results for fourth-quarter fiscal 2020 (ended Mar 31, 2020), wherein earnings surpassed estimates by 7.8% and net sales were line with the same.
The machinery company’s adjusted earnings in the reported quarter were 55 cents per share, surpassing the Zacks Consensus Estimate of 51 cents. Also, the bottom line gained 7.8% from the year-ago quarter number of 51 cents on sales growth.
For fiscal 2020, the company’s adjusted earnings were $2.01, reflecting an increase of 8.6% on a year-over-year basis.
Core Sales and Acquisitions Drive Revenues
In the reported quarter, Rexnord’s net sales were $547 million, increasing 1.8% year over year. The improvement was driven by a 1% contribution from core sales growth and 1% from the net positive impact of acquisitions/divestitures.
For fiscal 2020, net sales were $2,068.3 million, up 0.8% year over year.
The company reports results under two segments — Process & Motion Control, and Water Management. The quarterly segmental results are briefly discussed below:
Revenues from Process & Motion Control totaled $363.6 million, down 2.5% year over year. It represented 66.5% of the company’s quarterly net sales. Core sales in the quarter declined 1% as gains from consumer-facing and aerospace end markets were more than offset by the adverse impacts of soft demand in industrial process markets and product line simplification actions. Unfavorable movements in foreign currencies affected results by 1%.
Water Management’s revenues, representing 33.5% of net sales, were $183.4 million, up 11.4% year over year. Core sales in the quarter grew 7%, backed by demand growth in building construction markets in North America. However, product line simplification actions played spoilsport in the quarter. Also, acquisitions added 4% to sales growth in the quarter.
Margin Improves Y/Y
In the reported quarter, Rexnord’s cost of sales decreased 1.5% year over year to $330.5 million. It represented 60.4% of net sales versus 62.5% recorded in the year-ago quarter. Gross margin increased 210 bps to 39.6%. Selling, general and administrative expenses of $112.8 million increased 3.2% year over year and represented 20.6% of net sales versus 20.3% in the year-ago quarter.
Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $124 million, up 3.3% year over year. Adjusted EBITDA margin was 22.7%, up roughly 40 bps from the prior-year quarter. For the Process & Motion Control segment, adjusted EBITDA margin decreased 40 bps to 23.8%, while that for the Water Management segment expanded 110 bps to 25.6%.
Balance Sheet and Cash Flow
Exiting the fiscal fourth quarter, Rexnord had cash and cash equivalents of $573.4 million, reflecting a 107% increase from $277 million recorded in the last reported quarter. Long-term debt increased 21.8% sequentially to $1,397 million.
Notably, the company repaid $835.6 million of debt in fiscal 2020. Proceeds from the borrowings of debt totaled $1,050 million during the fiscal year.
In fiscal 2020, the company generated net cash of $298.6 million from operating activities, reflecting 15.7% year-over-year growth. It decreased the capital investment for purchasing property, plant and equipment by 7.8% from the previous year to $41.4 million. Free cash flow was $257.2 million, increasing 20.6% from the year-ago figure.
During the period, the company repurchased shares worth $100.7 million.
Outlook
Rexnord noted that the company is transitioning to a Dec 31 fiscal year-end in 2020 to enable investors to better evaluate its operating and financial performance compared with a larger of peers.
Notably, the company has not provided any guidance for the next nine months of 2020 on end-market uncertainties, owing to the coronavirus outbreak. However, based on the recent and anticipated order trends through June, Rexnord expects its sales in the June quarter to fall 18-23%. Also, it expects total segment adjusted EBITDA margin of 21-23%, while corporate expenses are anticipated to be $7 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted -7.59% due to these changes.
VGM Scores
Currently, Rexnord has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Rexnord has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.