Rexnord Corporation reported better-than-expected second-quarter fiscal 2019 (ended Sep 30, 2018) results, delivering positive earnings and sales surprises of 12.2% and 2.1%, respectively.
The machinery company’s adjusted earnings were 46 cents per share, surpassing the Zacks Consensus Estimate of 41 cents. Also, the bottom line increased 37.5% from the year-ago figure of 32 cents.
Segmental Performance
In the reported quarter, Rexnord’s net sales were $524.8 million, increasing 15.6% year over year. The improvement was driven by 9% contribution from core sales growth and 8% from positive impact of acquisitions, partially offset by 1% negative impact of currency translation.
Also, the top line surpassed the Zacks Consensus Estimate of $514 million.
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 $348.7 million, increasing 16% year over year. It represented 66.4% of net sales. The segment’s results benefited from improved demand in its end markets, resulting in 7% growth in core sales and 10% gains from the acquisition of Centa Power. However, movements in foreign currencies negatively impacted results by 1%.
Water Management revenues, representing 33.6% of net sales, were $176.1 million, up 15% year over year. Core sales growth of 12% was driven by rise in demand across North American building construction end markets. Also, acquisition of World Dryer added 3% on a year-over-year basis.
Margin Profile
In the reported quarter, Rexnord’s cost of sales jumped 14.8% to $321.6 million. It represented 61.3% of net sales versus 61.7% recorded in the year-ago quarter. Gross margin improved 40 basis points (bps) to 38.7%.
Selling, general and administrative expenses of $109.6 million increased 15.4% year over year and represented 20.9% of net sales.
Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $114.8 million, up 20.2%. Adjusted EBITDA margin was 21.9%, up 90 bps.
Balance Sheet and Cash Flow
Exiting the fiscal second quarter, Rexnord had cash and cash equivalents of $223.5 million, up from $193.2 million in the fiscal 2018 end. Long-term debt dipped 1.1% sequentially to $1,336.6 million.
For the first six months of fiscal 2019, free cash flow was $57.5 million versus $44.6 million in the similar period of fiscal 2018.
Outlook
For fiscal 2019, the company anticipates core sales growth in the higher end of the mid-single digit range. Gains from cost-reduction initiatives and improved operating leverage will prove beneficial. Adjusted EBITDA is projected to be $433-$443 million.
Net income will likely be $147-$154 million. Free cash will exceed net income.
Zacks Rank & Stocks to Consider
Rexnord currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the same space are Enersys (ENS - Free Report) , Eaton Corporation, PLC (ETN - Free Report) and Graco Inc. (GGG - Free Report) . While Enersys sports a Zacks Rank #1 (Strong Buy), Eaton and Graco carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Enersys surpassed estimates thrice in the trailing four quarters, the average beat being 2.86%.
Eaton exceeded estimates thrice in the trailing four quarters, the average beat being 2.90%.
Graco surpassed estimates twice in the trailing four quarters, the average beat being 4.05%.
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Rexnord Corporation reported better-than-expected second-quarter fiscal 2019 (ended Sep 30, 2018) results, delivering positive earnings and sales surprises of 12.2% and 2.1%, respectively.
The machinery company’s adjusted earnings were 46 cents per share, surpassing the Zacks Consensus Estimate of 41 cents. Also, the bottom line increased 37.5% from the year-ago figure of 32 cents.
Segmental Performance
In the reported quarter, Rexnord’s net sales were $524.8 million, increasing 15.6% year over year. The improvement was driven by 9% contribution from core sales growth and 8% from positive impact of acquisitions, partially offset by 1% negative impact of currency translation.
Also, the top line surpassed the Zacks Consensus Estimate of $514 million.
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 $348.7 million, increasing 16% year over year. It represented 66.4% of net sales. The segment’s results benefited from improved demand in its end markets, resulting in 7% growth in core sales and 10% gains from the acquisition of Centa Power. However, movements in foreign currencies negatively impacted results by 1%.
Water Management revenues, representing 33.6% of net sales, were $176.1 million, up 15% year over year. Core sales growth of 12% was driven by rise in demand across North American building construction end markets. Also, acquisition of World Dryer added 3% on a year-over-year basis.
Margin Profile
In the reported quarter, Rexnord’s cost of sales jumped 14.8% to $321.6 million. It represented 61.3% of net sales versus 61.7% recorded in the year-ago quarter. Gross margin improved 40 basis points (bps) to 38.7%.
Selling, general and administrative expenses of $109.6 million increased 15.4% year over year and represented 20.9% of net sales.
Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $114.8 million, up 20.2%. Adjusted EBITDA margin was 21.9%, up 90 bps.
Balance Sheet and Cash Flow
Exiting the fiscal second quarter, Rexnord had cash and cash equivalents of $223.5 million, up from $193.2 million in the fiscal 2018 end. Long-term debt dipped 1.1% sequentially to $1,336.6 million.
For the first six months of fiscal 2019, free cash flow was $57.5 million versus $44.6 million in the similar period of fiscal 2018.
Outlook
For fiscal 2019, the company anticipates core sales growth in the higher end of the mid-single digit range. Gains from cost-reduction initiatives and improved operating leverage will prove beneficial. Adjusted EBITDA is projected to be $433-$443 million.
Net income will likely be $147-$154 million. Free cash will exceed net income.
Zacks Rank & Stocks to Consider
Rexnord currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the same space are Enersys (ENS - Free Report) , Eaton Corporation, PLC (ETN - Free Report) and Graco Inc. (GGG - Free Report) . While Enersys sports a Zacks Rank #1 (Strong Buy), Eaton and Graco carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Enersys surpassed estimates thrice in the trailing four quarters, the average beat being 2.86%.
Eaton exceeded estimates thrice in the trailing four quarters, the average beat being 2.90%.
Graco surpassed estimates twice in the trailing four quarters, the average beat being 4.05%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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