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Here's Why Regal Beloit (RBC) is a Worthy Investment Option

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Investors seeking to gain from the exposure in the manufacturing space may find Regal Beloit Corporation an attractive option. The company’s solid fundamentals as well as healthy growth opportunities are worth noting. It is based in Beloit, WI, and has a market capitalization of $6.2 billion.

The company presently carries a Zacks Rank #2 (Buy). It belongs to the Zacks Manufacturing - Electronics industry, which is part of the broader Zacks Industrial Products sector. The industry is currently in the top 38% (with the rank of 97) of more than 250 Zacks industries.

In the past three months, the company’s shares have gained 29.3% compared with the industry’s growth of 12.7%.


Below we have discussed why Regal Beloit is worth investing in.

Impressive Q4 Results and Solid Projections: The company’s fourth-quarter 2020 earnings surpassed estimates by 13.4%, while sales beat the same by 6.5%. Also, earnings grew 42.4% year over year, driven by improvements in sales and margins. Improving orders, effective cost-control measures, supply-chain initiatives and restructuring actions are likely to benefit the company in the quarters ahead.

For first-quarter 2021, Regal Beloit anticipates earnings per share (adjusted) of $1.55-$1.75. The projection suggests an increase of 26% (at the mid-point) from the year-ago reported number.

Business Combination: The $3.69-billion deal to combine operations of Regal Beloit and Rexnord Corporation’s Process & Motion Control (“PMC”) segment was signed in this February. Notably, the PMC’s manufactured mechanical components are used in various end-markets like aerospace, general industrial, and energy.

The new Regal Beloit’s 61.4% stake will rest with the existing Regal Beloit’s shareholders and the rest 38.6% will be with Rexnord’s shareholders.    The business combination is anticipated to expand Regal Beloit’s product offerings, market presence and shareholder value. In all, this will strengthen the company’s position as a major provider of power transmission solutions.

The deal’s closure is anticipated in fourth-quarter 2021. Within three years of completion, the deal is likely to generate cost savings of $120 million for Regal Beloit.

Shareholders’ Rewards: The company is committed to rewarding its shareholders with dividend payments over time. In 2020, dividends totaling $48.7 million were distributed to shareholders. The quarterly dividend rate is presently at 30 cents.

Also, the company engages in repurchasing its common shares, having bought back shares worth $25 million in 2020. Exiting the year, it was left with the authorization to buy back $210-million of common shares from its previously approved $250-million program.

Earnings Estimate Revisions: Regal Beloit’s earnings estimates have increased in the past 60 days. Currently, the Zacks Consensus Estimate for earnings is pegged at $1.67 for the first quarter, up 7.7% from the 60-day-ago figure. Notably, there have been two revisions in the quarter’s estimates in the past two months.

In addition, the consensus estimate for 2021 has increased 7.5% to $7.15 in the past 60 days and 14.9% to $8.27 for 2022. Notably, there have been three upward revisions in estimates for 2021 and one revision for 2022 in the past 60 days.

Other Key Picks

Two other top-ranked stocks in the industry are II-VI Incorporated (IIVI - Free Report) and Emerson Electric Co. (EMR - Free Report) . Both companies presently carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Notably, II-VI’s shares have decreased 8.3% in the past three months, while Emerson’s shares have gained 11%.

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