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Reasons Why it is Worth Buying Regal Beloit (RBC) Stock Now

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Investors seeking exposure in the manufacturing electronics space may find Regal Beloit Corporation (RBC - Free Report) to be a suitable investment option. Strengthening end markets and an impressive outlook for the ongoing quarter enhance its attractiveness.

Based in Beloit, WI, the company engages in manufacturing electrical and mechanical motion control products, including electric generators, electric motors and blowers. Its market capitalization is $5.7 billion.

The company presently has a Zacks Rank #2 (Buy). It belongs to the Zacks Manufacturing - Electronics industry, which comes under the ambit of the Zacks Industrial Products sector. The industry is among the top 49% (with the rank of 122) of more than 250 Zacks industries.

In the past three months, the company’s shares have gained 1.1% compared with the industry’s growth of 2.3%. Notably, the S&P 500 expanded 6.2% and the sector advanced 4.6% in the same timeframe.


Below we discussed why Regal Beloit is a worthy investment option.

Earnings Performance and Projections: The company’s performance in the first quarter of 2021 was impressive, with earnings and sales beat of 17.86% and 4.37%, respectively. Improvements in sales and margin boosted the bottom line by 51.1% from the year-ago quarter.

In the quarters ahead, the company is poised to gain from solid product offerings and improving demand. It anticipates earnings of $1.85-$2.05 per share for the second quarter of 2021. The projection suggests a 100% increase (at the mid-point) from that reported in second-quarter 2020.

Revenues Projections & Deal: Improving order trend has brightened the company’s top-line prospects. While first-quarter orders were up 10.9% on a daily basis, it grew 9.1% in April.

For the second quarter of 2021, Regal Beloit anticipates year-over-year sales growth in high-20%.

As regard to the deal, the company will combine its operations with Rexnord Corporation’s (RXN - Free Report) Process & Motion Control segment, per a deal signed this February. The combination, expected to be completed in the fourth quarter of 2021, will enhance Regal Beloit’s product offerings of power transmission solutions.

Shareholders’ Rewards: The company has been rewarding its shareholders with dividend payments and share buybacks over time. In the first quarter of 2021, it distributed dividends of $12.2 million to its shareholders. Notably, Regal Beloit announced a hike of 10% in its quarterly dividend rate this April.

Under its $250-million buyback program, the company had the authorization to repurchase shares worth $210 million at the end of 2020. In first-quarter 2021, it refrained from engaging in any repurchase activities. Notably, Regal Beloit had halted its buyback activities, due to the pandemic, in May 2020.

A healthy cash flow position will likely help it reward its shareholders. For 2021, free cash flow is expected to be in excess of 100% of adjusted net income.

Earnings Estimate Revisions: The company’s earnings estimates have been increased in the past 30 days. Currently, the Zacks Consensus Estimate for earnings is pegged at $7.61 for 2021 and $8.50 for 2022, reflecting increases of 7.3% and 3.7% from the respective 30-day-ago figures.

Also, earnings estimates are pegged at $2.01 for the second quarter of 2021, reflecting an increase of 10.4% from the 30-day-ago figure.

Other Key Picks

Two other top-ranked stocks in the industry are A. O. Smith Corporation (AOS - Free Report) and Eaton Corporation plc (ETN - Free Report) . The companies currently carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 30 days, bottom-line estimates for these companies have improved for the current year. Further, positive earnings surprise in the last reported quarter was 7.14% for A. O. Smith and 15.20% for Eaton.

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