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Rexnord (RXN) Exhibits Solid Prospects Amid Persistent Risks

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On May 20, we issued an updated research report on Rexnord Corporation .

In the past three months, this Zacks Rank #3 (Hold) stock has returned 6.5% compared with the industry’s growth of 2.3%.

Existing Scenario

Rexnord has been gaining from operational execution, footprint-repositioning programs and its supply-chain optimization. Also, the business diversity has been allowing the company to mitigate the weakness in one end market with strength across others. Rexnord is working diligently to improve its prospects in the hygiene market.

Also, the company believes in adding complementary businesses through acquisitions. It acquired Just Manufacturing Co. and Canada-based Hadrian Inc. in 2020. Both these assets have been integrated with Rexnord’s Water Management segment. Notably, acquired assets boosted the company’s sales by 2% in the first quarter of 2021.

In addition, it focuses on rewarding shareholders through share repurchases and dividend payouts. For instance, in the first quarter of 2021, the company paid out dividends worth $10.8 million to shareholders besides repurchasing shares worth $0.9 million.

Despite the positives, weakness in the company’s Process & Motion Control segment, mainly in the aerospace business, remains a major concern. Weakness in the aerospace market might continue to hurt Rexnord’s performance in the quarters ahead.

Moreover, geographical diversification exposed the company to headwinds arising from geopolitical issues and movements in foreign currencies. Weakness in operating conditions in one or more countries might hurt its overall performance.

Key Picks

Some better-ranked stocks from the same space are A. O. Smith Corporation (AOS - Free Report) , Eaton Corporation, plc (ETN - Free Report) and Franklin Electric Co., Inc. (FELE - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A. O. Smith delivered an earnings surprise of 14.84%, on average, in the trailing four quarters.

Eaton delivered an earnings surprise of 16.78%, on average, in the trailing four quarters.

Franklin Electric delivered an earnings surprise of 25.39%, on average, in the trailing four quarters.

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