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Regal Beloit (RBC) Announces Planned Changes Post Deal With Rexnord
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Regal Beloit Corporation (RBC - Free Report) yesterday announced the planned changes to its power transmission business. The changes are subject to the consummation of the deal signed between the company and Rexnord Corporation in February 2021.
The company’s shares lost 1.97% yesterday, ending the trading session at $147.09.
Inside the Headlines
Before discussing about the announcement, let’s check out in brief some details of the deal signed in February.
The agreement was signed to combine Regal Beloit’s operations with Rexnord’s Process & Motion Control (“PMC”) segment. The transaction has been valued at $3.69 billion. Rexnord’s PMC segment engages in designing and manufacturing mechanical components used in complex systems. End markets served include agriculture, food and beverage, general industrial, aerospace, mining, petrochemical, and energy.
The transaction, to be completed in second-half of 2021, is anticipated to boost Regal Beloit’s product line and enhance its position as a major provider of power transmission solutions. The transaction will also strengthen its market presence and shareholder value. As noted, within three years of completion, the deal is likely to generate cost savings of $120 million for Regal Beloit. Adjusted earnings before interest, tax, depreciation and amortization are expected to be in excess of $1 billion in 2022.
Post the completion of the deal, Regal Beloit’s shareholders will own 61.4% of the combined entity (“New Regal”), while the rest 38.6% will be owned by Rexnord’s shareholders.
Per Regal Beloit’s planned changes, its power transmission business will comprise its existing Power Transmission Solutions segment and Rexnord’s PMC segment upon closing of the deal. The combined business will be grouped under Motion Control Solutions (“MCS”) segment.
In addition, Regal Beloit noted that the MCS segment will be led by Kevin J. Zaba and its president, Integration will be Jerry Morton. While Zaba is currently capacitated as president of PMC, Morton is the current president of PTS.
Zacks Rank, Estimates and Price Performance
With a market capitalization of $5.5 billion, Regal Beloit currently carries a Zacks Rank #2 (Buy). In 2021, the company anticipates benefiting from strengthening end markets and margin improvements. It expects adjusted earnings per share to be $8.70-$9.00, reflecting growth of 53% (at the mid-point) from the previous year. Sales are expected to grow in high-teens on a year-over-year basis.
In the past three months, the company’s shares have increased 5.8% compared with the industry’s growth of 7.1%.
Image Source: Zacks Investment Research
Meanwhile, the Zacks Consensus Estimate for its earnings is pegged at $8.85 for 2021 and $9.68 for 2022, reflecting growth of 13% and 11.9% from the respective 30-day-ago figures. Also, the estimate for the third quarter is pegged at $2.34, increasing 21.9% from the 30-day-ago figures.
In the past 30 days, bottom-line estimates for both companies have improved for the current year. Further, earnings surprise in the last reported quarter was 12.31% for A. O. Smith and 10.97% for Eaton.
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Regal Beloit (RBC) Announces Planned Changes Post Deal With Rexnord
Regal Beloit Corporation (RBC - Free Report) yesterday announced the planned changes to its power transmission business. The changes are subject to the consummation of the deal signed between the company and Rexnord Corporation in February 2021.
The company’s shares lost 1.97% yesterday, ending the trading session at $147.09.
Inside the Headlines
Before discussing about the announcement, let’s check out in brief some details of the deal signed in February.
The agreement was signed to combine Regal Beloit’s operations with Rexnord’s Process & Motion Control (“PMC”) segment. The transaction has been valued at $3.69 billion. Rexnord’s PMC segment engages in designing and manufacturing mechanical components used in complex systems. End markets served include agriculture, food and beverage, general industrial, aerospace, mining, petrochemical, and energy.
The transaction, to be completed in second-half of 2021, is anticipated to boost Regal Beloit’s product line and enhance its position as a major provider of power transmission solutions. The transaction will also strengthen its market presence and shareholder value. As noted, within three years of completion, the deal is likely to generate cost savings of $120 million for Regal Beloit. Adjusted earnings before interest, tax, depreciation and amortization are expected to be in excess of $1 billion in 2022.
Post the completion of the deal, Regal Beloit’s shareholders will own 61.4% of the combined entity (“New Regal”), while the rest 38.6% will be owned by Rexnord’s shareholders.
Per Regal Beloit’s planned changes, its power transmission business will comprise its existing Power Transmission Solutions segment and Rexnord’s PMC segment upon closing of the deal. The combined business will be grouped under Motion Control Solutions (“MCS”) segment.
In addition, Regal Beloit noted that the MCS segment will be led by Kevin J. Zaba and its president, Integration will be Jerry Morton. While Zaba is currently capacitated as president of PMC, Morton is the current president of PTS.
Zacks Rank, Estimates and Price Performance
With a market capitalization of $5.5 billion, Regal Beloit currently carries a Zacks Rank #2 (Buy). In 2021, the company anticipates benefiting from strengthening end markets and margin improvements. It expects adjusted earnings per share to be $8.70-$9.00, reflecting growth of 53% (at the mid-point) from the previous year. Sales are expected to grow in high-teens on a year-over-year basis.
In the past three months, the company’s shares have increased 5.8% compared with the industry’s growth of 7.1%.
Image Source: Zacks Investment Research
Meanwhile, the Zacks Consensus Estimate for its earnings is pegged at $8.85 for 2021 and $9.68 for 2022, reflecting growth of 13% and 11.9% from the respective 30-day-ago figures. Also, the estimate for the third quarter is pegged at $2.34, increasing 21.9% from the 30-day-ago figures.
Regal Beloit Corporation Price and Consensus
Regal Beloit Corporation price-consensus-chart | Regal Beloit Corporation Quote
Other Stocks to Consider
Two other top-ranked stocks in the industry are A. O. Smith Corporation (AOS - Free Report) and Eaton Corporation plc (ETN - Free Report) . Both 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 both companies have improved for the current year. Further, earnings surprise in the last reported quarter was 12.31% for A. O. Smith and 10.97% for Eaton.