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Rexnord (RXN) Posts In Line Q2 Earnings, Lowers FY17 View
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Machinery company Rexnord Corporation reported in line results for second-quarter of fiscal 2017 (ended Sep 30, 2016). The company’s adjusted earnings came in at 38 cents per share, same as the Zacks Consensus Estimate and roughly 5.6% above the year-ago tally of 36 cents.
Net sales of $491 million lagged the Zacks Consensus Estimate of $496.9 million. However, the result grew roughly 1% year over year on the back of 3% gain from acquired assets, partially offset by 2% core sales decline.
In fourth-quarter fiscal 2016, Rexnord announced its decision to exit its non-strategic RHF product line. The operations of the RHF product line were included within Rexnord’s Water Management platform. Excluding revenues of $5.5 million generated from this business, the quarter’s adjusted revenues were $485.5 million.
Rexnord reports its top-line results under two heads, Process & Motion Control and Water Management. The segmental quarterly results are briefly discussed below:
Revenues from Process & Motion Control totaled $286.9 million, up 6.7% year over year. It represented 58.4% of revenues.
Water Management revenues, representing 41.6%, were $204.1 million, down 6% year over year.
Adjusted revenues (revenues excluding the contribution from the RHF product line) were $198.6 million.
Margins
In the quarter, Rexnord’s cost of sales inched up 0.1% year over year, representing 64.6% of net sales, down from roughly 65.2% in the year-ago quarter. Gross margin inched up 60 basis point (bps) year over year to 34.8%.
Selling, general and administrative expenses, as a percentage of revenue, increased 180 bps year over year to 21.7%. Adjusted earnings before interest, tax, depreciation and amortization in the quarter were $90.3 million, down 3% year over year.
Balance Sheet and Cash Flow
Exiting the second quarter, Rexnord’s cash and cash equivalents were $208.5 million, above $183.2 million recorded in the preceding quarter. Long-term debt was roughly flat at $1,822 million.
In the first half of fiscal 2017, Rexnord generated cash of $59 million from its operating activities, down from $67 million recorded in the year-ago quarter. Spending on property, plant and equipment increased 73.1% year over year to $28.9 million.
Outlook
For fiscal 2017, Rexnord has lowered its adjusted earnings guidance to $1.32–$1.38 from the previous projection of $1.47−$1.57. Core sales are now predicted to decline roughly 3% as against the earlier guided range of (2%)−1% due to extension of project timelines in Middle East and uneven growth in the U.S. nonresidential construction market. The effective tax rate is expected to be around 25% (earlier expectation was 27%), while capital expenditure is anticipated to be approximately 3% of sales. Free cash will exceed net income.
For third-quarter fiscal 2017, Rexnord projects adjusted earnings within 23−26 cents per share. Sales are predicted in a range of $453−$463 million.
Rexnord expects to realize $30 million in annual cost-savings from its supply-chain optimization and footprint-repositioning programs by the end of fiscal 2017.
Applied Industrial Technologies’ earnings estimates for fiscal 2017 and fiscal 2018 have been revised upward over the last 60 days. Average earnings surprise for the last four quarters is a positive 4.93%.
AO Smith Corp. reported better-than-expected results in the last four quarters, with a positive average earnings surprise of 5.88%. Also, bottom-line expectations for 2016 and 2017 have improved over the past 60 days.
Schneider Electric SE’s earnings estimates for 2017 represent a year-over-year growth of 4.65%.
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Rexnord (RXN) Posts In Line Q2 Earnings, Lowers FY17 View
Machinery company Rexnord Corporation reported in line results for second-quarter of fiscal 2017 (ended Sep 30, 2016). The company’s adjusted earnings came in at 38 cents per share, same as the Zacks Consensus Estimate and roughly 5.6% above the year-ago tally of 36 cents.
Net sales of $491 million lagged the Zacks Consensus Estimate of $496.9 million. However, the result grew roughly 1% year over year on the back of 3% gain from acquired assets, partially offset by 2% core sales decline.
In fourth-quarter fiscal 2016, Rexnord announced its decision to exit its non-strategic RHF product line. The operations of the RHF product line were included within Rexnord’s Water Management platform. Excluding revenues of $5.5 million generated from this business, the quarter’s adjusted revenues were $485.5 million.
Segmental Revenues
Rexnord reports its top-line results under two heads, Process & Motion Control and Water Management. The segmental quarterly results are briefly discussed below:
Revenues from Process & Motion Control totaled $286.9 million, up 6.7% year over year. It represented 58.4% of revenues.
Water Management revenues, representing 41.6%, were $204.1 million, down 6% year over year.
Adjusted revenues (revenues excluding the contribution from the RHF product line) were $198.6 million.
Margins
In the quarter, Rexnord’s cost of sales inched up 0.1% year over year, representing 64.6% of net sales, down from roughly 65.2% in the year-ago quarter. Gross margin inched up 60 basis point (bps) year over year to 34.8%.
Selling, general and administrative expenses, as a percentage of revenue, increased 180 bps year over year to 21.7%. Adjusted earnings before interest, tax, depreciation and amortization in the quarter were $90.3 million, down 3% year over year.
Balance Sheet and Cash Flow
Exiting the second quarter, Rexnord’s cash and cash equivalents were $208.5 million, above $183.2 million recorded in the preceding quarter. Long-term debt was roughly flat at $1,822 million.
In the first half of fiscal 2017, Rexnord generated cash of $59 million from its operating activities, down from $67 million recorded in the year-ago quarter. Spending on property, plant and equipment increased 73.1% year over year to $28.9 million.
Outlook
For fiscal 2017, Rexnord has lowered its adjusted earnings guidance to $1.32–$1.38 from the previous projection of $1.47−$1.57. Core sales are now predicted to decline roughly 3% as against the earlier guided range of (2%)−1% due to extension of project timelines in Middle East and uneven growth in the U.S. nonresidential construction market. The effective tax rate is expected to be around 25% (earlier expectation was 27%), while capital expenditure is anticipated to be approximately 3% of sales. Free cash will exceed net income.
For third-quarter fiscal 2017, Rexnord projects adjusted earnings within 23−26 cents per share. Sales are predicted in a range of $453−$463 million.
Rexnord expects to realize $30 million in annual cost-savings from its supply-chain optimization and footprint-repositioning programs by the end of fiscal 2017.
REXNORD CORP Price, Consensus and EPS Surprise
REXNORD CORP Price, Consensus and EPS Surprise | REXNORD CORP Quote
Zacks Rank & Stocks to Consider
With a market capitalization of $2 billion, Rexnord Corporation presently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the machinery industry include Applied Industrial Technologies, Inc. (AIT - Free Report) , AO Smith Corp. (AOS - Free Report) and Schneider Electric SE (SBGSY - Free Report) . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Applied Industrial Technologies’ earnings estimates for fiscal 2017 and fiscal 2018 have been revised upward over the last 60 days. Average earnings surprise for the last four quarters is a positive 4.93%.
AO Smith Corp. reported better-than-expected results in the last four quarters, with a positive average earnings surprise of 5.88%. Also, bottom-line expectations for 2016 and 2017 have improved over the past 60 days.
Schneider Electric SE’s earnings estimates for 2017 represent a year-over-year growth of 4.65%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>