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Rexnord's (RXN) Growth Potential Solid: Should You Buy?

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We issued an updated research report on machinery company Rexnord Corporation (RXN - Free Report) on Apr 10. The company, with a $2.4 billion market capitalization, specializes in designing, manufacture and sale of process and motion control, and water management products.

Since the release of third-quarter fiscal 2017 results on Feb 1, 2017, shares of Rexnord yielded a 4.74% return, outperforming the gain of 0.68% recorded by the Zacks categorized Machinery Electrical industry.

We believe that Rexnord has the potential to expand its businesses by leveraging the accelerated demand from non-residential construction markets in the U.S. and from the global food and beverage end markets. The company targets mid-single digit core growth, 30% incremental profit margin and free cash flow in excess of net income in the long term.

In first-half fiscal 2016, Rexnord initiated a supply-chain optimization and footprint-repositioning program, anticipating $30 million of annual cost-savings by fiscal 2017. Also, the company has been successfully capitalizing on its acquisitions by penetrating into unexplored markets and expanding its product lines. In the first nine months of fiscal 2017, acquisitions and divestments combined had a 2% positive impact on the company’s sales growth.

Rexnord’s financial performance was impressive in the last four quarters, recording better-than-expected results in three and in-line results in one. Average earnings surprise was a positive 5.91%. In the last quarter, the company’s earnings of 25 cents per share exceeded the Zacks Consensus Estimate of 24 cents by 4.17%.

Rexnord currently carries a Zacks Rank #2 (Buy). Some other stocks worth considering in the machinery industry include AZZ Incorporated (AZZ - Free Report) , EnerSys (ENS - Free Report) and Regal Beloit Corporation (RBC - Free Report) . All these stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AZZ Incorporated’s earnings estimates for fiscal 2018 were revised upward over the last 60 days.
 
EnerSys reported better-than-expected results in the last four quarters, with a positive average earnings surprise of 4.39%. Also, bottom-line expectations for fiscal 2018 improved over the past 60 days.

Regal Beloit Corporation’s earnings estimates for 2018 improved over the last 60 days.

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