It has been about a month since the last earnings report for Regal Beloit (RBC - Free Report) . Shares have added about 1.1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Regal Beloit due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Second-Quarter 2018 Results
Regal Beloit reported mixed results for the second quarter of 2018.
Earnings/Revenues: On a GAAP basis, the industrial goods manufacturer reported net income of $65.9 million or $1.50 per share compared with $53 million or $1.18 per share in the year-earlier quarter. The improvement came on the back of higher revenues across segments.
Adjusted earnings were $1.60 per share compared with $1.29 in the year-ago quarter. However, the bottom line missed the Zacks Consensus Estimate of $1.61.
Net sales increased to $959.7 million from $869.2 million in the year-earlier quarter, driven by strong organic sales growth across all three operating segments. Moreover, quarterly revenues beat the Zacks Consensus Estimate of $954 million.
GAAP operating income improved to $99.6 million from $83.2 million in the prior-year quarter. Adjusted operating income was $106.1 million compared with $90.6 million in the year-ago quarter. Adjusted operating margin came in at 11.1%, up 70 basis points year over year.
Revenues from Power Transmission Solutions increased 11.6% year over year to $213.4 million. Sales were driven by rise in demand in the oil & gas, material handling, and aerospace end markets. Operating margin at the segment increased to 11.8% from 11.6% in the prior-year quarter.
Net sales from Commercial and Industrial Systems were $469 million, up 15.1% year over year, driven by strength in commercial HVAC (heating, ventilation and air conditioning), oil & gas and power generation and Asia. Operating margin at the segment increased to 6.5% from 5.1% in the prior-year quarter.
Net sales from Climate Solutions improved 2.5% year over year to $277.3 million owing to strength in North American residential HVAC, somewhat offset by weakness in the Middle East and residential hermetic motor components. Operating margin of the segment increased to 15.9% from 14.9% in the year-ago quarter.
Balance Sheet/Cash Flow: As on Jun 30, 2018, Regal Beloit's cash and cash equivalents were $175.6 million while long-term debt was $1,235.1 million.
Net cash from operating activities for the first six months of 2018 totaled $144.3 million, down from $148.9 million in the year-ago period.
Free cash flow for the reported quarter amounted to $80.6 million or 122.3% of net income compared with the respective tallies of $81.7 million and 154.2% in the prior-year period. During the quarter, Regal Beloit repurchased 579,005 shares for $46.1 million.
Outlook: For 2018, Regal Beloit currently expects its adjusted earnings per share in the range of $5.70-$6.00. The company projects GAAP earnings per share between $4.78 and $5.08, down from prior expectations of $5.29-$5.69.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
Currently, Regal Beloit has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Regal Beloit has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.