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Rexnord (RXN) Earnings & Revenues Surpass Estimates in Q2

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Rexnord Corporation (RXN - Free Report) reported better-than-expected second-quarter fiscal 2019 (ended Sep 30, 2018) results, delivering positive earnings and sales surprises of 12.2% and 2.1%, respectively.

The machinery company’s adjusted earnings were 46 cents per share, surpassing the Zacks Consensus Estimate of 41 cents. Also, the bottom line increased 37.5% from the year-ago figure of 32 cents.

Segmental Performance

In the reported quarter, Rexnord’s net sales were $524.8 million, increasing 15.6% year over year. The improvement was driven by 9% contribution from core sales growth and 8% from positive impact of acquisitions, partially offset by 1% negative impact of currency translation.

Also, the top line surpassed the Zacks Consensus Estimate of $514 million.

Rexnord Corporation Price, Consensus and EPS Surprise

Rexnord Corporation Price, Consensus and EPS Surprise | Rexnord Corporation Quote

The company reports results under two segments — Process & Motion Control and Water Management. The quarterly segmental results are briefly discussed below:

Revenues from Process & Motion Control totaled $348.7 million, increasing 16% year over year. It represented 66.4% of net sales. The segment’s results benefited from improved demand in its end markets, resulting in 7% growth in core sales and 10% gains from the acquisition of Centa Power. However, movements in foreign currencies negatively impacted results by 1%.

Water Management revenues, representing 33.6% of net sales, were $176.1 million, up 15% year over year. Core sales growth of 12% was driven by rise in demand across North American building construction end markets. Also, acquisition of World Dryer added 3% on a year-over-year basis.

Margin Profile

In the reported quarter, Rexnord’s cost of sales jumped 14.8% to $321.6 million. It represented 61.3% of net sales versus 61.7% recorded in the year-ago quarter. Gross margin improved 40 basis points (bps) to 38.7%.

Selling, general and administrative expenses of $109.6 million increased 15.4% year over year and represented 20.9% of net sales.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $114.8 million, up 20.2%. Adjusted EBITDA margin was 21.9%, up 90 bps.

Balance Sheet and Cash Flow

Exiting the fiscal second quarter, Rexnord had cash and cash equivalents of $223.5 million, up from $193.2 million in the fiscal 2018 end. Long-term debt dipped 1.1% sequentially to $1,336.6 million.

For the first six months of fiscal 2019, free cash flow was $57.5 million versus $44.6 million in the similar period of fiscal 2018.


For fiscal 2019, the company anticipates core sales growth in the higher end of the mid-single digit range. Gains from cost-reduction initiatives and improved operating leverage will prove beneficial. Adjusted EBITDA is projected to be $433-$443 million.

Net income will likely be $147-$154 million. Free cash will exceed net income.

Zacks Rank & Stocks to Consider

Rexnord currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space are Enersys (ENS - Free Report) , Eaton Corporation, PLC (ETN - Free Report) and Graco Inc. (GGG - Free Report) . While Enersys sports a Zacks Rank #1 (Strong Buy), Eaton and Graco carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Enersys surpassed estimates thrice in the trailing four quarters, the average beat being 2.86%.

Eaton exceeded estimates thrice in the trailing four quarters, the average beat being 2.90%.

Graco surpassed estimates twice in the trailing four quarters, the average beat being 4.05%.

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