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Regal Beloit (RBC) Down 1.5% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Regal Beloit (RBC - Free Report) . Shares have lost about 1.5% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Regal Beloit due for a breakout? 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.

Regal Beloit Beats on Q3 Earnings, Narrows '18 EPS View

Regal Beloit reported mixed results for third-quarter 2018.

Earnings/Revenues

Adjusted earnings in the reported quarter came in at $1.67 per share, up 22.8% year over year. The bottom line also surpassed the Zacks Consensus Estimate of $1.61.

Net sales in the quarter improved 8% year over year to $925.4 million. Notably, the top-line figure improved 5.2% year over year, organically. The company stated that acquisitions, net of divestitures boosted quarterly revenues by 4.1%. However, negative foreign-exchange and the residential hermetic motor-components business divestiture impact depressed the same by 0.9% and 0.4%, respectively.

We notice that Regal Beloit’s third-quarter revenues missed the Zacks Consensus Estimate of $930 million.

Segmental Break-Up

The Commercial & Industrial System revenues improved 13.3% year over year to $462.3 million.  The Climate Solutions segment generated $255.4 million sales in the third quarter, down marginally 0.2% from the year-ago tally. The top-line results of Power Transmission Solutions improved 7.7% year over year to $207.7 million.

Costs/Margins

Cost of sales in the reported quarter was up 8.4% year over year to $682.8 million. Gross profit margin in the third quarter was 26.2%, down 30 basis points (bps) year over year.

Aggregate operating expenses flared up 30.6% year over year to $173.2 million. Adjusted operating margin in the quarter expanded 60 bps year over year to 11.6%.

Balance Sheet/Cash Flow

Exiting the Sep-end quarter, Regal Beloit had cash and cash equivalents of $184.4 million, up from $139.6 million recorded as of Dec 30, 2017. Long-term debt stood at $1,278.3 million, up from $1,039.9 million recorded at the end of 2017.

In the reported quarter, the company generated $106 million cash from operating activities, up 23.1% year over year. Capital expenditure was up 22.2% to $18.7 million.

Outlook

Regal Beloit anticipates securing higher orders from all end-markets in the near future. The company intends to battle the adverse impacts of inflation and tariff backed by its pricing actions. Based on the existing market conditions, this Zacks Rank #3 (Hold) company has narrowed its earnings view for 2018 from $5.70-$6.00 per share to the $5.85-$5.95 per share range.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.

VGM Scores

Currently, Regal Beloit has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Regal Beloit has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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