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Regal Beloit Closes Divestment of Drives & Control Business

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Regal Beloit Corporation (RBC - Free Report) has announced that it successfully completed the divestiture of its highly engineered drives and control systems business (Regal Drive Technologies) on Jan 7. The other party to the transaction is an associate of Sun Capital Partners, Inc. The financial terms of the deal have not been disclosed.

We believe that the divestment will help Regal Beloit to concentrate on its core businesses by using freed-up resources more effectively.

It is worth mentioning here that the company’s shares price has gained nearly 0.4% at the close of the trading close on Jan 8. Yesterday, the closing share price was $71.27.

Brief Discussion on Regal Drive Technologies

Regal Drive Technologies primarily manufactures starters, engineered controls and drives. This business employees roughly 450 people and is anticipated to generate revenues of $131 million and earnings of 18 cents per share in 2018.

Results of Regal Drive Technologies are reported under Regal Beloit’s Commercial and Industrial Systems segment. This segment — accounted for roughly 49.9% of third-quarter 2018 revenues — primarily engages in manufacturing motors (medium and large), generators, custom drives, controls and systems. These products are used in industrial and commercial equipment; oil & gas systems; and commercial heating, ventilation and air conditioning (HVAC).

Inorganic Activities of Regal Beloit

In addition to divestments, Regal Beloit engages in business acquisitions to gain access to new customers, regions and product lines. In April 2018, the company acquired Nicotra Gebhardt S.p.A — specialist in making, selling, and servicing blowers and fans. Its leading product brands are Gebhardt and Nicotra. This acquired business was integrated with Regal Beloit’s Commercial & Industrial Systems.

It’s worth mentioning here that acquisitions and net of divestitures added approximately 4.1% to the company’s sales growth in the third quarter of 2018.

Zacks Rank & Stocks to Consider

With a market capitalization of nearly $3.1 billion, Regal Beloit currently carries a Zacks Rank #3 (Hold). Strengthening segmental businesses, synergistic gains from acquired assets and improved productivity will be advantageous for the company in the quarters ahead. However, rising costs mostly due to inflation in the prices of steel and aluminum, as well as the cyclical nature of the business and customer concentration risks, might be detrimental.

In the past 60 days, the Zacks Consensus Estimate for earnings was pegged at $5.91 for 2018 (results not yet released) and $6.56 for 2019, reflecting decline of 0.2% and growth of 0.5% from the respective 60-day-ago tallies. On a year-over-year basis, estimates for 2018 and 2019 represent growth of 21.4% and 10.9%, respectively.

Regal Beloit Corporation Price and Consensus


Regal Beloit Corporation Price and Consensus | Regal Beloit Corporation Quote

In the past three months, Regal Beloit’s shares have decreased 10.6% compared with 14.5% decline recorded by the industry.

Some better-ranked stocks in the Zacks Industrial Products sector are DXP Enterprises, Inc. (DXPE - Free Report) , Barnes Group, Inc. (B - Free Report) and Colfax Corporation (CFX - Free Report) . While DXP Enterprises currently sports a Zacks Rank #1 (Strong Buy), both Barnes and Colfax carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

For 2019, earnings estimates for these three companies have improved over the past 60 days. Further, positive earnings surprise for the last four quarters was 112.62% for DXP Enterprises, 7.04% for Barnes and 8.88% for Colfax.

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