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Here's Why it is Worth Investing in Regal Beloit (RBC) Now
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Regal Beloit Corporation (RBC - Free Report) can currently be considered a smart choice for investors seeking exposure in the manufacturing space. It boasts solid growth prospects on restructuring measures, impressive liquidity and shareholder-friendly policies.
The Beloit, WI-based company belongs to the Zacks Manufacturing – Electronics industry, which belongs to the broader Zacks Industrial Products sector. The company’s earnings are predicted to rise 10% in the next five years. It currently has a Zacks Rank #2 (Buy) and a VGM Score of A.
In the past three months, the company’s shares have dipped 2.8% compared with the industry’s decline of 6.8%. Despite the weak price performance, the stock is worth investing in. Let’s delve on the factors backing the stock’s investment appeal.
Healthy Projections: For 2020, Regal Beloit anticipates benefiting from its initiatives (discussed below), solid product offerings and effective services.
It anticipates adjusted earnings per share of $5.65-$6.05 for 2020, suggesting growth of 6.6% (at the mid-point) from the previous year’s reported figure. Also, 80/20 measure followed by the company will likely be advantageous.
Initiatives: Regal Beloit’s decentralization efforts are likely to bring in a radical change in its operations. It anticipates the efforts to simplify decision-making process, talent development easier, boost the speed of execution and improve operational efficiency.
In addition, the company’s business reorganization last December is expected to boost focus, transparency and accountability mainly for Industrial Systems and Commercial Systems segments. Regal Beloit shifted to reporting results under four segments — Industrial Systems, Climate Solutions, Power Transmission Solutions and Commercial Systems. Notably, the company earlier reported results under three segments.
Further, it anticipates benefits from footprint consolidation and simplification programs. Annual savings of $38 million are expected from the company’s restructuring measures.
Rewards to Shareholders: Regal Beloit is committed toward rewarding shareholders handsomely through dividend payments and share buybacks. In fourth-quarter 2019, the company’s dividend payout amounted to $12.3 million and shares worth $15 million were repurchased.
It is worth mentioning here that Regal Beloit announced a 7% increase in its quarterly dividend rate in April 2019. Also, a $250-million buyback program was announced in October 2019.
We believe that healthy cash flow position will help Regal Beloit in rewarding shareholders going forward.
Trend in Earnings Estimates: In the past 30 days, the company’s earnings estimates have shown an upward trend, with 3 positive revisions recorded for 2020 and one for 2021. There was no downward revision for the years in the same time frame.
Notably, the Zacks Consensus Estimate for earnings per share was pegged at $5.79 for 2020 and $6.53 for 2021, reflecting growth of 1.2% and 2.2% from the respective 30-day-ago figures. Also, estimates suggest year-over-year growth of 5.5% for 2020 and 12.6% in 2021.
In the past 60 days, earnings estimates for the companies have improved for the current year. Further, positive earnings surprise for the last four quarters, on average, was 0.40% for Graco and 26.60% for Tennant. Notably, Emerson recorded in-line earnings in the last four quarters.
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Here's Why it is Worth Investing in Regal Beloit (RBC) Now
Regal Beloit Corporation (RBC - Free Report) can currently be considered a smart choice for investors seeking exposure in the manufacturing space. It boasts solid growth prospects on restructuring measures, impressive liquidity and shareholder-friendly policies.
The Beloit, WI-based company belongs to the Zacks Manufacturing – Electronics industry, which belongs to the broader Zacks Industrial Products sector. The company’s earnings are predicted to rise 10% in the next five years. It currently has a Zacks Rank #2 (Buy) and a VGM Score of A.
In the past three months, the company’s shares have dipped 2.8% compared with the industry’s decline of 6.8%. Despite the weak price performance, the stock is worth investing in. Let’s delve on the factors backing the stock’s investment appeal.
Healthy Projections: For 2020, Regal Beloit anticipates benefiting from its initiatives (discussed below), solid product offerings and effective services.
It anticipates adjusted earnings per share of $5.65-$6.05 for 2020, suggesting growth of 6.6% (at the mid-point) from the previous year’s reported figure. Also, 80/20 measure followed by the company will likely be advantageous.
Initiatives: Regal Beloit’s decentralization efforts are likely to bring in a radical change in its operations. It anticipates the efforts to simplify decision-making process, talent development easier, boost the speed of execution and improve operational efficiency.
In addition, the company’s business reorganization last December is expected to boost focus, transparency and accountability mainly for Industrial Systems and Commercial Systems segments. Regal Beloit shifted to reporting results under four segments — Industrial Systems, Climate Solutions, Power Transmission Solutions and Commercial Systems. Notably, the company earlier reported results under three segments.
Further, it anticipates benefits from footprint consolidation and simplification programs. Annual savings of $38 million are expected from the company’s restructuring measures.
Rewards to Shareholders: Regal Beloit is committed toward rewarding shareholders handsomely through dividend payments and share buybacks. In fourth-quarter 2019, the company’s dividend payout amounted to $12.3 million and shares worth $15 million were repurchased.
It is worth mentioning here that Regal Beloit announced a 7% increase in its quarterly dividend rate in April 2019. Also, a $250-million buyback program was announced in October 2019.
We believe that healthy cash flow position will help Regal Beloit in rewarding shareholders going forward.
Trend in Earnings Estimates: In the past 30 days, the company’s earnings estimates have shown an upward trend, with 3 positive revisions recorded for 2020 and one for 2021. There was no downward revision for the years in the same time frame.
Notably, the Zacks Consensus Estimate for earnings per share was pegged at $5.79 for 2020 and $6.53 for 2021, reflecting growth of 1.2% and 2.2% from the respective 30-day-ago figures. Also, estimates suggest year-over-year growth of 5.5% for 2020 and 12.6% in 2021.
Regal Beloit Corporation Price and Consensus
Regal Beloit Corporation price-consensus-chart | Regal Beloit Corporation Quote
Other Key Picks
Three other top-ranked stocks in the sector are Emerson Electric Co. (EMR - Free Report) , Tennant Company (TNC - Free Report) and Graco Inc. (GGG - Free Report) . While Tennant and Graco sport a Zacks Rank #$1 (strong Buy), Emerson Electric carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for the companies have improved for the current year. Further, positive earnings surprise for the last four quarters, on average, was 0.40% for Graco and 26.60% for Tennant. Notably, Emerson recorded in-line earnings in the last four quarters.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>