Regal Beloit Corporation RBC seems to be a wise investment option in the manufacturing electronics space, donning healthy growth opportunities. The stock presently carries a Zacks Rank #2 (Buy).
This Beloit, WI-based company is a specialist in making mechanical motion control and electrical products. At present, its market capitalization is $4.6 billion.
The company belongs to the Zacks Manufacturing - Electronics industry, which comes under the ambit of the broader Zacks Industrial Products sector. The industry is in the top 30% (with rank of 74) of more than 250 Zacks industries.
Below we discussed why Regal Beloit is a worthy investment option.
Solid Results and Projections: In third-quarter 2020, Regal Beloit’s earnings and sales surpassed estimates by 39.52% and 6.8%, respectively. On a year-over-year basis, earnings increased 28.1% despite a 1.8% fall in revenues.
The company is poised to gain from improving order trends, cost-control measures and reorganization actions (80/20) in the quarters ahead. Also, its supply-chain actions and business restructuring moves might aid the company’s performance.
For the fourth quarter, Regal Beloit anticipates earnings to be $1.46-$1.66 per share, suggesting an increase of 25% (at the mid-point) from the year-ago quarter. Also, based on the results in the first three quarters of 2020 and the fourth-quarter expectation, earnings in 2020 are expected to be $5.45-$5.65 per share.
Order Trends: Improvement in order trends might be beneficial for Regal Beloit in the quarters to come. Regal Beloit noted that October orders increased 11% as against the decline of 6% seen in July. Orders for pumps too improved in the quarter, while orders in North America HVAC exhibited a 22% jump in October compared with only 12% growth in July.
Capital Allocation: Regal Beloit effectively utilizes its capital to lower debts, and also to reward shareholders handsomely through dividend payment and share buybacks. Exiting the third quarter, the company lowered its long-term debts by 26.1% from the 2019-end level. Its long-term debt exiting the quarter stood at $840.2 million.
As far as the rewards to shareholders are concerned, the company distributed dividends of $36.5 million to shareholders in the first three quarters of 2020. Also, it repurchased shares worth $25 million during the same time frame. Management has decided to resume with its share-buyback program, which was suspended due to the pandemic.
It is worth noting here that authorization worth $210 million are still left under the company’s $250-million buyback program announced in October 2019.
Price Performance and Earnings Estimate Revisions: Market sentiments have been positive for Regal Beloit for quite some time now. In the past three months, the company’s shares have gained 12.4% as compared with the industry’s growth of 9%.
In addition, the company’s earnings estimates have moved north in the past 30 days. Currently, the Zacks Consensus Estimate for earnings is pegged at $1.57 for the fourth quarter, up 31.9% from the 30-day-ago figure.
In addition, the consensus estimate for 2020 has moved up 19.3% to $5.57 in the past 30 days and 14.4% to $6.69 for 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 industry are II-VI Incorporated IIVI, Rexnord Corporation RXN and Franklin Electric Co., Inc. FELE. While IIVI currently sports a Zacks Rank #1 (Strong Buy), both Rexnord and Franklin Electric carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 30 days, the earnings estimates for these companies have moved up for the current year. Further, the earnings surprise for the last reported quarter was 52.73% for II-VI, 27.03% for Rexnord and 25.76% for Franklin Electric.
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