Rexnord Corporation RXN appears a smart investment option for investors seeking exposure in the manufacturing space. Its solid fundamentals and healthy growth opportunities are its compelling advantages. The company presently sports a Zacks Rank #1 (Strong Buy).
The company manufactures and provides water management, and process and motion control products. It is based in Milwaukee, WI, and presently has a $4.7-billion market capitalization.
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 34% (with a rank of 86) of more than 250 Zacks industries.
Below we discussed why Rexnord is a worthy investment option.
End-Market Exposure: Rexnord serves customers in multiple end-markets, including global water-infrastructure, food & beverage, mining, and non-residential construction. Such diversification enables the company to offset weakness in some end markets, with gains in others. Expansion in the market related to hygiene is an area of interest for the company.
For 2020, Rexnord anticipates generating revenues of $100 million from the sale of touchless faucets and flush valves. Also, it believes that nearly 20% of revenues in the Water Management segment will be generated from sales of components used in hygienic restrooms.
Rewards to Shareholders: Rexnord used part of its capital to increase shareholders’ value through share buybacks and dividends. In the six months ended September 2020, the company used $19.2 million for paying dividends to shareholders. As far as share buybacks are concerned, these activities were restored in the September-ended quarter. Notably, shares worth $15 million were repurchased in the quarter.
The company’s quarterly dividend rate is currently at 8 cents per share, while $208 million are still left under its authorized share buyback program.
Buyouts: Rexnord added new products to its portfolio and expanded its geographical presence through acquisitions. In January 2020, the company acquired Illinois-based Just Manufacturing Co. and integrated the same into its Water Management segment. Notably, Just Manufacturing makes plumbing fixtures and stainless steel sinks for use in the commercial and institutional markets.
In the September-ended quarter, the company’s sales increased 1% year over year, driven by gains from acquired assets.
Other Tailwinds: In the quarters ahead, Rexnord is poised to benefit from the expansion of the e-commerce business, solid operational execution, and supply-chain optimization and footprint-repositioning programs (“SCOFR”). Notably, SCOFR helped the company to lower structural costs, facility footprint and capital spending. The third phase of SCOFR is anticipated to generate savings of $12-$14 million in 2021.
Price Performance and Earnings Estimate Trend: Market sentiments have been in favor of Rexnord for quite some time now. Notably, the company’s shares have gained 28.8% in the past three months compared with the industry’s growth of 14.4%. Also, the sector expanded 16.5% and the S&P 500 grew 4.1% during the same timeframe.
Also, it is worth noting here that the company’s earnings estimates have been raised in the past 30 days. Presently, the Zacks Consensus Estimate of its earnings is pegged at 40 cents for the quarter ending December 2020 and 52 cents for the quarter ending March 2021, reflecting growth of 11.1% and 6.1% from the respective 30-day-ago figures.
Moreover, the company’s estimates are at $1.77 for the 12 months ended December 2020 and $2.04 for the 12 months ended December 2021, suggesting increases of 7.3% and 5.7% from the respective 30-day-ago figures.
Rexnord Corporation Price and Consensus
Rexnord Corporation price-consensus-chart | Rexnord Corporation Quote
Other Key Picks
Three other top-ranked stocks in the industry are II-VI Incorporated IIVI, Regal Beloit Corporation RBC and Franklin Electric Co., Inc. FELE. While IIVI currently sports a Zacks Rank #1, both Regal Beloit and Franklin Electric carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 30 days, 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, 39.52% for Regal Beloit and 25.76% for Franklin Electric.
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