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We have issued an updated research report on Regal Beloit Corporation RBC on Dec 30.
The company is based in Beloit, WI, and currently has a $5-billion market capitalization. It makes and distributes mechanical and electrical motion control products. The company presently carries a Zacks Rank #3 (Hold).
The company belongs to the Zacks Manufacturing - Electronics industry, which comes under the Zacks Industrial Products sector. The industry is in the top 43% (with a rank of 109) of more than 250 Zacks industries.
Important factors influencing Regal Beloit are briefly discussed below.
Company’s Projections: Regal Beloit’s earnings and sales performances in the third quarter of 2020 were better than expected, with earnings and sales beat being 39.52% and 6.8%, respectively.
In the quarters ahead, the company is poised to benefit from solid product offerings, improved order trends, business restructuring actions and efforts to strengthen supply chains. Also, its cost-reduction measures are likely to benefit.
For the fourth quarter of 2020, the company anticipates earnings of $1.46-$1.66 per share. This projection suggests a mid-point increase of 25% from the year-ago quarter’s reported figure. Based on results in the first three quarters of 2020 and projections for the fourth quarter, earnings for 2020 are anticipated to be $5.45-$5.65.
Capital Allocation: The company effectively uses its capital to reward shareholders and lower its debts.
In the first three quarters of 2020, it rewarded shareholders with $36.5 million dividend payouts and share buybacks of $25 million. Notably, no share repurchases were made in the second and third quarters of 2020 due to temporary suspension because of the pandemic. Also, the company has taken the decision to resume its share buyback activities.
As far as debts are concerned, the company lowered its long-term debts by 25.3% sequentially in the third quarter of 2020. Also, its times interest earned at 6.3X and total debt to total capital at 30.4% at the end of the third quarter compared favorably with the respective figures of 5.4X and 32.4% at the second-quarter end.
Top-Line Woes: Regal Beloit’s sales decreased 1.8% year over year in the third quarter of 2020. Organically, sales were down 1.5% due to the adversities related to the pandemic. The company believes that seasonality will impact heating, ventilation, air conditioning (“HVAC”) and pump businesses in the fourth quarter.
Also, woes related to divestments might be concerning for the company. Notably, divestments lowered sales by 3.5%, 1.5% and 1% in the first, second and third quarters of 2020, respectively.
Forex Woes: Regal Beloit carries out operations in multiple countries, including Asia, the United States, Canada, Europe and Mexico. International operations expose the company to unfavorable movements in foreign currencies, geopolitical issues, local competitive pressure and macroeconomic challenges. In third-quarter 2020, forex woes adversely impacted the company’s sales by 0.2% year over year.
Share Price Performance and Consensus Estimate Trend: Market sentiments seem to be favoring Regal Beloit for quite some time now. In the past three months, the company’s shares have gained 29.9% compared with the industry’s growth of 21.1%. During the same timeframe, the sector has expanded 19.1% and the S&P 500 has grown 11%.
Meanwhile, the Zacks Consensus Estimate for Regal Beloit’s earnings is pegged at $1.57 for the fourth quarter of 2020, $5.57 for 2020 and $6.69 for 2021. These estimates remained unchanged from the respective 60-day-ago figures. On a year-over-year basis, earnings estimates reflect growth of 25.6% for the fourth quarter, 1.5% for 2020 and 20.2% for 2021.
Regal Beloit Corporation Price and Consensus
Regal Beloit Corporation price-consensus-chart | Regal Beloit Corporation Quote
Stocks to Consider
Three better-ranked stocks in the industry are II-VI Incorporated IIVI, Rexnord Corporation RXN and SPX FLOW, Inc. FLOW. While II-VI currently sports a Rank #1 (Strong Buy), both Rexnord and SPX FLOW carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for II-VI improved for the current year, while have been stable for Rexnord and SPX FLOW. Further, earnings surprise for the last reported quarter was 52.73% for II-VI, 27.03% for Rexnord and 45.45% for SPX FLOW.
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