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Regal-Beloit Offers Common Stock

Zacks Equity Research

Headquartered in Beloit, Wisconsin, Regal-BeloitCorporation (RBC) recently issued a public offering of 2,750,000 shares of its common stock. The electrical and mechanical motion control products manufacturer also intends to provide the underwriters an option to buy up to an added 412,500 shares of common stock in order to cover over-allotments.

Underwriters to this offering are Credit Suisse Securities (USA) LLC, a subsidiary of Credit Suisse (CS) and Robert W. Baird & Co. Incorporated. The proceeds from the offerings are expected to aid the company’s future acquisitions along with other general corporate and working capital expenses.

The latest capital raising initiatives are likely to help the company minimize its total debt burden to a considerable extent. Further, the company will be able to raise its capital ratios with this capital spending which in turn will facilitate the company’s future growth prospects and acquisition opportunities. The strategic efforts are also aimed at increasing the liquidity of the company.

However, even though liquidity will improve in the short-term for the company, an increase in the number of outstanding shares may prove to be an extra burden for Regal-Beloit in the long run, considering its steady and regular dividend payout strategy.

Earlier, the company had reported adjusted diluted earnings per share of $1.32 in the third quarter of 2012 compared to $1.31 per share in the year-ago quarter and $1.50 in the second quarter of 2012. The results failed to meet the Zacks Consensus Estimate of $1.37 per share.

Exiting the third quarter, Regal-Beloit’s cash and cash equivalents were $185.8 million versus $190.9 million in the previous quarter. Long-term debt at the end of 3Q12 was $781.7 million versus $899.8 million at the end of the previous quarter.

In a different story, the company recently announced to pay its third-quarter dividend of $0.19 per share. The dividend will be paid on January 18, 2013, to shareholders of record as of December 28, 2012.

Regal-Beloit is operating in a highly competitive industry. Some of the competitors in electric motor, power generation and mechanical motion control markets are ABB Ltd. (ABB) and Emerson Electric Co. (EMR) who enjoy greater financial and other resources than the company. 

The current Zacks Consensus Estimates of Regal-Beloit for the fourth quarter of 2012 and for 2012 are 73 cents and $4.71, representing year-over-year growth of (21.0%) and 0.1%, respectively. The company currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. However, we are maintaining a long-term ‘Neutral’ recommendation on the stock.

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