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Regal Beloit (RBC) Q2 Earnings and Revenues Miss Estimates
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Regal Beloit Corporation (RBC - Free Report) reported weaker-than-expected second-quarter 2019 results, missing earnings estimates by 6.8%. Also, the company’s sales lagged estimates by 3.9%.
Regal Beloit’s adjusted earnings were $1.52 per share, missing the Zacks Consensus Estimate of $1.63. Further, the bottom line declined from $1.60 per share reported a year ago.
Core Sales, Divestments and Forex Woes Affect Revenues
In the reported quarter, Regal Beloit’s net sales were $873.7 million, decreasing 9% year over year. Adverse impact of 2.2% from organic sales, 5.3% from divestments and 1.5% from forex woes hurt results.
The top line lagged the Zacks Consensus Estimate of $909 million.
Excluding the impact of divested business, the company’s adjusted net sales were $868.1 million, down 3.7% year over year.
Regal Beloit Corporation Price, Consensus and EPS Surprise
The company reports results under three segments — Climate Solutions, Commercial and Industrial Systems and Power Transmission Solutions. The quarterly segmental results are briefly discussed below:
Revenues from Climate Solutions totaled $267.9 million, decreasing 3.4% year over year. Organic sales jumped 2.3% on account of positive impact from the FER pre-buy and residential HVAC growth. Forex woes and divestments had an adverse impact of 0.7% and 5%, respectively.
Commercial and Industrial Systems’ revenues were $401.8 million, down 14.3% year over year. Organic sales in the reported quarter decreased 5.5% while divestments resulted in adverse impact of 6.6%. Also, forex woes hurt sales by 2.2%.
Power Transmission Solutions’ revenues were $204 million, down 4.4% year over year. Organic sales declined 0.8% on account of softness in North American industrial end markets and de-stocking of inventory. Forex woes and divestments had an adverse impact of 1% and 2.6%, respectively.
Margins
In the reported quarter, Regal Beloit’s cost of sales decreased 10.2% year over year to $639.7 million. It represented 73.2% of net sales compared with 74.2% in the year-ago quarter. Gross margin increased 100 basis points (bps) to 26.8%. Operating expenses of $138 million decreased 6.6% and represented 15.8% of net sales.
Adjusted operating profit was $95.4 million, down 5.4% year over year, while margin dropped 20 bps to 11%. Adjusted effective tax rate in the quarter was 20.4% compared with 21.4% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the second quarter of 2019, Regal Beloit had cash and cash equivalents of $291.3 million, reflecting 17.2% growth from the figure reported on Dec 29, 2018. Long-term debt decreased 6.4%, to $1,222.7 million.
Notably, the company repaid $0.1 million of debt during the quarter.
In the second quarter, Regal Beloit generated net cash of $112.3 million from operating activities, reflecting a year-over-year increase of 10.3%. The company raised capital investment for purchasing property, plant and equipment by 69.8% over the year-ago figure to $36 million. Free cash flow was $76.3 million compared with cash flow of $80.6 million in the year-ago quarter.
During the quarter, the company paid dividends totaling $12 million to shareholders and repurchased shares worth $55.9 million.
Outlook
For 2019, adjusted earnings per share are expected to be $5.50-$5.80, lower from $6.15-$6.55 guided earlier.
Zacks Rank & Key Picks
Regal Beloit currently carries a Zacks Rank #4 (Sell).
Roper delivered average positive earnings surprise of 6.92% in the trailing four quarters.
Dover pulled off average positive earnings surprise of 6.91% in the trailing four quarters.
Tetra Tech delivered average positive earnings surprise of 8.72% in the trailing four quarters.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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Regal Beloit (RBC) Q2 Earnings and Revenues Miss Estimates
Regal Beloit Corporation (RBC - Free Report) reported weaker-than-expected second-quarter 2019 results, missing earnings estimates by 6.8%. Also, the company’s sales lagged estimates by 3.9%.
Regal Beloit’s adjusted earnings were $1.52 per share, missing the Zacks Consensus Estimate of $1.63. Further, the bottom line declined from $1.60 per share reported a year ago.
Core Sales, Divestments and Forex Woes Affect Revenues
In the reported quarter, Regal Beloit’s net sales were $873.7 million, decreasing 9% year over year. Adverse impact of 2.2% from organic sales, 5.3% from divestments and 1.5% from forex woes hurt results.
The top line lagged the Zacks Consensus Estimate of $909 million.
Excluding the impact of divested business, the company’s adjusted net sales were $868.1 million, down 3.7% year over year.
Regal Beloit Corporation Price, Consensus and EPS Surprise
Regal Beloit Corporation price-consensus-eps-surprise-chart | Regal Beloit Corporation Quote
The company reports results under three segments — Climate Solutions, Commercial and Industrial Systems and Power Transmission Solutions. The quarterly segmental results are briefly discussed below:
Revenues from Climate Solutions totaled $267.9 million, decreasing 3.4% year over year. Organic sales jumped 2.3% on account of positive impact from the FER pre-buy and residential HVAC growth. Forex woes and divestments had an adverse impact of 0.7% and 5%, respectively.
Commercial and Industrial Systems’ revenues were $401.8 million, down 14.3% year over year. Organic sales in the reported quarter decreased 5.5% while divestments resulted in adverse impact of 6.6%. Also, forex woes hurt sales by 2.2%.
Power Transmission Solutions’ revenues were $204 million, down 4.4% year over year. Organic sales declined 0.8% on account of softness in North American industrial end markets and de-stocking of inventory. Forex woes and divestments had an adverse impact of 1% and 2.6%, respectively.
Margins
In the reported quarter, Regal Beloit’s cost of sales decreased 10.2% year over year to $639.7 million. It represented 73.2% of net sales compared with 74.2% in the year-ago quarter. Gross margin increased 100 basis points (bps) to 26.8%. Operating expenses of $138 million decreased 6.6% and represented 15.8% of net sales.
Adjusted operating profit was $95.4 million, down 5.4% year over year, while margin dropped 20 bps to 11%. Adjusted effective tax rate in the quarter was 20.4% compared with 21.4% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the second quarter of 2019, Regal Beloit had cash and cash equivalents of $291.3 million, reflecting 17.2% growth from the figure reported on Dec 29, 2018. Long-term debt decreased 6.4%, to $1,222.7 million.
Notably, the company repaid $0.1 million of debt during the quarter.
In the second quarter, Regal Beloit generated net cash of $112.3 million from operating activities, reflecting a year-over-year increase of 10.3%. The company raised capital investment for purchasing property, plant and equipment by 69.8% over the year-ago figure to $36 million. Free cash flow was $76.3 million compared with cash flow of $80.6 million in the year-ago quarter.
During the quarter, the company paid dividends totaling $12 million to shareholders and repurchased shares worth $55.9 million.
Outlook
For 2019, adjusted earnings per share are expected to be $5.50-$5.80, lower from $6.15-$6.55 guided earlier.
Zacks Rank & Key Picks
Regal Beloit currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the Zacks Industrial Products sector are Roper Technologies, Inc. (ROP - Free Report) , Dover Corporation (DOV - Free Report) and Tetra Tech, Inc. (TTEK - Free Report) . All these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Roper delivered average positive earnings surprise of 6.92% in the trailing four quarters.
Dover pulled off average positive earnings surprise of 6.91% in the trailing four quarters.
Tetra Tech delivered average positive earnings surprise of 8.72% in the trailing four quarters.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>