Regal Beloit Corporation (NYSE:) currently seems to be a smart choice for investors seeking exposure in the machinery space. Solid fundamentals and positive revision in earnings estimates are reflective of healthy growth potential of the stock.
This Beloit, WI-based company currently carries a Zacks Rank #2 (Buy). It belongs to the Zacks Manufacturing-Electronics industry, currently placed in the top 36% (with Zacks Industry Rank #91) of more than 250 Zacks industries. Notably, the top 50% of the Zacks-ranked industries tend to outperform the bottom 50% by a factor of more than 2 to 1.
Below we discussed why investing in Regal Beloit will be a smart choice.
Share Price Performance, Impressive Earnings Outlook: Market sentiments seem to be working in favor of Regal Beloit over time. In the past three months, the company’s share price has gained 17.7% against the industry’s growth of 9.8%.
It is worth mentioning here that the company’s shares have increased roughly 10% since the release of fourth-quarter 2018 results on Feb 4, 2019. Earnings in the reported quarter were $1.41 per share, roughly 7.6% above the Zacks Consensus Estimate and 22.5% higher than the year-ago figure.
For 2019, the company anticipates gaining from pricing and solid product portfolio. Adjusted earnings in the year are predicted to be $6.15-$6.55 per share. The mid-point of the guidance is above $6.00 recorded in 2018.
In the past 60 days, earnings estimates for 2019 and 2020 have been revised upward, reflecting positive sentiments about the company’s growth prospects. Currently, the Zacks Consensus Estimate is pegged at $6.43 for 2019 and $7.04 for 2020, reflecting growth of 0.2% and 1.4% from the respective 60-day-ago tallies.
Regal Beloit Corporation Price and Consensus
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Regal Beloit Corporation Price and Consensus | Regal Beloit Corporation Quote
Top-Line Growth Prospects: Regal Beloit delivered solid organic results in the fourth quarter of 2018. Total revenues in the reported quarter increased 7.4% year over year, with organic sales rising 5.2% on the back of healthy performance of Commercial & Industrial System, Climate Solutions, and Power Transmission Solutions segments.
For 2019, the company anticipates gaining from strengthening HVAC (heating, ventilation and air conditioning) end markets and FER energy efficiency regulation. It predicts organic sales to grow in a low to mid-single digit in the year.
Inorganic Moves: Over time, Regal Beloit strengthened its core business through growth investments as well as divestment of non-core operations. One such divestment was that of the company’s engineered drives and control systems business (Regal Drive Technologies) in January 2019.
Shareholder-Friendly Policies: Regal Beloit remains committed to rewarding shareholders handsomely through dividend payments and share buybacks. In 2018, the company’s dividend payments have grown 6.1% year over year to $47.2 million. Also, it used approximately $127.8 million for repurchasing shares versus $45.1 million in 2017.
It is worth mentioning here that the company hiked the quarterly dividend rate by 8% in April 2018 and announced a $250-million share buyback program in July 2018.
Other Key Picks
Some other top-ranked stocks in the Zacks Industrial Products sector are DXP Enterprises, Inc. (NASDAQ:) , Sun Hydraulics Corporation (NASDAQ:) and Roper Technologies, Inc. (NYSE:) . All these stocks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for all these three stocks have improved for the current year. Further, average earnings surprise for the last four quarters was a positive 46.55% for DXP Enterprises, 2.27% for Sun Hydraulics and 4.96% for Roper.
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