Regal Beloit (RBC) Beats On Q3 Earnings, Narrows '18 EPS View

Regal Beloit Corporation (NYSE:RBC) reported mixed results for third-quarter 2018.

Earnings/Revenues

Adjusted earnings in the reported quarter came in at $1.67 per share, up 22.8% year over year. The bottom line also surpassed the Zacks Consensus Estimate of $1.61.

Net sales in the quarter improved 8% year over year to $925.4 million. Notably, the top-line figure improved 5.2% year over year, organically. The company stated that acquisitions, net of divestitures boosted quarterly revenues by 4.1%. However, negative foreign-exchange and the residential hermetic motor-components business divestiture impact depressed the same by 0.9% and 0.4%, respectively.

We notice that Regal Beloit’s third quarter revenues missed the Zacks Consensus Estimate of $930 million.

Segmental Break-Up

The Commercial & Industrial System revenues improved 13.3% year over year to $462.3 million. The Climate Solutions segment generated $255.4 million sales in the third quarter, down marginally 0.2% from the year-ago tally. The top-line results of Power Transmission Solutions improved 7.7% year over year to $207.7 million.

Costs/Margins

Cost of sales in the reported quarter was up 8.4% year over year to $682.8 million. Gross profit margin in the third quarter was 26.2%, down 30 basis points (bps) year over year.

Aggregate operating expenses flared up 30.6% year over year to $173.2 million. Adjusted operating margin in the quarter expanded 60 bps year over year to 11.6%.

Balance Sheet/Cash Flow

Exiting the Sep-end quarter, Regal Beloit had cash and cash equivalents of $184.4 million, up from $139.6 million recorded as of Dec 30, 2017. Long-term debt stood at $1,278.3 million, up from $1,039.9 million recorded at the end of 2017.

In the reported quarter, the company generated $106 million cash from operating activities, up 23.1% year over year. Capital expenditure was up 22.2% to $18.7 million.

Outlook

Regal Beloit anticipates to secure higher orders from all end-markets in the near future. The company intends to battle the adverse impacts of inflation and tariff backed by its pricing actions. Based on the existing market conditions, this Zacks Rank #3 (Hold) company has narrowed its earnings view for 2018 from $5.70-$6.00 per share to the $5.85-$5.95 per share range.

Stocks to Consider

Some better-ranked stocks in the Zacks Industrial Products sector are listed below:

Atkore International Group Inc. (NYSE:ATKR) sports a Zacks Rank #1 (Strong Buy), at present. The company generated an average positive earnings surprise of 24.46% in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Donaldson Company, Inc. (NYSE:DCI) carries a Zacks Rank #2 (Buy), currently. The company delivered an average positive earnings surprise of 2.29% in the preceding four quarters.

Currently, Rockwell Automation, Inc. (NYSE:ROK) also holds a Zacks Rank of 2. The company came up with an average positive earnings surprise of 5.58% during the same time frame.

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