We recently initiated our coverage on
), a well-known mechanical components manufacturer, with an
Rexnord specializes in designing and manufacturing process and
motion control, and water management products. These products are
sold across the globe for use in diversified end markets.
The company has presence in a variety of end markets, including
mining, food & beverage, aerospace, non-residential
construction and global water infrastructure. Rise of backlog in
the non-residential construction market in U.S. and Canada are
likely to favor Rexnord in the years to come. The water
infrastructure market was boosted from the growing demand for
clean water while similar trend of rising demand is noticed in
the aerospace industry.
Besides the favorable end markets, acquisitions over time have
strengthened Rexnord's product portfolio and enabled expansion in
unexplored markets. Acquired assets of Zurn Plumbing products
business in 2007 became the foundation of the company's Water
Management Platform. The recently acquired assets of Micro
Precision Gear and LWG Specialised Plumbing Products are expected
to boost the company's business in the civil aerospace industry
and expand its Zurn brand products sales in Australia,
Rexnord has been working towards lowering its financial burden
resulting from its debts. In Apr 2013, measures were undertaken
that reduced the interest rate on term loans by 75 basis points.
A similar action of refinancing term loans has been repeated in
Aug 2013. The recent refinancing is anticipated to save $41-$48
million annually in pre-tax interest expenses for Rexnord and
lead to earnings per share accretion of $0.25-$0.30.
Talking of Rexnord's financial performance in the fiscal first
quarter 2014, core sales growth was driven by benefits derived
from diversified product portfolio, growth initiatives undertaken
and improving demands. For fiscal 2014, core sales growth
guidance has been raised to 2%-4% while the lower end of the
earnings guidance has been raised by $0.02 to $1.12-$1.18.
Over the long-term, Rexnord targets achieving mid-single-digit
core growth, 30+% incremental profit margins and free cash flow
in excess of net income in the long term.
Other Stocks to Consider
Rexnord Corporation provided a year-to-date return of 20.7% and
currently has a $2.0 billion market capitalization. Other stocks
to watch out for are
AO Smith Corp.
), with a Zacks Rank #1 (Strong Buy) while
Plug Power Inc.
), each come with a Zacks Rank #2 (Buy).
SMITH (AO) CORP (AOS): Free Stock Analysis
ENERSYS INC (ENS): Free Stock Analysis Report
PLUG POWER INC (PLUG): Free Stock Analysis
REXNORD CORP (RXN): Free Stock Analysis
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