Regal Beloit Corporation
) 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 annual rise
in the earnings was driven by the company's improved operational
performance during the quarter.
The results surpassed the company's previously provided
guidance range of $1.22 to $1.30 per share but failed to meet the
Zacks Consensus Estimate of $1.37 per share.
Net sales spiked 5.8% year over year but down 9.8%
sequentially to $779.5 million, although the sales missed the
Zacks Consensus Estimate of $840 million. The company has
witnessed sequential decline in its sales due to a clouded fiscal
scenario. Although the company's residential HVAC business grew
slightly during the quarter, Regal Beloit witnessed low demand in
its other businesses. The foreign currency translation reduced
the net sales by 1.7% from the year-ago quarter.
Revenues from the Electrical segment climbed 6.1% year over
year $708.3 million mostly driven by its business acquisition
activity, but was down 9.6% sequentially. Excluding the company's
business acquisitions, the Electrical segment's sales dropped
9.2% year over year due to the fall in the revenues accrued from
Regal Beloit's Commercial, Industrial and Asian businesses. The
North American residential HVAC motor sales surged 0.4% year over
year. The North American commercial and industrial motor sales
declined 6.4% year over year in the quarter.
Net sales in the mechanical segment hiked 2.6% year over year
but declined 11.3% sequentially to $71.2 million. Sales from the
North America Mechanical segment (the company's acquired and
divested businesses excluded) declined 0.9% from the year-ago
quarter. The sales outside the United States decreased 9.4% year
Gross profit in the quarter was $192.6 million, up 7.2% year
over year while gross margin increased to 24.7% in the third
quarter of 2012 from 24.4% a year ago. Operating margin in the
quarter was 10.7% compared to 10.6% in the year-ago quarter and
12.0% in the prior quarter.
On a segmental basis, the gross margin of the Electrical
Segment was 24.5% in the quarter versus 24.0% in the year-ago
quarter. The Mechanical Segment's gross margin declined 100 basis
points year over year to 27.2%.
Operating margin of the Electrical Segment in the quarter was
10.3%, declining from 10.4% in the prior year quarter. Mechanical
Segment reported a 14.2% operating margin in the quarter versus
12.7% in the year-ago quarter.
Balance Sheet and Cash flows
Exiting the third quarter, Regal Beloit's cash and cash
equivalents were $185.8 million versus $190.9 million in the
previous quarter. Inventories were $594.9 million compared with
$583.9 million in the second quarter of 2012. Long-term debt at
the end of 3Q12 was $781.7 million versus $899.8 million at the
end of the previous quarter.
Net cash provided by operating activities in the quarter was
$71.8 million compared with $66.7 million in the prior-year
quarter. The effective tax rate in the quarter was 24.5% versus
30.3% in the prior year quarter.
Management expects that the clouded fiscal scenario and weak
demand in the market would continue to affect the company's
financial as well as operating performance. However, the
company's HVAC business is expected to improve in the fourth
quarter of 2012. Additionally, the company would focus more on
its restructuring actions to improve its profitability.
Regal Beloit expects that the earnings per share (including
the restructuring charges of 9 cents per share) will be within
the range of 58 cents to 66 cents per share for the fourth
quarter of 2012.
Regal Beloit currently has a Zacks #4 Rank, which implies a
short-term (1-3 months) 'Sell' rating on the stock.
REGAL BELOIT (RBC): Free Stock Analysis
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