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Regal Beloit Beats on Q4 Earnings, But Misses on Revenues

Industrial goods manufacturer Regal Beloit CorporationRBC reported strong fourth-quarter 2015 results with adjusted earnings of $1.17 per share, up 43% year over year. The adjusted earnings per share beat the Zacks Consensus Estimate of $1.11.

GAAP net loss came in at $19.3 million or 43 cents per share, narrowing from GAAP net loss of $116.5 million or $2.61 per share in the year-ago quarter. The year-over-year improvement was driven by the company's simplification initiatives.

Net sales fell to $773.5 million in the quarter from $775.6 million in the year-earlier quarter. The fall in revenue was driven by a decline in organic sales during the quarter and 2.7% headwind in currency translation. However, the fall in sales was partially offset by positive impact of the PTS acquisition. The quarterly revenues missed the Zacks Consensus Estimate of $839 million.

However, full-year 2015 revenues improved 8% year over year to an all-time high of $3,509.7 million. Earnings per share were $3.18 in comparison to the prior year which was 69 cents.

Adjusted operating profit margin in the fourth quarter was 10.3%, up 250 basis points from the prior year. The improvement came from benefits of the simplification initiative, cost controls and accretion from the PTS acquisition.

Segment Analysis

Revenues from the Power Transmission segment continued to impress, increasing an astounding 182% year over year to $193 million, driven by inorganic growth of $128 million. However, the sales were negatively impacted by fewer shipping days, headwinds in the oil & gas and agricultural markets, and decrease in foreign currency translation.

Net sales in the Commercial and Industrial System segment was $371 million, down 18%. The decrease in revenue in this segment was driven by sluggishness in oil and gas, a slowdown in the industrial markets in China and a negative foreign currency translation effect of 3.7%.

Net sales from the Climate Solutions segment was $210.3 million, down 18% year over year dragged down by the effect of contractual two-way material price formulas, warmer weather in the North American markets and a negative foreign currency translation effect of 1.5%.

Balance Sheet and Cash Flow

At year-end 2015, Regal Beloit's cash and cash equivalents were $252.9 million, compared with $334.1 million as of Jan 2, 2016. Long-term debt stood at $1,715.6 million, up from $624.7 as of Jan 2, 2015.

Net cash from operating activities during the quarter aggregated $113.9 million, up from $71.1 million in the year-ago period, bringing the respective tallies for the years to $381.1 million and $298.2 million. Free cash flow was 169% of adjusted net income and the company paid down $77 million of debt during the reported quarter.

Moving Forward

Regal Beloit expects 2016 adjusted earnings per share to be in the range of $4.80 to $5.20.The company expects continued weakness in industrial markets that is likely to affect its sales. However, Regal Beloit expects the second half of 2016 to be favorable on a year-over-year comparison.

The company is focused on simplifying its business and looks forward to deliver synergy benefits, which will help it tackle challenges to the top line.

Regal Beloit currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth a look include II-VI Incorporated IIVI , LSB Industries Inc. LXU and Macquarie Infrastructure Corporation MIC each carrying a Zacks #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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