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Regal Beloit (RBC) Q4 Earnings In Line, Revenues Up Y/Y

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Industrial goods manufacturer Regal Beloit CorporationRBC reported decent fourth-quarter 2017 results, on the back of modest organic growth and positive order trends. On a GAAP basis, the company reported a net income of $51.5 million or $1.15 per share compared with $45.6 million or $1.01 per share in the year-earlier quarter. The significant year-over-year improvement was backed by higher revenues.

In the reported quarter, adjusted earnings were $1.14 per share compared with $1.04 in the year-ago quarter. The figure improved considerably year over year and came in line with the Zacks Consensus Estimate.

For 2017, Regal Beloit recorded GAAP earnings of $213 million or $4.74 per share compared with $203.4 million or $4.52 per share in 2016. Adjusted earnings for 2017 were $4.87 per share compared with $4.44 in the previous year.

Net sales increased to $820.7 million from $758.1 million in the year-earlier quarter, largely driven by organic growth across all segments. Moreover, quarterly revenues beat the Zacks Consensus Estimate of $790 million. For 2017, the company recorded net sales of $3,360.3 million compared with $3,224.5 million in 2016.

GAAP operating income improved to $78.3 million from $70.1 million in the prior-year quarter. Adjusted operating income was $79.5 million compared with $72.2 million in the year-ago quarter. Adjusted operating margin came in at 9.7%, up 20 basis points compared with the prior-year quarter.

Segmental Analysis

Revenues from the Power Transmission Solutions segment increased 13.2% year over year to $196.6 million. Sales were driven by rise in demand in the oil & gas and renewable energy end markets and in the distribution channel.However, GAAP operating margin decreased to 12.2% from 13% in the prior-year quarter.

Regal Beloit Corporation Price, Consensus and EPS Surprise

Regal Beloit Corporation Price, Consensus and EPS Surprise | Regal Beloit Corporation Quote

Net sales in the Commercial and Industrial System segment were $407.7 million, up 10.4% year over year owing to broad-based global end market strength in both OEM and distribution channels. Operating margin at the segment increased to 5.9% from 5.6% in the prior-year quarter.

Net sales from the Climate Solutions segment were $216.4 million, up 0.6% year over year. Operating margin of the segment also improved to 14% from 12.5% in the year-ago quarter.

Balance Sheet and Cash Flow

At year-end 2017, Regal Beloit's cash and cash equivalents were $139.6 million while long-term debt was $1,039.9 million compared with the respective tallies of $284.5 million and $1,310.9 million in the year-ago period. The company paid down $74.3 million of debt in the quarter under review.

Net cash from operating activities for 2017 totaled $291.9 million, down from $442.3 million in the year-ago period. In 2017, free cash flow was 106.4% of net income or $226.7 million compared with the respective tallies of 185.4% and $377.1 million in 2016.

Guidance

For 2018, Regal Beloit anticipates organic growth in range of low to mid-single digit single digits and expects to improve its adjusted operating margin for the third consecutive year. Additionally, it projects adjusted earnings per share guidance in the range of $5.35-$5.75 while GAAP earnings are expected in the range of $5.19-$5.59.

Regal Beloit carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the same space include Applied Industrial Technologies, Inc. AIT , Cintas Corporation CTAS and Deere & Company DE . While Applied Industrial Technologies sports a Zacks Rank #1 (Strong Buy), Cintas and Deere & Company carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Applied Industrial Technologies has an excellent earnings surprise history, surpassing estimates in the trailing four quarters with an average beat of 11.0%.

Cintas has an excellent earnings surprise history, exceeding estimates in the trailing four quarters with an average beat of 8.2%.

Deere & Company has posted earning beat in the trailing four quarters. It boasts an average beat of 19.5%.

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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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