Markets

Regal Beloit (RBC) Q4 Earnings In Sync, Offers 2017 View

Industrial goods manufacturer Regal Beloit CorporationRBC reported relatively modest fourth-quarter 2016 results despite a challenging macroeconomic environment. On a GAAP basis, the company reported a net income of $45.6 million or $1.01 per share against a loss of $19.3 million or loss of 43 cents per share in the year-earlier quarter. The significant year-over-year improvement in GAAP earnings despite lower revenues was primarily due to goodwill impairment charges in fourth-quarter 2015.

Adjusted earnings for the quarter were $1.04 per share compared with $1.17 in the year-ago quarter. Although adjusted earnings declined considerably year over year, it matched the Zacks Consensus Estimate.

For full-year 2016, Regal Beloit recorded GAAP earnings of $203.4 million or $4.52 per share compared with $143.3 million or $3.18 per share in 2015. Adjusted earnings for 2016 were $4.44 per share compared with $5.33 in 2015.

Net sales fell to $758.1 million from $773.5 million in the year-earlier quarter owing to adverse foreign currency translation impact and divestiture. However, quarterly revenues beat the Zacks Consensus Estimate of $756 million. For 2016, the company recorded net sales of $3,224.5 million compared with $3,509.7 million in 2015.

Gross profit for the reported quarter decreased to $193.2 million from $219.8 million a year ago due to lower revenues and higher cost of sales. GAAP operating income improved to $70.1 million from an operating loss of $14.1 million owing to goodwill impairment charges in prior-year quarter. Adjusted operating income was $72.2 million compared with $79.5 million in the year-ago quarter for respective adjusted operating margins of 9.5% and 10.3%.

Regal Beloit Corporation Price, Consensus and EPS Surprise

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

Segmental Analysis

Revenues from the Power Transmission Solutions segment decreased 9.8% year over year to $173.7 million. Sales were affected by foreign currency translation and the Mastergear divestiture along with softness in the oil & gas end market. Operating margin (GAAP) improved to 13.0% from 8.7% in the prior-year quarter, primarily due to lower operating expenses.

Net sales in the Commercial and Industrial System segment were $369.2 million, down 0.4% year over year owing to adverse foreign currency translation effect. Operating margin improved to 5.6% from a negative 16.1% due to simplification initiatives and right-sizing of oil & gas business.

Net sales from the Climate Solutions segment were $215.2 million, up 2.3% year over year due to strength in the North American residential HVAC (heating, ventilation, air conditioning) market, partially offset by softness in the Middle East. Operating margin declined to 12.5% from 13.7% due to LIFO inventory expense.

Balance Sheet and Cash Flow

At year-end 2016, Regal Beloit's cash and cash equivalents were $284.5 million, while long-term debt was $1,310.9 million compared with the respective tallies of $252.9 million and $1,715.6 million in the year-ago period. The company paid down $100.4 million of debt during the quarter and approximately $315 million in 2016.

Net cash from operating activities for 2016 totaled $439.6 million, up from $381.1 million in the year-ago period. Free cash flow was 184.1% of net income or $374.4 million in 2016 compared with the respective tallies of 134.9% and $288.9 million in 2015.

Guidance

Although Regal Beloit expects sales to remain affected by the continued weakness in industrial markets, organic growth is anticipated to be positive. For 2017, the company anticipates adjusted earnings per share in the range of $4.50-$4.90 per share, while GAAP earnings are expected in the range of $4.35-$4.75. Regal Beloit continues to focus on simplification initiatives to lower operating costs and improve margins in the future.

Regal Beloit presently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Eaton Corporation plc ETN , Pioneer Power Solutions, Inc. PPSI and Barloworld Limited BRRAY , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Eaton has a long-term earnings growth expectation of 8.8% and has an average earnings surprise of 1.56% in the trailing four quarters, having beaten estimates thrice.

Pioneer Power is currently trading at a forward P/E of 12.9x.

Barloworld has a long-term earnings growth expectation of 18.7% and is currently trading at a forward P/E of 11.0x.

Just Released - Driverless Cars: Your Roadmap to Mega-Profits Today

In this latest Special Report, Zacks' Aggressive Growth Strategist Brian Bolan explores a full-blown technological breakthrough in the making - autonomous cars. He also spotlights 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Eaton Corporation, PLC (ETN): Free Stock Analysis Report

Regal Beloit Corporation (RBC): Free Stock Analysis Report

Pioneer Power Solutions, Inc. (PPSI): Free Stock Analysis Report

Barloworld Ltd. (BRRAY): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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.

In This Story

PPSI ETN

Other Topics

Earnings Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More