With first-quarter earnings drawing to a close, industry peers are doing various analysis and comparisons to gauge the underlying metrics and relative performance. Let us perform a similar comparative analysis between two stocks in the Zacks Industrial Products sector - Regal Beloit CorporationRBC and IDEX CorporationIEX - to pick the better investment option.
Regal Beloit reported decent first-quarter 2018 results, supported by strong organic sales growth and favorable foreign currency translation impact. On a GAAP basis, the industrial goods manufacturer reported net income of $58.4 million or $1.31 per share compared with $46.3 million or $1.02 per share in the year-earlier quarter. The year-over-year improvement was primarily due to higher revenues across segments. Adjusted earnings for the reported quarter were $1.34 per share compared with $1.07 in the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of $1.26. Net sales increased to $878.8 million from $813.5 million in the year-earlier quarter, driven by strong organic sales growth across all three operating segments. Moreover, quarterly revenues beat the Zacks Consensus Estimate of $867 million.
IDEX reported strong first-quarter results with all-time high revenues, operating income and earnings driven by healthy organic growth and diligent execution of operational plans. GAAP earnings for the reported quarter were $99 million or $1.27 per share compared with $75.9 million or 99 cents per share in the year-earlier quarter. The year-over-year improvement was primarily attributable to top-line growth. Excluding restructuring and other non-recurring items, adjusted earnings for the reported quarter were $1.29 per share, which beat the Zacks Consensus Estimate of $1.24. Net sales came in at $612.3 million compared with $553.6 million in the year-ago quarter. Quarterly sales exceeded the Zacks Consensus Estimate of $601 million. The top-line increase was primarily attributable to organic growth of 7%. Investments in product innovations, business development and reallocation of resources led to growth in revenues across all segments of the company, which helped drive total revenues.
Based on first-quarter earnings, there appears to be no clear favorite as Regal Beloit has an edge over IDEX with respect to earnings surprise percentage, while it is just the opposite with respect to revenue surprise percentage.
Over the past month, Regal Beloit has outperformed IDEX with an average return of 8.7% against a loss of 3.1% for the latter while the sector declined 1.7%. Based on the price performance, Regal Beloit appears to be a clear winner.
Zacks Rank & VGM Score
With a Zacks Rank #2 (Buy), Regal Beloit has a Value Growth Momentum score ( VGM Score ) of A. IDEX has a VGM Score of D and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Our research shows that stocks with a VGM Score of A or B combined with a Zacks Rank #1 or 2, offer the best investment opportunities for investors. Consequently, Regal Beloit appears to be better positioned than IDEX with regards to this metric.
Post earnings release, Regal Beloit's current-quarter estimates increased from $1.49 to $1.52 per share (up 2%) while that for the current year increased from $5.57 to $5.66 (up 1.6%).
IDEX's current-quarter estimates increased to $1.31 from $1.29 post earnings release (up 1.6%) while current-year estimates increased to $5.18 per share from $5.07 (up 2.2%). With positive estimate revisions, investor sentiments appear to be more bullish on Regal Beloit than IDEX with respect to current-quarter estimates but just the opposite for current-year estimates.
For 2018, Regal Beloit raised its adjusted earnings per share to $5.60-$6.00 from $5.35-$5.75 expected earlier. It expects the Nicotra Gebhardt acquisition to be 13-15 cents accretive to adjusted earnings in 2018. The company projects GAAP earnings per share between $5.29 and $5.69, up from prior expectations of $5.19-$5.59.
IDEX is poised to gain from robust organic growth, disciplined capital deployment and a favorable global macroeconomic environment. With solid quarterly results and continued strength in order trajectory, management has raised its earlier guidance for 2018. Full-year adjusted earnings are currently anticipated to lie within the $5.05-$5.20 per share range, up from $4.90-$5.10 expected earlier on organic growth of 5-6%.
To Sum Up
Based on the current scenario, although the two stocks seem to match each other on most counts, Regal Beloit appears to have trumped IDEX on few metrics and stands out as a better investment proposition. A couple of other top-ranked stocks in the industry are Ingersoll-Rand Plc IR and A. O. Smith Corporation AOS , both carrying a Zacks Rank #2.
Ingersoll-Rand has a long-term earnings growth expectation of 11.2%. It surpassed estimates thrice in the trailing four quarters with an average positive earnings surprise of 3.9%.
A. O. Smith has a long-term earnings growth expectation of 12.2%. It topped estimates thrice in the trailing four quarters with an average positive earnings surprise of 3.1%.
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