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Regal Rexnord shares initiated with Buy rating on margin improvement

EditorNatashya Angelica
Published 12/12/2024, 13:52
RRX
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On Thursday, Regal Rexnord Corp (NYSE:ZWS) (NYSE:RRX) shares, an $11.3 billion industrial powerhouse, received a positive outlook from a Jefferies analyst, who initiated coverage on the company with a Buy rating and a price target set at $215.00.

The company, known for its leadership in motor and power transmission systems, is recognized for its ongoing margin improvement and a portfolio that is strategically positioned to capitalize on growth opportunities as the industrial environment strengthens. InvestingPro data shows analyst targets ranging from $190 to $220, reflecting strong institutional confidence in the company's trajectory.

The analyst pointed out that Regal Rexnord's EBITDA margins are projected to reach around 25% by the end of 2025, which would mark an approximate 300 basis points enhancement compared to the estimated figures for 2024. With current EBITDA at $1.25 billion and a healthy current ratio of 2.45, the company demonstrates strong financial health.

The anticipated increase is largely attributed to the realization of $65 million in acquisition synergies expected in 2025, primarily through further rationalization of the company's global footprint.

Regal Rexnord's merger and acquisition activities have reshaped its portfolio, with about 50% now exposed to sectors experiencing secular growth. This repositioning, along with organic growth initiatives, is forecasted to yield more substantial growth than the company has seen in the past.

The analyst's outlook suggests that the combination of margin expansion and top-line growth drivers will enable Regal Rexnord to achieve a double-digit compound annual growth rate in earnings per share over the coming years. This positive assessment reflects confidence in the company's strategic initiatives and its potential for continued financial performance improvement.

In other recent news, Regal Rexnord Corporation reported mixed third-quarter results, with record-high adjusted gross and EBITDA margins. Despite a slight decline in total sales, the company saw a 2.5% daily increase in orders, mainly driven by its Industrial Powertrain Solutions segment. However, challenges were faced in the Power Efficiency Solutions and Applied Motion Control segments.

The company also revised its full-year 2024 sales outlook downwards and expects limited growth in 2025 due to ongoing market uncertainties. In addition, Loop Capital increased its price target for Regal Rexnord to $220, maintaining a Buy rating on the stock.

The decision followed the company's earnings report, which aligned with market expectations. Loop Capital's analysis suggests that Regal Rexnord is well positioned for double-digit annual earnings per share growth over the next several years. These are recent developments.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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