Regal Rexnord Fails to Deliver as Engineered Components and Systems Stocks Lag
Regal Rexnord (NYSE:RRX) and the Rest of the Engineered Components and Systems Stocks Take a Hit in Q4
The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. For Regal Rexnord (NYSE:RRX) and the rest of the engineered components and systems stocks, it has been a tough quarter. Let’s take a closer look at their performance in Q4.
Engineered Components and Systems Stocks: A Mixed Bag
Engineered components and systems companies possess technical know-how in sometimes narrow areas such as metal forming or intelligent robotics. Lately, automation and connected equipment collecting analyzable data have been trending, creating new demand. On the other hand, like the broader industrials sector, engineered components and systems companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.
The 13 engineered components and systems stocks we track reported a satisfactory Q4. As a group, revenues were in line with analysts’ consensus estimates while next quarter’s revenue guidance was 0.5% below. While some engineered components and systems stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 3.1% since the latest earnings results.
Regal Rexnord (NYSE:RRX): A Disappointing Quarter
Headquartered in Milwaukee, Regal Rexnord (NYSE:RRX) provides power transmission and industrial automation products. Regal Rexnord reported revenues of $1.46 billion, down 9.1% year on year. This print fell short of analysts’ expectations by 1.9%. Overall, it was a disappointing quarter for the company with full-year EPS guidance missing analysts’ expectations.
Regal Rexnord Total Revenue
The stock is down 21.9% since reporting and currently trades at $121.01. Despite its struggles in Q4, Regal Rexnord has been making efforts to expand its product offerings and improve operational efficiency. However, the company’s revenue growth has been slow in recent quarters, which may be a concern for investors.
ESCO (NYSE:ESE): A Standout Performer
A developer of the communication systems used in the Batmobile of "The Dark Knight," ESCO (NYSE:ESE) is a provider of engineered components for the aerospace, defense, and utility sectors. ESCO reported revenues of $247 million, up 13.2% year on year, outperforming analysts’ expectations by 2.8%. The business had a stunning quarter with EPS guidance for next quarter exceeding analysts’ expectations and a solid beat of analysts’ EPS estimates.
ESCO Total Revenue
ESCO achieved the fastest revenue growth among its peers. The market seems happy with the results as the stock is up 20.8% since reporting. It currently trades at $159.77. ESCO’s strong performance in Q4 can be attributed to its diversified customer base and expanding product offerings, which have helped the company tap into new markets.
NN (NASDAQ:NNBR) and Applied Industrial (NYSE:AIT)
Formerly known as Nuturn, NN (NASDAQ:NNBR) provides metal components, bearings, and plastic and rubber components to the automotive, aerospace, medical, and industrial sectors. NN reported revenues of $106.5 million, down 5.3% year on year, falling short of analysts’ expectations by 1.9%. Still, its results were good as it locked in an impressive beat of analysts’ EPS estimates and a solid beat of analysts’ EBITDA estimates.
NN Total Revenue
As expected, the stock is down 1.5% since the results and currently trades at $2.67. NN’s revenue growth has been slower in recent quarters due to market competition and reduced demand from some of its major customers. However, the company’s cost-cutting measures have helped it maintain profitability.
Applied Industrial (NYSE:AIT) distributes industrial products–everything from power tools to industrial valves–and services to a wide variety of industries. Applied Industrial reported revenues of $1.07 billion, flat year on year. This number was in line with analysts’ expectations. It was a strong quarter as it also logged an impressive beat of analysts’ adjusted operating income estimates.
Applied Industrial Total Revenue
The stock is down 8.5% since reporting and currently trades at $230.23. Despite its solid performance in Q4, Applied Industrial’s revenue growth has been sluggish in recent quarters due to market competition and reduced demand from some of its major customers.
RBC Bearings (NYSE:RBC)
With a Guinness World Record for engineering the largest spherical plain bearing, RBC Bearings (NYSE:RBC) is a manufacturer of bearings and related components for the aerospace & defense, industrial, and transportation industries. RBC Bearings reported revenues of $394.4 million, up 5.5% year on year. This print met analysts’ expectations. Aside from that, it was a slower quarter as it recorded a significant miss of analysts’ EPS estimates and a miss of analysts’ EBITDA estimates.
RBC Bearings Total Revenue
The stock is up 9.1% since reporting and currently trades at $351.43. RBC Bearings has been expanding its product offerings and improving operational efficiency, which have helped the company maintain profitability despite market competition.
Conclusion
In conclusion, Regal Rexnord (NYSE:RRX) and the rest of the engineered components and systems stocks had a tough quarter in Q4. While some companies fared better than others, they collectively declined with average share prices down 3.1% since the latest earnings results. However, there are still opportunities to be found among these companies. Companies like ESCO (NYSE:ESE) have demonstrated strong performance and growth potential, making them worth considering for investors looking for winners with rock-solid fundamentals.
