Core Insights - Regal Rexnord reported $1.5 billion in revenue for the quarter ended June 2025, reflecting a year-over-year decline of 3.3% while EPS increased to $2.48 from $2.29 a year ago [1] - The revenue exceeded the Zacks Consensus Estimate of $1.49 billion by 0.53%, and the EPS surpassed the consensus estimate of $2.42 by 2.48% [1] Revenue Performance - Automation & Motion Control (AMC) revenues were $411.1 million, down 2.6% year-over-year, and below the average estimate of $416.59 million [4] - Industrial Powertrain Solutions (IPS) revenues reached $649.8 million, a decline of 3.8% year-over-year, and also below the average estimate of $656.41 million [4] - Power Efficiency Solutions (PES) revenues were $435.2 million, representing a 5.9% increase year-over-year, exceeding the average estimate of $416.71 million [4] Adjusted EBITDA Performance - Adjusted EBITDA for Industrial Powertrain Solutions (IPS) was $175.1 million, surpassing the average estimate of $170.18 million [4] - Adjusted EBITDA for Automation & Motion Control (AMC) was $80.2 million, below the average estimate of $92.02 million [4] - Adjusted EBITDA for Power Efficiency Solutions (PES) was $74.4 million, exceeding the average estimate of $69.63 million [4] Stock Performance - Regal Rexnord shares returned -1% over the past month, contrasting with the Zacks S&P 500 composite's +1% change [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Core Insights - Regal Rexnord (RRX) reported quarterly earnings of $2.48 per share, exceeding the Zacks Consensus Estimate of $2.42 per share, and up from $2.29 per share a year ago, indicating an earnings surprise of +2.48% [1] - The company generated revenues of $1.5 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 0.53%, although this represents a decline from year-ago revenues of $1.55 billion [2] - Regal Rexnord has outperformed consensus EPS estimates three times over the last four quarters and has topped consensus revenue estimates two times in the same period [2] Earnings Outlook - The sustainability of Regal Rexnord's stock price movement will largely depend on management's commentary during the earnings call and future earnings expectations [3][4] - The current consensus EPS estimate for the upcoming quarter is $2.62 on revenues of $1.48 billion, and for the current fiscal year, it is $9.87 on revenues of $5.87 billion [7] Industry Context - The Manufacturing - General Industrial industry, to which Regal Rexnord belongs, is currently ranked in the top 16% of over 250 Zacks industries, suggesting a favorable outlook for stocks within this sector [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5][6]

Core Insights - Regal Rexnord Corporation reported strong performance in Q2 2025, with sales and earnings slightly exceeding expectations, driven by growth in the PES segment and margin expansion in IPS despite market challenges [3][5][12] - The company has updated its annual guidance for GAAP diluted earnings per share to a range of $4.50 to $5.10 and adjusted diluted earnings per share to a range of $9.70 to $10.30, with mitigation actions in place to counteract tariff impacts [5][21] - The company ended Q2 with a $300 million cross-sell opportunity funnel and is on track to realize $170 million of cross-sell synergies this year, aiming for $250 million by 2027 [3][5] Financial Performance - Q2 2025 net sales were $1,496.1 million, a decrease of 3.3% compared to the previous year, with organic sales down 1.2% [11][12] - GAAP net income for Q2 2025 was $79.6 million, up from $63.0 million in Q2 2024, with adjusted EBITDA of $329.7 million [11][19] - The adjusted diluted earnings per share for Q2 2025 was $2.48, an increase of 8.3% compared to the previous year [11][19] Segment Performance - The PES segment achieved net sales of $435.2 million, reflecting a 5.9% increase, driven by strong performance in residential and commercial HVAC markets [12][24] - The IPS segment reported net sales of $649.8 million, a decrease of 3.8%, primarily due to project timing in the metals and mining market [12][24] - The Automation & Motion Control segment saw net sales of $411.1 million, a decrease of 2.6%, impacted by challenges in the medical market and sourcing rare earth magnets [12][24] Cash Flow and Debt Management - The company entered into a $400 million accounts receivable securitization facility, contributing $368.5 million to operating cash flows in Q2 2025, which was used to repay a significant portion of existing bank loans [4][11] - Cash from operating activities for Q2 2025 was $523.2 million, with adjusted free cash flow of $493 million, including proceeds from the receivables securitization facility [11][23] - The company paid down $469.8 million of gross debt, resulting in a net debt to adjusted EBITDA ratio of approximately 3.3x [11][23]

Group 1 - Regal Rexnord (RRX) and Trimble Navigation (TRMB) are both considered for investment in the Manufacturing - General Industrial sector, with a focus on identifying undervalued stocks [1] - Both companies currently hold a Zacks Rank of 2 (Buy), indicating positive earnings estimate revisions and improving earnings outlooks [3] - Value investors utilize various traditional metrics, including P/E ratio, P/S ratio, earnings yield, and cash flow per share, to identify undervalued companies [4] Group 2 - RRX has a forward P/E ratio of 15.93, while TRMB has a forward P/E of 29.36, suggesting RRX may be more attractively priced [5] - RRX's PEG ratio is 1.59, compared to TRMB's PEG ratio of 2.94, indicating RRX's expected earnings growth is more favorable relative to its valuation [5] - RRX has a P/B ratio of 1.62, while TRMB's P/B ratio is 3.75, further supporting RRX as the superior value option based on these valuation metrics [6]

Company Overview - Regal Rexnord Corporation (RRX) is experiencing significant attention from investors due to high implied volatility in its options market, particularly the Aug 15, 2025 $60.00 Put option [1] - The company currently holds a Zacks Rank 2 (Buy) in the Manufacturing - General Industrial industry, which is in the top 20% of the Zacks Industry Rank [3] Analyst Insights - Over the past 60 days, one analyst has raised earnings estimates for the current quarter, resulting in an increase in the Zacks Consensus Estimate from $2.40 to $2.42 per share [3] - The high implied volatility suggests that options traders are anticipating a significant price movement for Regal Rexnord shares, indicating potential trading opportunities [4] Trading Strategy - Options traders often seek out options with high implied volatility to sell premium, a strategy that can capture decay and potentially reduce risk if the underlying stock does not move as much as expected [4]

Core Insights - Regal Rexnord (RRX) and Trimble Navigation (TRMB) are two stocks in the Manufacturing - General Industrial sector, with RRX currently presenting a better value opportunity compared to TRMB [1] Valuation Metrics - RRX has a forward P/E ratio of 15.15, while TRMB has a significantly higher forward P/E of 27.35 [5] - The PEG ratio for RRX is 1.52, indicating a more favorable valuation relative to its expected earnings growth, compared to TRMB's PEG ratio of 2.74 [5] - RRX's P/B ratio stands at 1.54, whereas TRMB's P/B ratio is 3.49, further highlighting RRX's superior valuation metrics [6] Earnings Outlook - RRX holds a Zacks Rank of 2 (Buy), indicating a positive earnings outlook due to recent revisions in earnings estimates, while TRMB has a Zacks Rank of 4 (Sell) [3][4] - The solid earnings outlook for RRX, combined with its favorable valuation metrics, positions it as the superior value option in comparison to TRMB [6]

Company Overview - Regal Rexnord Corporation has 30,000 associates globally, providing sustainable solutions that power, transmit, and control motion [4] - The company offers electric motors and air moving subsystems that create motion, along with a portfolio of engineered power transmission components for industrial applications [4] - Regal Rexnord operates in three segments: Industrial Powertrain Solutions, Power Efficiency Solutions, and Automation & Motion Control [6] Market Demand - The company's end markets experience significant secular demand tailwinds, including sectors such as discrete automation, food & beverage, aerospace, medical, data center, energy, residential and commercial buildings, general industrial, and metals and mining [5] Financial Reporting - Regal Rexnord plans to release its second quarter 2025 financial results after market close on August 5, 2025 [1] - A conference call to discuss the earnings will be held on August 6, 2025, at 9:00 am CT (10:00 am ET) [2] - Webcast and telephone replay options will be available for three months following the earnings call [3]

Financial Performance - Net sales for the three months ended March 31, 2025, were $1,418.1 million, a decrease of 8.3% compared to $1,547.7 million for the same period in 2024[12]. - Gross profit for the same period was $527.6 million, down from $553.1 million, reflecting a gross margin of 37.2%[12]. - Net income attributable to Regal Rexnord Corporation increased to $57.3 million, compared to $19.8 million in the prior year, representing a growth of 189.4%[12]. - Earnings per share attributable to Regal Rexnord Corporation were $0.86, significantly higher than $0.30 for the same quarter last year[12]. - Comprehensive income for the three months ended March 31, 2025, was $181.9 million, compared to a loss of $67.5 million in the prior year[14]. - Net income for the three months ended March 31, 2025, was $57.5 million, compared to $20.4 million for the same period in 2024, representing an increase of 181.8%[21]. - The company reported a consolidated income from operations of $159.7 million for Q1 2025, an increase from $133.9 million in Q1 2024[114]. Assets and Liabilities - Total assets as of March 31, 2025, were $14,032.3 million, slightly down from $14,033.7 million at the end of 2024[16]. - Current liabilities increased to $1,218.4 million from $1,215.7 million, with accounts payable rising to $589.3 million[16]. - Long-term debt decreased to $5,291.8 million from $5,452.7 million, indicating a reduction in leverage[16]. - Cash and cash equivalents were $305.3 million, down from $393.5 million at the end of 2024[16]. - Total debt as of March 31, 2025, was $5,296.9 million, a decrease from $5,457.7 million as of December 31, 2024[54]. - As of March 31, 2025, total current assets were $1,165.6 million, an increase from $1,132.2 million as of December 31, 2024[139]. Cash Flow and Capital Expenditures - Net cash provided by operating activities increased to $102.3 million in Q1 2025 from $83.1 million in Q1 2024, a growth of 23.0%[21]. - Cash flow provided by operating activities increased by $19.2 million to $102.3 million for the three months ended March 31, 2025, compared to $83.1 million in 2024[124]. - Cash flow used in investing activities decreased to $3.5 million for the three months ended March 31, 2025, from $17.5 million in the same period in 2024[125]. - Capital expenditures for the three months ended March 31, 2025, totaled $16.8 million[47]. - The company anticipates capital spending for property, plant, and equipment to be approximately $120 million in 2025[126]. Segment Performance - North America generated $1,002.3 million in revenue for Q1 2025, accounting for 70.6% of total revenue, while Asia contributed $95.0 million, representing 6.7%[29]. - The Automation & Motion Control segment reported net sales of $396.3 million, a decrease of $3.9 million or 1.0% compared to Q1 2024, with a negative foreign currency translation impact of 1.4%[117]. - The Industrial Powertrain Solutions segment had net sales of $612.7 million, a decrease of $30.7 million or 4.8% compared to Q1 2024, with an organic sales decline of 3.4%[118]. - The Power Efficiency Solutions segment achieved net sales of $409.1 million, an increase of $23.8 million or 6.2% compared to Q1 2024, driven by an organic sales increase of 8.0%[119]. Tax and Interest - The effective tax rate for the three months ended March 31, 2025, was 21.2%, a decrease from 34.8% for the same period in 2024, primarily due to a non-deductible loss from the divestiture of the industrial motors and generators businesses[70]. - The average daily balance in borrowings under the Multicurrency Revolving Facility was $81.4 million for the three months ended March 31, 2025, compared to $98.5 million for the same period in 2024[61]. - The company paid $76.9 million in interest during the three months ended March 31, 2025, compared to $94.8 million in the same period of 2024, a reduction of 18.9%[21]. Shareholder Actions - The company declared dividends of $0.35 per share, totaling $23.2 million for the quarter[18]. - The Company authorized a share repurchase program of up to $500.0 million, with $145.0 million remaining available for purchase as of March 31, 2025[167]. - Curtis Stoelting terminated a Rule 10b5-1 trading arrangement on February 14, 2025, which allowed for the potential sale of up to 4,500 shares[168]. - A new Rule 10b5-1 trading arrangement was entered into by Mr. Stoelting for the sale of up to 9,000 shares, effective May 26, 2025[169]. Derivatives and Hedging - The Company has commodity forward contracts to hedge forecasted purchases of commodities, with a notional amount of $56.0 million for copper as of March 31, 2025[84]. - The Company had currency forward contracts with a notional amount of $1,227.5 million for euros as of March 31, 2025[84]. - The fair value of derivative currency contracts as of March 31, 2025, was $18.7 million, compared to $1.0 million on December 31, 2024[92]. - The company recorded an estimated liability for incurred claims related to sub-fractional motors, but cannot assure that these claims will not materially affect its subsidiary's financial condition[74]. - The company is exposed to foreign currency risks from operations, including translation of local currency balances and intercompany loans, and aims to minimize this exposure through foreign currency exchange contracts[146]. Restructuring and Future Outlook - The restructuring costs for the three months ended March 31, 2025, totaled $9.8 million, slightly up from $9.3 million in the same period of 2024[96]. - The company expects to incur approximately $16.8 million in future restructuring charges throughout the remainder of 2025[96]. - The company plans to mitigate the impact of current tariffs on 2025 earnings through various actions[113]. - The company expects to incur increased costs due to tariffs imposed by the US government and retaliatory tariffs from other countries, which may impact financial results[159].

Financial Data and Key Metrics Changes - Sales in the first quarter were up 0.7% year-over-year on an organic basis, or 2.3% on a daily organic basis, with strength in residential HVAC, aerospace, and energy markets [11][12] - Adjusted gross margin was 37.9%, up 50 basis points year-over-year, while adjusted EBITDA margin was 21.8%, up 30 basis points [13][14] - Adjusted earnings per share in the quarter was $2.15, up 7.5% year-over-year, or approximately 10% adjusted for the impact of the Industrial Systems divestiture [14] - Free cash flow generated in the quarter was nearly $86 million, up 32% year-over-year, contributing to a debt reduction of $164 million [14][32] Business Line Data and Key Metrics Changes - Automation and Motion Control (AMC) net sales were up 40 basis points year-over-year on an organic basis, driven by strength in aerospace and defense, and a return to growth in discrete automation [22] - Industrial Powertrain Solutions (IPS) net sales were down 3.4% year-over-year on an organic basis, reflecting weakness in the machinery off-highway market [25] - Power Efficiency Solutions (PES) net sales were up 8% year-over-year on an organic basis, largely due to strong growth in residential HVAC, which was up nearly 30% [28][29] Market Data and Key Metrics Changes - IPS sales in North America were up low single digits, while sales in China, Europe, and the rest of the world experienced weakness [26] - Orders in IPS were up nearly 9% in the first quarter, reflecting further outgrowth in attractive markets [26] - Organic orders in April were down 1.8%, largely due to aerospace project timing in AMC and anticipated order rebalancing in PES [12] Company Strategy and Development Direction - The company is focused on executing growth, synergy, and cash flow acceleration plans, while implementing robust tariff mitigation strategies [10][14] - The humanoid robot market is identified as a significant growth opportunity, with expectations of strong double-digit CAGRs for the next decade [15][19] - The company aims to leverage its automation portfolio to gain market share in the humanoid space, with recent wins worth over $20 million in annual sales [20] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about improving growth prospects, noting three quarters of positive orders growth and a belief that most end markets are near trough levels of demand [7][9] - The company reaffirmed its earnings guidance for the year, despite macroeconomic uncertainties and tariff-related challenges [9][33] - Management emphasized confidence in achieving tariff-related cost and margin neutrality by mid-2026 [42][44] Other Important Information - The company ended the quarter with total debt of approximately $5.3 billion and net debt just below $5 billion [32] - The company plans to continue deploying the majority of its free cash flow to debt reduction in 2025 [32] Q&A Session Summary Question: Dynamics of long cycle versus short cycle orders - Management noted good momentum in winning longer cycle projects, especially in IPS, while short cycle orders remained stable [48][50] Question: Competitive positioning and share gains - Management highlighted a net advantageous position due to global manufacturing footprint and dual country sourcing strategies, expecting share opportunities to arise [53][54] Question: EBITDA margin outlook and drivers - Management expects a step-up in EBITDA margins in the second half, driven by mix, volume, and price synergies [58][59] Question: PES revenue outlook and conservatism in guidance - Management expressed caution regarding the second half outlook for PES due to macroeconomic factors, despite strong first quarter performance [63] Question: Mitigation of tariff impacts - Management outlined that supply chain realignments and production relocations are primary mitigation strategies, with pricing actions also contributing [69][70] Question: IPS margin guide and mix effects - Management confirmed that the margin guide for IPS is primarily affected by mix rather than tariff pressures [83] Question: Humanoid market opportunities - Management indicated that the $100 million opportunity funnel is global, with recent wins not primarily based in China [100]

Financial Data and Key Metrics Changes - Sales in Q1 2025 increased by 0.7% year-over-year on an organic basis, or 2.3% on a daily organic basis, with notable strength in residential HVAC, aerospace, and energy markets [10][12] - Adjusted gross margin was 37.9%, up 50 basis points year-over-year, while adjusted EBITDA margin was 21.8%, up 30 basis points [12][13] - Adjusted earnings per share in the quarter was $2.15, reflecting a 7.5% increase year-over-year, or approximately 10% adjusted for the impact of the Industrial Systems divestiture [13] - Free cash flow generated in the quarter was nearly $86 million, up 32% year-over-year, contributing to a $164 million debt repayment [13][33] Business Line Data and Key Metrics Changes - Automation and Motion Control (AMC) net sales were up 40 basis points year-over-year on an organic basis, driven by strength in aerospace and defense, with discrete automation returning to growth [22][23] - Industrial Powertrain Solutions (IPS) net sales decreased by 3.4% year-over-year on an organic basis, reflecting weakness in the machinery off-highway market, but orders were up nearly 9% [25][27] - Power Efficiency Solutions (PES) net sales increased by 8% year-over-year on an organic basis, primarily due to strong growth in residential HVAC, which was up nearly 30% [29][30] Market Data and Key Metrics Changes - IPS sales in North America were up low single digits, while sales in China, Europe, and the rest of the world experienced declines [26] - Orders in IPS were up nearly 9% in Q1, indicating strong performance in metals and mining and marine markets [27] - Organic orders in April were down 1.8%, largely due to aerospace project timing in AMC and anticipated order rebalancing in PES [11] Company Strategy and Development Direction - The company is focused on executing growth, synergy, and cash flow acceleration plans while implementing robust tariff mitigation strategies [8][10] - Regal Rexnord is well-positioned in the humanoid robot market, with expectations for significant growth opportunities in the coming years [14][19] - The company aims to achieve EBITDA margin neutrality by mid-2026 through effective tariff mitigation actions [40][43] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about improving growth prospects, noting that most end markets are at or near trough levels of demand and starting to rebound [6][7] - The company reaffirmed its 2025 guidance, indicating confidence in its ability to manage through tariff-related uncertainties while maintaining a positive outlook on order momentum [34][45] - Management highlighted the potential for share gains due to tariff-related pricing and strategic opportunities [38][45] Other Important Information - The company ended the quarter with total debt of approximately $5.3 billion and net debt just below $5 billion, with plans to continue deploying free cash flow to debt reduction [33] - The company has a funnel of opportunities worth approximately $100 million in the humanoid robot market, with several recent wins worth over $20 million in annual sales [20][104] Q&A Session Summary Question: Dynamics of long cycle vs short cycle orders - Management noted good momentum in winning longer cycle projects, particularly in IPS, while short cycle orders remained stable [49][50] Question: Competitive positioning and share gains - Management emphasized a net advantageous position due to global manufacturing footprint and dual country sourcing strategies, expecting share opportunities to arise [53][54] Question: EBITDA margin outlook and tariff impacts - Management expects a step-up in EBITDA margins in the second half of the year, primarily driven by mix and volume improvements, with confidence in achieving EBITDA neutrality by year-end [59][60] Question: PES revenue outlook and conservatism in guidance - Management indicated that while pleased with Q1 performance, they remain cautious about the second half due to macroeconomic factors [63] Question: Mitigation of tariff impacts - Management outlined that supply chain realignments and production relocations are primary mitigation strategies, with pricing actions also contributing [70][71] Question: Humanoid market opportunities - Management clarified that the $100 million opportunity funnel is global, with recent wins primarily not based in China [102][104]