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The last year and a half has been a little more challenging for Regal Rexnord (RRX) than I’d expected. While the integration of Altra seems to be going well, and I’m still bullish on
Tough End-Markets Temporarily Putting The Brakes On Regal Rexnord's Long-Term Growth Story
Summary
- Q2 earnings were mixed with ongoing industrial and automation weakness, but aerospace, data center, and medical end-markets remain strong, and order trends seem to be improving.
- General industrial, discrete automation, and off-road machinery are likely to remain weak for at least a little longer, but industrial and automation markets should recover in 2025.
- Management has been leveraging capabilities in precision motion control to expand its opportunities in faster-growing markets like aerospace and biopharma, and repositioning core tech into faster-growing markets remains a driver.
- Despite some risks in the second half, I expect long-term revenue growth of 4%-6% and meaningful margin expansion, driving low double-digit long-term FCF growth.
- Valuation is not a slam dunk, but a 12.5x forward EV/EBITDA multiple suggests a fair value close to $190, supporting a cautiously optimistic outlook.
Stephen Simpson is a freelance financial writer and investor.Spent close to 15 years on the Street (sell-side, buy-side, equities, bonds).
Analyst’s Disclosure:I/we have a beneficial long position in the shares of ABBNY either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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