As the Q2 earnings season wraps, let’s dig into this quarter’s best and worst performers in the engineered components and systems industry, including Regal Rexnord (NYSE:RRX) and its peers.
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 mixed Q2. As a group, revenues missed analysts’ consensus estimates by 1.2% while next quarter’s revenue guidance was 0.9% below.
Big picture, the Federal Reserve has a dual mandate of inflation and employment. The former had been running hot throughout 2021 and 2022 but cooled towards the central bank's 2% target as of late. This prompted the Fed to cut its policy rate by 50bps (half a percent) in September 2024. Given recent employment data that suggests the US economy could be wobbling, the markets will be assessing whether this rate and future cuts (the Fed signaled more to come in 2024 and 2025) are the right moves at the right time or whether they're too little, too late for a macro that has already cooled.
Thankfully, engineered components and systems stocks have been resilient with share prices up 5.4% on average since the latest earnings results.
Regal Rexnord (NYSE:RRX)
Headquartered in Milwaukee, Regal Rexnord (NYSE:RRX) provides power transmission and industrial automation products.Regal Rexnord reported revenues of $1.55 billion, down 12.5% year on year. This print exceeded analysts’ expectations by 2.7%. Overall, it was a very strong quarter for the company with an impressive beat of analysts’ operating margin estimates and a solid beat of analysts’ organic revenue estimates.
Interestingly, the stock is up 3% since reporting and currently trades at $165.49.
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Best Q2: Arrow Electronics (NYSE:ARW)
Founded as a single retail store, Arrow Electronics (NYSE:ARW) provides electronic components and enterprise computing solutions to businesses globally.Arrow Electronics reported revenues of $6.89 billion, down 19% year on year, outperforming analysts’ expectations by 5.7%. The business had an exceptional quarter with an impressive beat of analysts’ earnings estimates.
Arrow Electronics delivered the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 7.5% since reporting. It currently trades at $132.94.
Weakest Q2: Worthington (NYSE:WOR)
Founded by a steel salesman, Worthington (NYSE:WOR) specializes in steel processing, pressure cylinders, and engineered cabs for commercial markets.Worthington reported revenues of $257.3 million, down 17.5% year on year, falling short of analysts’ expectations by 13.1%. It was a disappointing quarter as it posted a miss of analysts’ revenue and operating margin estimates.
Worthington delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 8% since the results and currently trades at $41.61.
Enpro (NYSE:NPO)
Holding a Guinness World Record for creating the world's largest gasket, Enpro (NYSE:NPO) designs, manufactures, and sells products used for machinery in various industries.Enpro reported revenues of $271.9 million, down 1.8% year on year. This print met analysts’ expectations. It was a very strong quarter as it also put up a solid beat of analysts’ earnings estimates.
The stock is up 9.9% since reporting and currently trades at $160.47.
Mayville Engineering (NYSE:MEC)
Originally founded solely on tool and die manufacturing, Mayville Engineering Company (NYSE:MEC) specializes in metal fabrication, tube bending, and welding to be used in various industries.Mayville Engineering reported revenues of $163.6 million, up 17.7% year on year. This print surpassed analysts’ expectations by 2.8%. It was an exceptional quarter as it also recorded an impressive beat of analysts’ operating margin estimates.
Mayville Engineering pulled off the fastest revenue growth among its peers. The stock is up 19.7% since reporting and currently trades at $20.06.
This content was originally published on Stock Story
