On Wednesday, Goldman Sachs (NYSE:GS) maintained a Buy rating on Regal Rexnord Corp (NYSE:ZWS) (NYSE:RRX) with a steady price target of $191.00. The firm's analysis followed Regal Rexnord's adjusted third-quarter EBITDA, which came in at $337 million, falling short by 4% compared to the consensus estimates. This shortfall was attributed to lower sales and EBITDA in the company's AMC and PES segments. However, the Industrial Power Systems (IPS) segment showed positive performance, with margins exceeding expectations at 26.8%, which was a year-over-year improvement of over 500 basis points.
Despite the third-quarter miss, there were some positive indicators. For instance, the IPS segment's margin performance outpaced the consensus estimates, highlighting the effectiveness of synergies and improved execution. Nevertheless, Regal Rexnord has revised its fiscal year 2024 guidance downwards by $0.30 at the midpoint, now expected to be between $9.15 and $9.45. Goldman Sachs anticipates the actual figure to be closer to the lower end of the range, setting their estimate at $9.20, considering the ongoing softness in discrete automation trends and other market segments.
Looking ahead to 2025, Goldman Sachs forecasts modest sales growth for Regal Rexnord, with an estimated organic sales increase of 1%. The analysis also includes expected benefits from synergies of around $65 million, a $50 million interest expense benefit, and a potential $15 million tax headwind. This leads to a projected 2025 earnings per share (EPS) of $10.40. The firm notes that there could be upside to these estimates, citing better-than-expected order trends in long cycle AMC businesses and potential improvements in discrete automation.
Goldman Sachs also provided a glimpse into their 2026 EPS estimate for Regal Rexnord, which stands at $12.00. The medium-term outlook for the company remains positive, with the analyst highlighting Regal Rexnord's significant improvements in fundamental metrics and potential for top-quartile EPS growth. The maintained Buy rating and $191 price target reflect an anticipated free cash flow yield of approximately 7.0-7.5% for fiscal year 2026.
In other recent news, industrial machinery player, Regal Rexnord Corporation, has amended its supplemental retirement plan, a move indicating an enhancement to the company's executive compensation package. The company has also been the focus of several analyst notes. Citi initiated coverage on Regal Rexnord with a Buy rating and a price target of $200, citing growth potential in its end-markets and acquisition synergies. Loop Capital maintained its Buy rating on the company, with a steady price target of $200, highlighting the company's potential growth and strategic initiatives.
KeyBanc reaffirmed its Overweight rating and a price target of $190, expressing confidence in the company's potential for long-term growth and effective debt management. Goldman Sachs also reaffirmed its Buy rating on shares of Regal Rexnord, with a steady price target of $195, emphasizing an increase in organic growth and significant improvements in financial metrics. Lastly, Baird reaffirmed its Outperform rating on Regal Rexnord, maintaining a price target of $213, noting the company's improved portfolio, better growth, and margin profile compared to its historical performance. These recent developments underscore a promising outlook for Regal Rexnord, as indicated by analysts.
InvestingPro Insights
To complement Goldman Sachs' analysis of Regal Rexnord Corp (NYSE:RRX), recent data from InvestingPro offers additional context. The company's market capitalization stands at $11.12 billion, with a P/E ratio of 53.87, suggesting a premium valuation compared to some peers. This aligns with Goldman's positive outlook and Buy rating.
InvestingPro Tips highlight that Regal Rexnord has maintained dividend payments for an impressive 52 consecutive years, underscoring the company's financial stability and commitment to shareholder returns. This track record of consistent dividends supports Goldman's view on the company's improving fundamental metrics.
Additionally, InvestingPro data shows a strong one-year price total return of 67.48%, indicating significant market confidence in Regal Rexnord's prospects. This performance aligns with Goldman's expectation of top-quartile EPS growth and their maintained Buy rating.
For investors seeking a deeper understanding of Regal Rexnord's financial health and growth potential, InvestingPro offers 8 additional tips that could provide valuable insights for investment decisions.
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