Why Regal Rexnord Shares Are Up More Than 9% This Week

Electric motor specialist Royal Rexnord (RX’s) -2.63%) has been a growth engine over the past few trading sessions. The company’s shares were a bright spot in the market, rising more than 9% for the week, according to data compiled by S&P Global Market Intelligence. Management gave new estimates for the coming years, and investors clearly liked what they heard.

Driving growth

Regal Rexnord held its 2024 investor day Tuesday at an exclusive New York hotel, a posh setting that was fitting as management offered indications its fundamentals are set to improve significantly.

It announced that it would maintain its current guidance for the full year, specifically that sales would total $6.2 billion and non-GAAP (adjusted) net income would be between $9.40 and $9.80 per share. However, the company said it currently believes the lower half of that latter range is likely.

Regal Rexnord also provided new insight, revealing a set of forecasts for the 2024-2027 period. During that period, organic net sales should increase at a compound annual growth rate (CAGR) of 2% to 5%. Adjusted net income should also increase, with management predicting it will do so at a low-double-digit CAGR, although it did not provide a more specific range.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) will likely increase to around 25% after 2025 and remain at that level thereafter.

Transformation is working, says management

Regal Rexnord quoted CEO Louis Pinkham as saying about the immediate future of Regal Rexnord:We see significant opportunities to create significant shareholder value by leveraging the strengths of our business, which we have radically transformed through organic and inorganic actions over the past five years to become increasingly sustainable, high-margin and cash-generative.