Regal Rexnord Stock Plummets: What’s Next for the Industrial Giant?

Milwaukee, Wisconsin – Regal Rexnord, a company based in Milwaukee, Wisconsin, has been facing challenges due to organic sales declines affecting its profitability. The company’s leverage has raised concerns, especially with softening industrial markets in recent weeks.

Regal Rexnord focuses on providing sustainable solutions for powering, transmitting, and controlling motion. With a workforce of approximately 30,000 employees, the company operates in three main segments: power transmission, automation, and motor & air moving. The power transmission business accounts for over 40% of sales, serving clients in industrial, food & beverage, and energy sectors.

Primarily operating in North America, Regal Rexnord generates about 70% of its sales in the region, with 17% exposure to Europe and the rest to Asia-Pacific. The company has undergone significant transformation in recent years, aiming to diversify its business across various industries and regions.

In the past five years, Regal Rexnord has experienced substantial growth in sales and EBITDA margins, attributed in part to a major acquisition of Altra Industrial Motion. The acquisition, valued at $4.95 billion, has bolstered the company’s position in the market, although it has increased leverage ratios.

Despite a drop in share prices from $180 to $138 due to general industrial market trends, Regal Rexnord reported a 29% increase in full-year sales to $6.25 billion in February. Organic sales growth, although decent, was offset by a significant interest expense resulting from the Altra deal.

Looking ahead, Regal Rexnord anticipates adjusted earnings to improve in 2024, driven by synergies from previous acquisitions and divestments. The company recently closed the sale of its Industrial Motors & Generators business, aiming to reduce debt and interest expenses.

As the company navigates challenges in organic sales and leverage, investors remain cautious. While hopeful for long-term growth prospects, monitoring deleveraging efforts and organic growth performance will be key in assessing the company’s trajectory.

Overall, Regal Rexnord’s journey towards sustainable growth and reduced leverage will be closely watched in the coming months as the company continues to adapt to evolving market conditions.