If management’s predictions are accurate, the company is in for a period of sustained growth.
Electric motor specialist Regal Rexnord (RRX -2.63%) was quite the motor of growth over the past few trading sessions. The company’s shares were a bright spot on the market, rising by more than 9% over the week, according to data compiled by S&P Global Market Intelligence. Management gave fresh estimates for the coming years, and investors clearly liked what they heard.
Guiding for growth
Regal Rexnord held its 2024 investor day on Tuesday in a high-end New York City hotel. The fancy setting was appropriate, as management proffered guidance indicating its fundamentals would improve notably.
It announced that it was maintaining its existing guidance for the entirety of this year, specifically that sales will total $6.2 billion and non-GAAP (adjusted) net income would land at $9.40 to $9.80 per share. The company did admit, though, that it now believes the lower half of the latter range is probable.
Regal Rexnord also presented a fresh outlook, unveiling a set of forecasts for the 2024 to 2027 period. Over that stretch, organic net sales should rise at a compound annual growth rate (CAGR) of 2% to 5%. Adjusted net income should also increase; management is predicting this will occur at a low-double-digit CAGR, although it did not provide a more specific range.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) are likely to rise to around 25% after 2025 and remain at that level in future years.
The transformation is working, says management
Regal Rexnord quoted CEO Louis Pinkham as saying of Regal Rexnord’s proximate future that “We see many opportunities to create significant value for shareholders by capitalizing on the strengths of our enterprise, which over the last five years we have dramatically transformed, through organic and inorganic actions, to be increasingly durable, high-margin, and cash generative.”
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
