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Baird reaffirmed its Outperform rating on Regal Rexnord (NYSE:ZWS) Corp (NYSE:RRX), maintaining the price target of $213.00. The firm's analysis followed an analyst day event where Regal Rexnord showcased its improved portfolio, which now features a better growth and margin profile compared to its historical performance. The company's management outlined their 2027 targets, which include a compound annual growth rate (CAGR) of approximately 2-5% in organic growth and an EBITDA margin of around 25%.
The company's guidance for 2024 was confirmed, although expectations were adjusted towards the lower end of the range, reflecting weaker order rates observed in August. Despite this, the analyst day was perceived positively, with the firm noting that there are various factors that could lead to performance exceeding expectations.
Baird emphasized Regal Rexnord's potential for dynamic earnings growth as market conditions improve. The analyst's commentary underscored the company's ability to outperform regardless of the cyclical nature of the industry. The firm's stance indicates confidence in Regal Rexnord's strategic direction and its ability to leverage opportunities for upside in the coming years.
The reaffirmation of the Outperform rating and the $213.00 price target suggests that Baird views Regal Rexnord as a compelling investment for the long term. The firm sees the company as one of its top long-term ideas, suggesting a strong belief in Regal Rexnord's market position and financial prospects.
In other recent news, Regal Rexnord Corporation has been a focal point for investors following its strong second-quarter results. The company posted a record adjusted gross margin of 38.1%, despite a 7% decrease in organic sales excluding Industrial Systems. However, positive order growth in July indicates a potential upturn in the latter half of the year.
Regal Rexnord's Power Systems business demonstrated impressive performance, particularly in the data center market. In contrast, the Power Efficiency Solutions (PES) segment saw a dip in organic sales but projects improved margins ahead.
Financial prudence was also on display as the company paid down $481 million in debt, with plans to pay an additional $900 million in 2024. Looking ahead, Regal Rexnord anticipates positive top-line growth in the second half of the year and into 2025, driven primarily by expected low-single digit growth in residential orders.
KeyBanc maintained an Overweight rating on Regal Rexnord shares, emphasizing the company's significantly restructured portfolio and potential for long-term earnings per share growth.
InvestingPro Insights
As Baird reaffirms its optimistic outlook on Regal Rexnord Corp (NYSE:RRX), the latest data from InvestingPro offers additional context to the company's financial health and market performance. With a market capitalization of $10.9 billion, Regal Rexnord has shown a significant return over the last week with a 10.21% price total return, reflecting a potential uptick in investor confidence. This aligns with the "InvestingPro Tips" which highlight the company's high shareholder yield and the expectation of net income growth this year.
Moreover, Regal Rexnord's ability to maintain dividend payments for 52 consecutive years, as pointed out by "InvestingPro Tips", underscores its commitment to shareholder returns, a factor that may be appealing for long-term investors. The company's revenue growth in the last twelve months, as of Q2 2024, stands at 14.21%, demonstrating its resilience and potential for continued expansion. Additionally, with analysts predicting profitability this year and a solid three-month price total return of 15.18%, the company seems to be on a positive trajectory.
For investors looking for more in-depth analysis, "InvestingPro Tips" lists a total of 9 tips on Regal Rexnord, available at https://www.investing.com/pro/RRX, offering a comprehensive view of the company's financial and market performance.
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