Citi sets starts Regal Rexnord stock at Buy, cites growth potential

On Monday, Citi initiated coverage on Regal Rexnord (NYSE:ZWS) Corp (NYSE:RRX) with a positive outlook, assigning the stock a Buy rating and establishing a price target of $200.00.

"We expect growth in secular end-markets (50% of sales) and acquisition synergies to drive earnings momentum and margin expansion, even through a challenging macro backdrop," said analysts at the firm.

Regal Rexnord, which derives half of its sales from secular end-markets, is expected to meet and potentially exceed its organic growth estimates, according to Citi. The company's conservative growth projections, in combination with strategic capital decisions, are anticipated to contribute to sustained higher through-cycle margins and less earnings volatility.

Citi's price target is based on a projected price-to-earnings (P/E) multiple of approximately 17.5 times the firm's estimated earnings per share (EPS) for the year 2025. This valuation exceeds Regal Rexnord's historical average P/E multiple. The analyst justifies the higher multiple with reference to the company's recent portfolio transformation and an enhanced margin profile.

The analysis also includes a forecast of cost synergies and a strong organic growth outlook, which Citi believes positions Regal Rexnord favorably when compared to its peers in shorter-cycle industries.

In other recent news, Loop Capital maintained its Buy rating on the company, with a steady price target of $200, following a recent analyst event that highlighted Regal Rexnord's potential growth and strategic initiatives. In addition, the company's long-term earnings per share (EPS) growth target, referred to as LDD+, is deemed highly achievable by Loop Capital.

KeyBanc reaffirmed its positive stance on Regal Rexnord shares, maintaining the Overweight rating and a price target of $190. This endorsement follows the company's 2024 investor day, where significant structural advancements were showcased. 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.

Baird reaffirmed its Outperform rating on Regal Rexnord, maintaining a price target of $213. The firm's analysis noted the company's improved portfolio, better growth, and margin profile compared to its historical performance.

InvestingPro Insights

Citi's optimistic outlook on Regal Rexnord Corp (NYSE:RRX) aligns with several key metrics and insights from InvestingPro. The company's market cap stands at $11.39 billion, reflecting its significant presence in the industry. InvestingPro data shows that Regal Rexnord has demonstrated strong performance, with a 32.98% price total return over the past year and a robust 17.9% return in the last three months.

InvestingPro Tips highlight that Regal Rexnord has maintained dividend payments for an impressive 52 consecutive years, underscoring its financial stability and commitment to shareholder returns. This track record supports Citi's view on the company's potential for sustained performance. Additionally, analysts predict that the company will be profitable this year, aligning with Citi's expectations for earnings momentum.

It's worth noting that InvestingPro offers 8 additional tips for Regal Rexnord, providing investors with a more comprehensive analysis of the company's prospects. These insights could be valuable for those looking to delve deeper into Regal Rexnord's investment potential beyond the scope of this article.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.