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MILWAUKEE - Regal Rexnord Corporation (NYSE:RRX) shares fell 5.9% after the company reported third quarter adjusted earnings that missed analyst expectations despite posting strong data center orders.
The industrial equipment manufacturer reported adjusted earnings per share of $2.51 for the third quarter, falling short of analyst estimates of $2.54, even as revenue slightly exceeded expectations at $1.5 billion versus the $1.49 billion consensus. The company highlighted $135 million in data center orders during the quarter, plus an additional $60 million in October, but this wasn’t enough to offset investor concerns about the earnings miss.
Regal Rexnord narrowed and lowered its full-year adjusted earnings guidance to a range of $9.50 to $9.80 per share, citing "net unfavorable impacts from recently announced tariffs and China trade policies related to rare earth magnets" since its second quarter report.
"Our enterprise gained significant momentum in the third quarter by delivering very strong orders, nicely above our expectations," said CEO Louis Pinkham. "The highlight is positive momentum in data center, where we secured orders worth $135 million in 3Q, plus an additional $60 million to date in 4Q."
The company reported organic sales growth of 0.7% YoY, with its Industrial Powertrain Solutions segment leading the way with 1.6% organic growth. Adjusted EBITDA increased slightly to $339.4 million from $337.0 million in the prior year period.
Regal Rexnord continued its debt reduction efforts, paying down $74.5 million of gross debt during the quarter. The company now has a net debt to adjusted EBITDA ratio of approximately 3.2x and expects to reach roughly 3x by the end of 2025.
Looking ahead, management expressed confidence in accelerating organic growth, projecting mid-single digit growth in the fourth quarter and low- to mid-single digit growth in 2026, despite persistent headwinds in short cycle industrial and residential HVAC markets.
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