Regal Beloit's 3Q Below Estimate - Analyst Blog
30 Oktober 2012 - 11:30AM
Zacks
Regal Beloit
Corporation (RBC) reported adjusted diluted earnings per
share of $1.32 in the third quarter of 2012 compared to $1.31 per
share in the year-ago quarter and $1.50 in the second quarter of
2012. The annual rise in the earnings was driven by the company’s
improved operational performance during the quarter.
The results surpassed the company’s
previously provided guidance range of $1.22 to $1.30 per share but
failed to meet the Zacks Consensus Estimate of $1.37 per share.
Revenue
Net sales spiked 5.8% year over
year but down 9.8% sequentially to $779.5 million, although the
sales missed the Zacks Consensus Estimate of $840 million. The
company has witnessed sequential decline in its sales due to a
clouded fiscal scenario. Although the company’s residential HVAC
business grew slightly during the quarter, Regal Beloit witnessed
low demand in its other businesses. The foreign currency
translation reduced the net sales by 1.7% from the year-ago
quarter.
Segment
Analysis
Revenues from the Electrical
segment climbed 6.1% year over year $708.3 million mostly driven by
its business acquisition activity, but was down 9.6% sequentially.
Excluding the company’s business acquisitions, the Electrical
segment’s sales dropped 9.2% year over year due to the fall in the
revenues accrued from Regal Beloit’s Commercial, Industrial and
Asian businesses. The North American residential HVAC motor sales
surged 0.4% year over year. The North American commercial and
industrial motor sales declined 6.4% year over year in the
quarter.
Net sales in the mechanical segment
hiked 2.6% year over year but declined 11.3% sequentially to $71.2
million. Sales from the North America Mechanical segment (the
company’s acquired and divested businesses excluded) declined 0.9%
from the year-ago quarter. The sales outside the United States
decreased 9.4% year over year.
Margins
Gross profit in the quarter was
$192.6 million, up 7.2% year over year while gross margin increased
to 24.7% in the third quarter of 2012 from 24.4% a year ago.
Operating margin in the quarter was 10.7% compared to 10.6% in the
year-ago quarter and 12.0% in the prior quarter.
On a segmental basis, the gross
margin of the Electrical Segment was 24.5% in the quarter versus
24.0% in the year-ago quarter. The Mechanical Segment’s gross
margin declined 100 basis points year over year to 27.2%.
Operating margin of the Electrical
Segment in the quarter was 10.3%, declining from 10.4% in the prior
year quarter. Mechanical Segment reported a 14.2% operating margin
in the quarter versus 12.7% in the year-ago quarter.
Balance Sheet and Cash
flows
Exiting the third quarter, Regal
Beloit’s cash and cash equivalents were $185.8 million versus
$190.9 million in the previous quarter. Inventories were $594.9
million compared with $583.9 million in the second quarter of 2012.
Long-term debt at the end of 3Q12 was $781.7 million versus $899.8
million at the end of the previous quarter.
Net cash provided by operating
activities in the quarter was $71.8 million compared with $66.7
million in the prior-year quarter. The effective tax rate in the
quarter was 24.5% versus 30.3% in the prior year quarter.
Guidance
Management expects that the clouded
fiscal scenario and weak demand in the market would continue to
affect the company’s financial as well as operating performance.
However, the company’s HVAC business is expected to improve in the
fourth quarter of 2012. Additionally, the company would focus more
on its restructuring actions to improve its profitability.
Regal Beloit expects that the
earnings per share (including the restructuring charges of 9 cents
per share) will be within the range of 58 cents to 66 cents per
share for the fourth quarter of 2012.
Our
Recommendation
Regal Beloit currently has a Zacks
#4 Rank, which implies a short-term (1-3 months) ‘Sell’ rating on
the stock.
REGAL BELOIT (RBC): Free Stock Analysis Report
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