Rexnord’s Quarterly Profit Beats The Street; Analyst Sees 22% Upside

Rexnord’s EPS in the quarter ended September fell 7.8% to $0.47 year-over-year but outperformed the Street consensus of $0.37. Revenues of the manufacturer of process and motion control (PMC) and water management (WM) products decreased by 5.3% to $494 million in the reported quarter but exceeded analysts’ estimates of $442.5 million.

Rexnord (RXN) said that the decline in its top and bottom line reflects lower demand across the majority of its end markets amid a shift in buying patterns during the COVID-19 pandemic. Its adjusted EBITDA margin fell 70 basis points to 22% in the three months ended September.

Looking ahead to the current quarter, the company expects sales to decline between 7% and 11%. Adjusted EBITDA margin in the three months ended December is forecast in the range of 21.5% and 23%. The CEO said “we have high confidence in the resilience of our business model, execution and strategy. However, we’re going to continue to be guarded in our external outlook due to the potential range of outcomes based on things outside our control, namely the current realities of the ongoing pandemic.” (See RXN stock analysis on TipRanks).

Following the quarterly results, Oppenheimer analyst Bryan Blair maintained a Buy rating and a price target of $38 (21.6% upside potential), “given clear upside vs. expectations and discounted valuation.” He also remains bullish on the company’s “strong execution and impressive free cash generation,” along with portfolio transformation and cost savings measures.

Currently, the Street has a bullish outlook on the stock. The Strong Buy analyst consensus is based on 4 Buys and 1 Hold. The average price target of $35.40 implies upside potential of about 13.3% to current levels. Shares are down by 4.2% year-to-date.

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