Company: Regal Beloit (RBC US)
QMG product view: POSITIVE (US29.11 – Producers of engines & turbines)
Event: Q1 15 Results
o Revenue: $912m (+14% yoy)
o Operating income: $89m (+19% yoy)
o Operating margin: +40bps to 9.8%
o Company guidance: EPS Adjusted: $5.45-$5.75 (+26% to +33% yoy), Sales guidance unchanged: FY2015, $3.78b (+16%)
A recent addition to our US focus list, Regal Beloit posted a solid set of Q1 results, topping market estimates with revenue of $912m (+14% yoy vs. cons $895m) and adjusted EPS $1.21 (vs. cons +$1.16). In spite of headwinds from weakness in oil and gas, net sales for the Power Transmission segment rose 179% to $175m (driven by acquisition growth), while Commercial and Industrial systems rose 1% to $456m. Climate Solutions was the laggard, falling 2% to $280m. QMG data remains positive on US producers of engines and turbines – sales growth remains very strong (+19%), driven by +17% volume growth and consistent pricing trends. In addition, margins continue to expand (+695bps), with our latest data showing costs -5.8% yoy. RBC manufactures electric motors and generators along with gearboxes and automotive transmissions. With approximately 70% of group activities in the US, QMG’s product level data provides detailed insight on RBC’s sales and margin trends. Post 1Q 15 results, we see further upside to consensus estimates, and with the shares trading at a discount to historic EV/Sales and EV/ EBITDA multiples – we see scope for further upgrades. We retain our positive view on RBC in our US focus list.