Milwaukee, Wisconsin based Rexnord Corporation (RXN) recently completed scrutinizing its available options to enhance shareholders value, ending a program initiated by the board of directors on Feb 11, this year.
Rexnord operates in mainly two segments; viz., Process & Motion Control and Water Management. One of the strategic options Rexnord evaluated was whether to divest one or both of the segments. Another option that was weighed on was the possible sale of the entire company. Goldman Sachs Group Inc. (GS) served as the financial adviser for the review.
The study concluded that the best option for Rexnord will be to continue to function as a stand-alone public company. Management believes that Rexnord’s expertise and experience will enable it to strengthen its market position and increase profitability in the long run.
The decision follows strong fiscal 2013 results, with earnings per share increasing by a penny year over year to 98 cents. Revenue also increased 3.1% year over year to $2.0 billion. This was mostly driven by acquisitions undertaken by the company. Adjusted EBITDA also increased 5.0% year over year to $405.0 million.
Moving forward, Rexnord expects earnings per share in fiscal 2014 to be in the range of $1.10-$1.18, signifying a year-over-year increase of 16.0% at the mid-point. Revenue is expected to experience an organic growth of 1%-3% in fiscal 2014.
Management believes that Rexnord’s shareholders will be benefited by the strategies currently adopted by the company as well as new alternatives planned to be undertaken.
Rexnord currently carries a Zacks Rank #3 (Hold). Other stocks to watch out for in the diversified machinery industry are AO Smith Corp. (AOS), carrying a Zacks Rank #1 (Strong Buy); whereas Plug Power Inc. (PLUG) carries a Zacks Rank #2 (Buy).
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