Rexnord Corporation (RXN) reported impressive results for first-quarter fiscal 2015 (ended Jun 30, 2014). Adjusted earnings came in at 26 cents per share, up 18.2% from 22 cents earned in the year-ago quarter. Also, the bottom line traced the higher end of the management-guided range of 24−26 cents.
Revenues
Rexnord’s net revenues inched up 0.2% year over year to $509.8 million. The top-line, too was at the higher end of the company’s revenue guidance of $500−$510 million.
The company is seeking strategic alternatives for its non-core ring gear and pinion product line, Mill Products. Excluding the revenue results, Rexnord recorded a 2% improvement in net revenues that included a 3% gain from acquisitions, offset partially by 1% core sales decline.
The company reports its top-line results under two heads — Process & Motion Control and Water Management. A brief discussion on the segments’ quarterly result is provided below:
Revenues from the Process & Motion Control segment declined 3.2% year over year to $304.6 million, representing 59.7% of net revenues generated in the quarter.
The Water Management segment’s revenues were $205.2 million, reflecting an increase of 5.7% year over year and accounted for 40.3% of the company’s net revenues.
Margins
Rexnord’s cost of sales went up 1.1% year over year and represented 64.8% of net revenues, up 60 basis points (bps) from 64.2% in the year-ago quarter. Gross margin was at 35.2%. Selling, general and administrative expenses, as a percentage of total revenue, declined to 20.6% by 40 bps.
Adjusted earnings before interest, tax, depreciation and amortization were stable at $92.8 million with a margin of 18.2%.
Balance Sheet/Cash Flow
Exiting first-quarter fiscal 2015, Rexnord’s cash and cash equivalents decreased 8.2% sequentially to $311.3 million, while long-term debt edged down 0.2% to $1,938.9 million.
In the quarter, Rexnord generated cash of $6.4 million from its operating activities versus $27.3 million cash used in the year-ago quarter. Investment on property, plant and equipment grew 11.5% year over year to $8.7 million.
Outlook
For fiscal 2015, Rexnord maintained it’s previously issued adjusted earnings guidance range of $1.60−$1.70 per share. At mid-point, the forecast reflects year-over-year growth of 19%. Core sales growth is expected to be within 3−5%.
For the second quarter, Rexnord anticipates adjusted earnings to be in the 38−41 cents per share range. Sales are expected to come within $540−$550 million, including core sales growth of 4−6%.
With a market capitalization of $2.7 billion, Rexnord Corporation presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the diversified machinery industry include CommScope Holding Company, Inc. (COMM), Powell Industries, Inc. (POWL) and AO Smith Corp. (AOS). While CommScope Holding sports a Zacks Rank #1 (Strong Buy), both Powell Industries and AO Smith hold a Zacks Rank #2 (Buy).
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