Within a week of releasing its second-quarter fiscal 2015 (ended Sep 30) results, Rexnord Corporation (RXN) announced a public offering of 14.7 million common shares. The offered stocks are held by certain affiliates of Apollo Global Management, LLC (APO).
As communicated, Rexnord will not directly offer shares and thus, will not be entitled to receive any proceeds from this public offering. Prior to this, the company carried out a similar public offering comprising 10 million and 15 million shares in August and May 2014, respectively.
Exiting fiscal 2014, Apollo Global Management, Rexnord’s largest shareholder, owned nearly 42% of the company’s common shares. Any change in ownership of shares by Apollo directly influences Rexnord.
Although Rexnord managed to post a decent year-over-year bottom-line improvement in second-quarter fiscal 2015, it failed to exhibit quality top-line growth. Revenue growth was restricted due to weak industrial demand in Europe and adverse foreign currency translation impacts. Higher cost of sales pulled down gross margin by 80 basis points (bps).
For fiscal 2015, Rexnord lowered its earnings and core sales growth forecasts to $1.52−$1.60 per share and 3−4%, respectively. European industrial demand is anticipated to remain weak in the second half, while currency translation will negatively impact full-year earnings by 4 cents per share. Tax rate headwind will also hurt the third-quarter earnings.
The Zacks Consensus Estimate for Rexnord Corporation is pegged at $1.51 for fiscal 2015 and $1.82 for fiscal 2016.
With a market capitalization of $2.8 billion, Rexnord Corporation presently carries a Zacks Rank #3 (Hold). Two better-ranked stocks in the machinery industry include Blount International Inc. (BLT) and The Babcock & Wilcox Company (BWC). While Blount International sports a Zacks Rank #1 (Strong Buy), The Babcock & Wilcox Company carries a Zacks Rank #2 (Buy).
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