Q2 Earnings Preview for Rexnord (NYSE:RXN)

in EARNINGS/INVESTING IDEAS by

Rexnord Corporation (NYSE:RXN) is scheduled to report Q2 earnings results after markets close for trading on October 27, 2020.

The company is expected to report earnings of $0.48/share on revenue of $500.1 million. The consensus earnings per share (EPS) of $0.48/share is based on a poll of 3 analysts and represents a growth in eps of 32.0% over the same quarter last year, when the company reported earnings of $0.36/share.

The revenue forecast of $500.1 million based on a poll of 2 analysts implies a year-over-year (YoY) growth in revenue of 11.3%. Last year the company reported $449.1 million in revenue for the quarter.

Expected to report EPS growth of 32.0% for Q2, 2021
Metric Expected Prior Year YoY Change
Revenue $500.06 $449.10 11.3%
EPS $0.48 $0.36 32.0%

Earnings Call Trends

Management has been great at managing analyst expectations historically. The company has a perfect record over the last 7 tracked quarters of exceeding earnings guidance.

What are your expectations from Rexnord Corporation for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q4, 2020 $0.35 $0.55 58.5% Beat
Q3, 2020 $0.37 $0.48 30.7% Beat
Q2, 2020 $0.29 $0.36 23.3% Beat
Q1, 2020 $0.43 $0.48 11.1% Beat
Q4, 2019 $0.47 $0.51 8.1% Beat
Q3, 2019 $0.40 $0.47 17.5% Beat
Q2, 2019 $0.42 $0.46 9.5% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −1.3%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 28, 2020 $30.61 $30.22 −1.3% Decline
May 12, 2020 $27.10 $25.26 −6.8% Decline
April 28, 2020 $26.30 $28.60 8.7% Increase
January 28, 2020 $31.89 $34.12 7.0% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.85, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.85 implies a 0.2% chance of earnings manipulation.

Fundamentals And Technical Analysis

Rexnord Corporation is currently trading at $31.68/share, up 0.5% for the day. The company is trading at approximately 88.9% of its 52-week high of $35.64/share. The company’s stock price is up 4.8% since the last earnings report and down −0.6% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 57.54 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.

NYSE:RXN Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 23.80 and a forward P/E multiple of 16.65.

Rexnord Corporation’s current share price also implies a price-to-book (P/B) multiple of 2.83. The following table summarizes some other key fundamental ratios:

Data as of October 21, 2020
Metric Value
Last Reported Fiscal Period Key FY2021.Q1
Period End Date June 30, 2020
Stock Price (Current) $31.68
P/E Ratio 23.8x
P/E Ratio (Fwd) 16.6x
PEG Ratio 0.2
Total Debt / Total Capital 25.4%
Levered Free Cash Flow $283.2 million
EV / EBITDA 12.4x

Finbox

Rexnord Corporation is a mid-cap stock with a market capitalization of $3.822 billion and a total enterprise value of $4.77 billion. The company operates in the Industrials sector and the Machinery industry.

Rexnord Corporation designs, manufactures, and markets process and motion control, and water management products worldwide. It operates in two segments, Process & Motion Control Platform and Water Management Platform. The company offers table top conveying chain and related accessories, metal conveying and engineered woven metals, gearing and gear drives, conveying equipment, industrial chain, and custom assemblies; custom-engineered, application-specific miniature gearboxes, and motion control assemblies and components used in aerospace, defense, medical equipment, robotics, semiconductor, instrumentation, and satellite communications; and shaft management products, including couplings, torque limiters, electromagnetic clutches and brakes, industrial bearings, and shaft locking assemblies. It also provides aerospace components for use in door systems, engine accessories and controls, engine mounts, flight control systems, gearboxes, landing gears, and rotor pitch controls. The company offers valve, distribution and drainage, and site work products; water conservation and finish plumbing products; and commercial electric hand dryers. It sells products through distribution partners, independent sales representatives, plumbing wholesalers, industry-specific distributors, and sales agencies to commercial construction, institutional, infrastructure, and residential construction end market, as well as to original equipment manufacturers and end users. The company offers its products under the Rexnord, Rex, Addax, Euroflex, Falk, FlatTop, Cambridge, Link-Belt, Omega, PSI, Shafer, Stearns, Highfield, Thomas, Centa, Tollok, Zurn, Wilkins, Green Turtle, World Dryer, JUST, Aquaflush, AquaSense, AquaVantage, AquaSpec, EcoVantage, Zurn One, and Zurn One Systems names. Rexnord Corporation was incorporated in 2006 and is headquartered in Milwaukee, Wisconsin.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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