Rexnord (RXN) Misses Q4 EPS by 9c, Revenues Miss; Initiates FY20 Adj. EBITDA Outlook

Rexnord (NYSE: RXN) reported Q4 EPS of $0.38, $0.09 worse than the analyst estimate of $0.47. Revenue for the quarter came in at $538 million versus the consensus estimate of $543.91 million.

Fourth Quarter Highlights

• Net sales were $538 million and increased 4% year over year (+4% core sales(1), +2% acquisitions, -2% foreign currency translation).
• Net income from continuing operations was $48 million (diluted EPS of $0.39), compared with $58 million (diluted EPS of $0.47) in the year-ago quarter.
• Net income(2) was $41 million (diluted EPS of $0.38), compared with a net loss(2) of $68 million (diluted loss per share of $0.51), which included a $120 million loss from discontinued operations in the year-ago quarter.
• Adjusted EPS(1) was $0.51 compared with $0.47 in the year-ago quarter.
• Adjusted EBITDA(1) increased 6% year over year and was $120 million (22.3% of net sales), compared with $113 million (21.8% of net sales) in last year\'s fourth quarter.

Fiscal 2019 Highlights

• Net sales were $2.051 billion and increased 11% year over year (+6% core sales(1), +6% acquisitions, -1% foreign currency translation).
• Net income from continuing operations was $189 million (diluted EPS of $1.53), compared with $207 million (diluted EPS of $1.69) in the prior year.
• Net income(2) was $11 million (diluted EPS of $0.28), including a $155 million loss from discontinued operations, compared with $53 million (diluted EPS of $0.62), which included a $131 million loss from discontinued operations, in the prior year.
• Adjusted EPS(1) was $1.85 and increased 25% from $1.48 in the prior year.
• Adjusted EBITDA(1) increased 15% year over year and was $443 million (21.6% of net sales), compared with $386 million (20.9% of net sales) in the prior year.
• Net debt leverage ratio decreased to 2.1x.

Todd Adams, President and Chief Executive Officer, commented, “We reported solid operating results for our fourth-quarter to cap off a year of record financial results. We delivered a new record for annual free cash flow of $213 million in our fiscal 2019, which enabled us to reduce our financial leverage to an all-time low. We leveraged the Rexnord Business System (“RBS”) to overcome tariff pressures and deliver further margin expansion and a new record for annual Adjusted EBITDA. Furthermore, we successfully completed the second phase of our Supply Chain Optimization and Footprint Repositioning (“SCOFR”) program and launched a third phase to deliver incremental annualized structural cost savings of $20 million by the end of our fiscal 2022. We are excited about the expanding growth runways that are developing in both platforms as we accelerate our digitally-connected product solutions to market. Looking into our fiscal year 2020, our compounding simplification initiatives and our relentless focus on operational excellence position us well to further expand our margins and free cash flow and we remain confident in our ability to create real value in an environment of slower global growth.”

“Net sales in our Process & Motion Control (“PMC”) platform grew 3% year over year in our fourth quarter with mostly stable demand trends outside Europe and a relatively stronger contribution from our aerospace end markets. Given the successful integration and steady margin expansion at Centa and the execution of our SCOFR initiatives, we are well positioned to drive margins higher while investing in growth. Our accelerating simplification initiatives are expected to enable us to reduce complexity and costs and position us to amplify the impact of our investments in our DiRXN (pronounced “Direction”) digital enterprise strategy.”

“Our Water Management platform delivered 5% net sales growth in our fourth quarter, despite significant headwinds from severe weather. We also successfully offset the impact of the ongoing tariff situation and delivered higher Adjusted EBITDA margins for the fourth quarter and the full year. We expect overall demand from our core North American nonresidential construction markets will continue to expand in our fiscal 2020, led by relative strength in institutional building verticals and enhanced by further gains from our market expansion strategies and a differentiated array of digitally-connected commercial-grade plumbing products.”

Fiscal 2020 Outlook

Adams continued, “Our initial outlook for fiscal 2020 is based on our assumption of low-single-digit core growth for the full year, net of an estimated 150-200 basis point impact from our product line simplification initiatives. We expect to continue to fully offset the impact of tariffs while we deliver incremental savings from our structural cost reduction initiatives and solid operating leverage on our core growth, partially offset by investments to advance our strategic growth and cost reduction initiatives. We expect our GAAP net income to be in a range of $180 million to $190 million, our Adjusted EBITDA to be in a range of $460 million to $475 million, and our free cash flow to exceed net income.”

For earnings history and earnings-related data on Rexnord (RXN) click here.

You May Also Be Interested In

• Tesla plans 'flying' Roadster stunt at SpaceX Texas site as early as August
• Silexion Therapeutics (SLXN) Tops Q2 EPS by 793c
• Zeo Energy Corp (ZEO) Misses Q2 EPS by 7c