Rexnord (RXN) Tops Q2 EPS by 4c, Revenues Beat; Updates FY20 Outlook

Rexnord (NYSE: RXN) reported Q2 EPS of $0.51, $0.04 better than the analyst estimate of $0.47. Revenue for the quarter came in at $521 million versus the consensus estimate of $524.88 million.

Second Quarter Highlights

• Net sales were $521 million and decreased 1% year over year (flat core sales(1), +1% acquisitions, -2% foreign currency translation).
• Net income from continuing operations grew 24% to $57 million (diluted EPS of $0.46), compared with $46 million (diluted EPS of $0.37) in the year-ago quarter.
• Net income(2) was $51 million (diluted EPS of $0.46), compared with a net loss(2) of $43 million, including a $84 million loss from discontinued operations (diluted EPS of $(0.30)) in the year-ago quarter.
• Adjusted EPS(1) grew 11% to $0.51 compared with $0.46 in the year-ago quarter.
• Adjusted EBITDA(1) was $118 million (22.7% of net sales) compared with $115 million (21.9% of net sales) in last year's second quarter.
• Net debt leverage ratio of 2.0x.

Todd Adams, President and Chief Executive Officer, commented, “We delivered solid second quarter results against a difficult prior-year comparison as our operating results demonstrate our ability to deliver growth in our earnings and cash flow in a slowing macro environment. Both platforms delivered significant margin expansion while advancing our organic growth strategies and execution of the third phase of our Supply Chain Optimization and Footprint Repositioning initiatives. The progress we’ve made over the past several years to reduce our fixed cost structure while investing in more stable growth areas gives us confidence that we are well-positioned to generate strong free cash flow over the balance of this year and beyond, and to create shareholder value across an increasingly wider range of end-market environments.”

“Our Process & Motion Control (“PMC”) platform delivered substantial margin expansion in the quarter against the most difficult top-line comparison we\'ll face this year, enhanced by our purposeful product line simplification efforts which accounted for essentially all of the core growth decline in the quarter. It’s clear that the macro environment has become a bit more challenging, yet we’re delivering growth in our consumer-facing and aerospace end markets and seeing only modest changes across our process industry end markets. Our differentiated SCMS (Smart Condition Monitoring System) and IIoT solutions continue to gain traction and we’re pleased with our progress in a number of targeted growth areas.”

“Our Water Management platform also delivered solid growth against a difficult year-over-year comparison and record margins in our second quarter, as we continue to see solid end-market demand in our core North American institutional construction markets and in targeted commercial verticals. We remain confident that our investments in new products and in market expansion into adjacencies will continue to augment our growth over the balance of the year. Our digitally-connected products are gaining increasing interest and traction across multiple end-market verticals and are uncovering substantial opportunities to expand our penetration within retrofit applications.”

Fiscal 2020 Outlook

Adams continued, “At the half-way point of our fiscal 2020, we’re updating our outlook for net income from continuing operations to be between $184 million and $189 million and narrowing the range of our guidance for Adjusted EBITDA(1) from $460 million to $475 million to $460 million to $467 million. Our updated earnings outlook reflects an additional $4 million of adverse currency translation impact that was not included in our prior outlook as well as incorporating our first half actual results and a refreshed view of the second half of our fiscal year. We continue to expect free cash flow to exceed net income.”

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

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