With short-cycle industrial markets firmly in recovery mode and longer-term opportunities in HVAC and industrial automation, end-market conditions are looking pretty supportive these days for Regal Beloit (RBC). Strong execution in tougher markets in 2019 and 2020 likewise lends more credibility to management’s cost reduction targets, as the company definitely outperformed expectations for decremental margins during the pandemic downturn.
On top of that, the acquisition/merger with Rexnord’s (RXN) Process and Motion Control business (or PMC) creates new synergy opportunities on both the cost and revenue lines, with the deal also significantly enhancing Regal Beloit’s Power Transmission business.
I can see near-term upside in Regal Beloit to around $160, and above-average longer-term total annualized return potential beyond that. It is a cyclical, largely short-cycle, industrial business, but one where I believe there are both revenue and margin tailwinds to drive the business.
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