Why Regal Rexnord shares are up more than 9% this week

Electric motors specialist Regal Rexnord (RRX -2.63%) has been quite the engine of growth in the last few trading sessions. The company’s shares were a bright spot in the market, rising more than 9 percent for the week, according to data compiled by S&P Global Market Intelligence. Management gave new estimates for the coming years, and investors clearly liked what they heard.

Guide to growth

Regal Rexnord held its 2024 investor day on Tuesday at a luxury hotel in New York. The posh setting was appropriate as management provided guidance indicating that the fundamentals would improve considerably.

It announced that it is maintaining its existing guidance for the full year, specifically that sales will total $6.2 billion and non-GAAP (adjusted) net income will reach $9.40 to $9.80 per share. The company admitted, however, that it now believes the lower half of the latter range is likely.

Regal Rexnord also presented a new outlook, revealing a set of forecasts for the period 2024-2027. During this period, organic net sales should grow at a compound annual growth rate (CAGR) of 2% to 5%. Adjusted net income should also increase; management predicts this will happen at a low double-digit CAGR, although it did not provide a more specific range.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) is likely to increase to around 25% after 2025 and remain at this level for years to come.

The transformation is working, management says

Regal Rexnord quoted CEO Louis Pinkham as saying about Regal Rexnord’s near future that “We see many opportunities to create significant value for shareholders by capitalizing on the strengths of our business, which over the past five years we have transformed dramatically, through organic and inorganic actions, to be increasingly sustainable, with a high margin and cash generators.”