Regal Rexnord (NYSE:RRX) Beats Expectations in Strong Q1, Stock Soars

Industrials products and automation company Regal Rexnord (NYSE: RRX). reported Q1 CY2025 results exceeding the market’s revenue expectations, but sales fell by 8.4% year on year to $1.42 billion. Its non-GAAP profit of $2.15 per share was 17.7% above analysts’ consensus estimates.

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Company Overview

Headquartered in Milwaukee, Regal Rexnord (NYSE: RRX) provides power transmission and industrial automation products.

Sales Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Luckily, Regal Rexnord’s sales grew at an exceptional 13.6% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Regal Rexnord’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 7.1% over the last two years was well below its five-year trend.

We can better understand the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Regal Rexnord’s organic revenue averaged 6% year-on-year declines. Because this number is lower than its normal revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline results.

This quarter, Regal Rexnord’s revenue fell by 8.4% year on year to $1.42 billion but beat Wall Street’s estimates by 3%.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will face some demand challenges.

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Operating Margin

Regal Rexnord has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 9.7%, higher than the broader industrials sector.

Analyzing the trend in its profitability, Regal Rexnord’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Regal Rexnord generated an operating profit margin of 11.3%, up 2.6 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Regal Rexnord’s EPS grew at a solid 11.4% compounded annual growth rate over the last five years. However, this performance was lower than its 13.6% annualized revenue growth, telling us the company became less profitable on a per-share basis as it expanded.

Diving into the nuances of Regal Rexnord’s earnings can give us a better understanding of its performance. A five-year view shows Regal Rexnord has diluted its shareholders, growing its share count by 63%. This has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Regal Rexnord, its two-year annual EPS declines of 5% mark a reversal from its (seemingly) healthy five-year trend. We hope Regal Rexnord can return to earnings growth in the future.

In Q1, Regal Rexnord reported EPS at $2.15, up from $2 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Regal Rexnord’s full-year EPS of $9.27 to grow 9.2%.

Key Takeaways from Regal Rexnord’s Q1 Results

We were impressed by how significantly Regal Rexnord blew past analysts’ organic revenue expectations this quarter. We were also glad its EPS and full-year EPS guidance trumped Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The stock traded up 8% to $119 immediately after reporting.

Sure, Regal Rexnord had a solid quarter, but if we look at the bigger picture, is this stock a buy? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.