Shares of industrial goods manufacturer Regal Beloit Corporation RBC hit a 52-week high of $72.75 on Nov 23, closing a notch lower at $72.65, reflecting a healthy year-to-date return of 24.2%. Despite the strong price appreciation, this Zacks Rank #3 (Hold) stock still has more room to run. The stock is currently trading at a forward P/E of 16.4x and has long-term earnings growth expectation of 11%.
Regal Beloit’s long-term growth strategy involves organic growth through innovation of new products, broadening of customer base, exploitation of new opportunities and tactical investments in emerging markets. Over the years, the company has consolidated its product lines and streamlined product brands to evolve as a dynamic enterprise.
In order to drive continuous improvement, Regal Beloit follows ‘Compass Operating System’ that encompasses a common set of business processes, disciplines and lean Six Sigma tools. Backed by an “open-door” management style, this has helped the company to gain a competitive advantage and reach more people in diverse markets around the world.
At the same time, Regal Beloit continues to focus on prudent investment decisions for a disciplined capital allocation, strong and flexible balance sheet position and cash flow enhancement to support dividend growth. Such moves, along with its robust operating platform and an efficient management team help in the execution of its strategic priorities and drive net asset value and dividend growth.
The company’s strong free cash generation is another positive, providing it an opportunity to pursue accretive acquisitions and unlock additional value. Regal Beloit has expanded technologically and geographically on the back of its aggressive acquisition policy. Management has further indicated that the company will continue seeking accretive acquisitions as part of its overall growth strategy. Going forward, Regal Beloit remains confident of generating robust operating cash flow to fund its organic and inorganic growth as well as return significant capital to shareholders.
Stocks to Consider
Some better-ranked stocks in the industry include EnerSys ENS, II-VI Incorporated IIVI and Leucadia National Corporation LUK, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
EnerSys is currently trading at a forward P/E of 17.3x and has beaten estimates thrice in the trailing four quarters, the average positive earnings surprise being 3%.
II-VI Incorporated is currently trading at a forward P/E of 28.9x and has beaten estimates in each of the trailing four quarters, the average positive earnings surprise being 39.8%.
Leucadia National has a long-term earnings growth expectation of 18% and is currently trading at a forward P/E of 96.8x.
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