Regal Rexnord Corporation (RRX) Earnings & Analysis

Latest quarter

Regal Rexnord reported third-quarter revenue of $1.6 billion, up 6.08% from $1.5 billion a year earlier. Revenue and adjusted earnings per share of $2.90 both exceeded the consensus. Diluted earnings per share fell to −$0.19 from $1.20 a year earlier.

The filing said organic sales growth was driven primarily by Automation & Motion Control (AMC), partly offset by a decline in Industrial Powertrain Solutions (IPS). AMC’s growth included data-center and discrete-automation sales, while the filing attributed the IPS decline to metals and mining, partly offset by discrete automation and energy. Power Efficiency Solutions grew as commercial HVAC gains offset some residential HVAC and pool declines.

Regal Rexnord’s gross margin was 37.2%, compared with 37.0% a year earlier; the filing said tariff refunds contributed to gross profit. Operating margin fell to 5.13% from 11.6%, and the filing attributed higher operating expenses primarily to a goodwill impairment at AMC. Free cash flow rose to $195.1 million from $174.6 million.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Aamir Paul said demand had accelerated, but plant execution and material planning needed more work as facilities shifted from consolidation and cost optimization toward growth. Regal Rexnord had broadly paused plant consolidations to prioritize output and engaged outside help, he said.

CFO Rob Rehard said daily orders rose 5.70% year over year in the third quarter, or 13.3% excluding data centers, where project timing affected orders. He said the company booked a $113.0 million switchgear order in October that had slipped from the third quarter. In Power Efficiency Solutions, he said commercial HVAC orders rose over 60.0%, supported by new data-center air-moving products, while consumer-linked orders fell 12.0%.

Rehard said output at several IPS plants had not kept pace with demand, increasing past-due backlog and leaving sales below expectations. He identified material availability, planning and manufacturing inefficiencies as the issues, and said the immediate priority was stabilizing output and reducing late orders. Asked about the operational problems, Paul said AMC’s issues were primarily supplier-related, particularly in aerospace, whereas IPS faced both supplier and internal execution issues. Paul said returning to targeted performance would take a couple of quarters.

On margins, Rehard said adjusted gross margin excluding tariff refunds declined from a year earlier because of price-cost pressure and operating headwinds, partly offset by higher volume. He said the company took price actions in the third quarter and expected additional pricing in the fourth quarter and first quarter to address inflation.

Paul said Regal Rexnord had begun a portfolio review with its board and outside advisers and was exploring a sale of its Autonomous Mobile Solutions business. Asked about E-Pods, he said the business needed customers buying at scale to support efficiency, and that the company was in design validation with other accounts. Rehard said the company would provide more detail on recovery timing and expected growth and margin impacts when it reports fourth-quarter results.

Guidance

Regal Rexnord raised its FY2026 sales outlook to approximately $6.2 billion and raised its adjusted EPS range to $10.60–$10.90. Rehard said the EPS increase reflected lower depreciation and tax expense, while the adjusted EBITDA dollar outlook was unchanged. The company lowered its GAAP EPS range to $3.76–$4.06.

Rehard raised the AMC revenue-growth outlook to the mid-teens from low double digits and lowered the IPS outlook to flat to low-single-digit growth from low single digits, citing slower conversion of backlog into shipments. He also raised expected fourth-quarter E-Pod revenue to $40.0 million and FY2026 E-Pod revenue to $65.0 million.