Regal Beloit (RBC) Hits 52-Week High On Holistic Growth

 | Jul 11, 2017 08:59AM ET

Shares of industrial goods manufacturer, Regal Beloit Corporation (NYSE:RBC) scaled a new 52-week high of $84.60 during yesterday’s trading session, before closing a tad lower at $84.15 for a healthy year-to-date return of 21.5%. This Zacks Rank #2 (Buy) stock has the potential for further price appreciation with long-term earnings growth expectations of 9%.

Growth Drivers

Over the years, Regal Beloit has consolidated its product lines and streamlined brands to evolve as a dynamic enterprise. In order to drive continuous improvement, the company strictly followed ‘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 Regal Beloit gain a competitive advantage and reach more people in diverse markets around the world.

In addition, the company has continually focused on prudent investment decisions for a disciplined capital allocation, strong and flexible balance sheet position and cash flow enhancement to support dividend growth. Regal Beloit recently increased its quarterly dividend by 8% year over year to 26 cents per share. We believe that such moves along with its robust operating platform and an efficient management team will help in the execution of its strategic priorities and drive net asset value in the future. The company’s strong free cash generation is another positive, providing it an opportunity to pursue accretive acquisitions and unlock additional value. Going forward, Regal Beloit remains confident of generating robust operating cash flow to fund its organic and inorganic growth as well as to return significant capital to shareholders.

With a diligent execution of operational plans, Regal Beloit has outperformed the Zacks categorized Machinery-Electrical industry with an average year-to-date return of 21.5% compared with an 12.4% gain for the latter. Its long-term strategy involves organic growth through innovative products, broadening customer base, exploitation of new opportunities and tactical investments in emerging markets. The company has also expanded technologically and geographically on the back of its aggressive acquisition policy. Management further indicated that it plans to continue seeking accretive acquisitions as part of the company’s overall growth strategy.