Overview of Financial Performance

Regal Rexnord Corporation is a leading manufacturer of industrial powertrain solutions, power efficiency solutions, automation and motion control products, and industrial systems. The company’s sales are derived primarily through direct sales by its own sales personnel, as well as through manufacturer’s representatives.

Regal Rexnord’s total revenue can experience quarterly variations due to factors like demand, economic conditions, customer perceptions, and the company’s ability to meet customer needs. The company uses the term “organic sales” to refer to sales from existing operations, excluding the impact of acquisitions, divestitures, and foreign currency translation.

Gross profit is impacted by net sales levels and cost of sales, which include raw materials, components, labor, and manufacturing overhead. Regal Rexnord attempts to mitigate commodity price fluctuations through fixed-price agreements and hedging strategies. The company’s different business segments can experience varying levels of quarterly sales volatility based on factors specific to each segment.

Revenue and Profit Trends

In 2024, Regal Rexnord’s net sales were $6,033.8 million, a decrease of 3.5% compared to 2023. This consisted of an organic sales decline of 5.0% and a negative foreign currency translation impact of 0.3%, partially offset by acquisition growth of 7.5%. The decrease was due in part to the sale of the industrial motors and generators businesses, which closed on April 30, 2024.

Gross profit increased 6.0% in 2024 to $2,191.0 million, driven by the Altra acquisition, the absence of acquisition-related inventory step-up amortization, and productivity and cost synergies, partially offset by the decline in PES segment sales.

Total operating expenses decreased 7.6% in 2024 to $1,561.0 million, primarily due to the divestiture of the industrial motors and generators businesses, which included a reduction in loss on the sale and lower transaction/integration costs, partially offset by increased expenses from the Altra acquisition.

Income from operations increased to $630.0 million in 2024, up from $377.1 million in 2023. This improvement was driven by the factors mentioned above.

Segment Performance

The Industrial Powertrain Solutions (IPS) segment saw net sales increase 8.1% in 2024 to $2,598.1 million, with acquisition growth of 10.1% partially offset by an organic sales decline of 1.7%. Gross profit increased 24.6% due to the Altra acquisition, the absence of acquisition-related inventory step-up amortization, and productivity/synergy benefits.

The Power Efficiency Solutions (PES) segment experienced a 9.1% decline in net sales to $1,644.1 million, driven by an 8.8% organic sales decline due to weakness in residential HVAC, general commercial, and non-U.S. commercial HVAC markets. Gross profit decreased 12.6% due to the lower sales volumes.

The Automation & Motion Control (AMC) segment had a 7.7% increase in net sales to $1,633.8 million, with acquisition growth of 13.1% partially offset by an organic sales decline of 5.1%. Gross profit increased 10.2% due to the Altra acquisition, the absence of acquisition-related inventory step-up amortization, and productivity/synergy benefits.

The Industrial Systems segment, which represented the majority of the divested industrial motors and generators businesses, saw net sales decrease to $157.8 million in 2024 prior to the sale on April 30, 2024.

Strengths and Weaknesses

A key strength of Regal Rexnord is its diversified portfolio of industrial products across multiple end markets. This helps mitigate large quarter-to-quarter fluctuations outside of general economic conditions. The company’s focus on developing energy-efficient and environmentally-friendly products is also a strength, as demand for such solutions continues to grow.

However, the company’s reliance on raw material and component costs, which can be subject to commodity price fluctuations, is a potential weakness. Regal Rexnord attempts to mitigate this through fixed-price agreements and hedging, but it remains an area of risk. The divestiture of the industrial motors and generators businesses also represents a significant change for the company that it will need to navigate.

Outlook and Future Prospects

For 2025, Regal Rexnord is forecasting diluted earnings per share in the range of $4.42 to $5.22, based on an effective tax rate of 21.5%. This guidance reflects the company’s expectations for continued strong performance, despite the challenges of commodity costs and global economic conditions.

The company’s liquidity position remains solid, with $393.5 million in cash and cash equivalents as of the end of 2024. Regal Rexnord generated $609.4 million in operating cash flow in 2024, though this was a decrease from 2023 due to working capital changes. The company plans to use cash from operations to fund interest obligations and reduce debt over time.

Overall, Regal Rexnord appears to be navigating the current business environment effectively, leveraging its diverse product portfolio, operational efficiency initiatives, and strategic acquisitions and divestitures to drive profitability. While challenges remain, the company’s outlook for 2025 and beyond seems cautiously optimistic.

Tables

The following tables present key financial information for Regal Rexnord:

Net Sales by Segment:

Segment	2024 Amount	2024 % of Net Sales	2023 Amount	2023 % of Net Sales
Industrial Powertrain Solutions	$2,598.1	43.0%	$2,403.5	38.5%
Power Efficiency Solutions	$1,644.1	27.2%	$1,808.9	28.9%
Automation & Motion Control	$1,633.8	27.1%	$1,516.8	24.3%
Industrial Systems	$157.8	2.6%	$521.5	8.3%
Consolidated	$6,033.8	100.0%	$6,250.7	100.0%

Gross Profit by Segment:

Segment	2024 Amount	2024 Gross Margin %	2023 Amount	2023 Gross Margin %
Industrial Powertrain Solutions	$1,051.5	40.5%	$844.1	35.1%
Power Efficiency Solutions	$458.7	27.9%	$524.9	29.0%
Automation & Motion Control	$641.6	39.3%	$582.4	38.4%
Industrial Systems	$39.2	24.8%	$115.9	22.2%
Consolidated	$2,191.0	36.3%	$2,067.3	33.1%

Operating Expenses by Segment:

Segment	2024 Amount	2024 % of Net Sales	2023 Amount	2023 % of Net Sales
Industrial Powertrain Solutions	$728.8	28.1%	$692.3	28.8%
Power Efficiency Solutions	$296.1	18.0%	$307.5	17.0%
Automation & Motion Control	$497.2	30.4%	$443.4	29.2%
Industrial Systems	$38.9	24.7%	$247.0	47.4%
Consolidated	$1,561.0	25.9%	$1,690.2	27.0%

Income (Loss) from Operations by Segment:

Segment	2024 Amount	2024 Operating Margin %	2023 Amount	2023 Operating Margin %
Industrial Powertrain Solutions	$322.7	12.4%	$151.8	6.3%
Power Efficiency Solutions	$162.6	9.9%	$217.4	12.0%
Automation & Motion Control	$144.4	8.8%	$139.0	9.2%
Industrial Systems	$0.3	0.2%	$(131.1)	(25.1)%
Consolidated	$630.0	10.4%	$377.1	6.0%

Conclusion

Regal Rexnord has demonstrated resilience in the face of economic and industry challenges, leveraging its diverse product portfolio, operational efficiency initiatives, and strategic acquisitions and divestitures to drive profitability. While the company faces ongoing risks related to commodity costs and global economic conditions, its 2025 outlook suggests cautious optimism about its ability to continue delivering value to shareholders.