What Happened?
Shares of industrials products and automation company Regal Rexnord (NYSE: RRX). fell 4.2% in the afternoon session after the company reported third-quarter earnings that fell short of analyst expectations and lowered its full-year guidance.
Regal Rexnord's adjusted earnings per share came in at $2.51, which was below the $2.54 analysts had forecasted, even though its revenue of $1.48 billion slightly topped expectations. The main point of concern for investors was the company's decision to cut its future profit outlook. The industrial manufacturer lowered its adjusted earnings guidance for the year to a range of $9.50 to $9.80 per share, down from a previous midpoint of about $10.00. Adding to the uncertainty, the company also recently announced the planned departure of its CEO, Louis Pinkham, as part of a succession process. The combination of missing profit targets, a weaker outlook, and a leadership transition prompted a negative reaction from the market.
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What Is The Market Telling Us
Regal Rexnord’s shares are somewhat volatile and have had 12 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 11 days ago when the stock gained 3.7% on the news that positive news on corporate earnings, easing political and trade tensions, and optimism about future interest rate cuts all converged to lift investor sentiment.
The overall market, including the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite, climbed significantly. A major catalyst was Apple shares rising 4% after a firm upgraded its rating, citing improving iPhone demand and predicting a long growth cycle. More broadly, the third-quarter earnings season got off to a strong start, with 76% of the 58 S&P 500 companies beating expectations, lifting the market's mood. Additionally, there were hope for an end to the ongoing U.S. government shutdown, which is seen as good for the economy. Investors also moved past recent fears over credit risks that had caused a sell-off the previous week, with shares of regional banks rebounding. Finally, signs that trade tensions with China were de-escalating, including expectations that new tariffs might be avoided, added to the overall positive momentum, leading traders to focus on more favorable factors like earnings and potential Federal Reserve rate cuts.
Regal Rexnord is down 8.8% since the beginning of the year, and at $139.85 per share, it is trading 23.3% below its 52-week high of $182.22 from November 2024. Investors who bought $1,000 worth of Regal Rexnord’s shares 5 years ago would now be looking at an investment worth $1,333.
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