10 Best Manufacturing Stocks To Buy According to Analysts

3. Regal Rexnord Corporation (NYSE:RRX)

Number of Hedge Fund Investors  in Q1 2024: 31

Average Analyst Share Price Upside: 25%

Average Analyst Share Price Target: $192.75

Regal Rexnord Corporation (NYSE:RRX) is a diversified industrial equipment company that serves the needs of agriculture, construction, power generation, mining, food and beverages, and medical devices industries along with others. Its target industries, particularly agriculture and industries make it vulnerable to a revenue slowdown during an economic downturn. Additionally, Regal Rexnord Corporation (NYSE:RRX)’s products such as power generation and transmission products require vast amounts of capital to fund manufacturing, which further exposes it to a downturn by leaving it vulnerable to maintain healthy leverage ratios. This is also evident on the balance sheet, with $6.5 billion in long term debt compared to $15 billion in total assets leaving Regal Rexnord Corporation (NYSE:RRX) in a rather precarious position. Management is also aware of the need to control margins in a cost heavy business, and Regal Rexnord Corporation (NYSE:RRX) has implemented an 80/20 strategy through which aims to focus on only those products and businesses that generate the highest returns.

Diamond Hill Capital mentioned Regal Rexnord Corporation (NYSE:RRX) in its Q1 2024 investor letter. Here is what the firm said:

“Designer and manufacturer of industrial powertrain solutions, power transmission components and other specialty electronics Regal Rexnord is capitalizing on merger synergies and its commitment to focusing on its most productive areas to improve margins and drive organic growth faster than peers. While the company’s leverage is somewhat elevated, possibly exposing it to any macroeconomic weakness, recent strong free cash flow generation has helped it make progress deleveraging. We believe Regal Rexnord remains well-positioned to benefit from secular tailwinds such as the increased focus on energy efficiency, automation, re-shoring and electrification in the period ahead.”