Leon Cooperman Stock Portfolio: Top 12 Picks

9. Regal Rexnord Corporation (NYSE:RRX)

Total Number of Shares Owned: 700,000

Total Value of Shares Owned: $94,654,000

Number of Hedge Fund Investors: 32

In Q2 2024, Regal Rexnord Corporation (NYSE:RRX)’s sales dipped to $1.55 billion from $1.77 billion in the same quarter the previous year. However, its net income rose significantly to $62.5 million, nearly doubling from $32.1 million in Q2 2023. This increase highlights improved profitability, with earnings per share (EPS) growing from $0.48 to $0.94 year-over-year. For the first half of 2024, Regal Rexnord Corporation (NYSE:RRX) also experienced a modest increase in sales compared to the previous year, while net income jumped from $26.2 million to $82.3 million, showcasing strong operational performance.

A crucial factor in this positive outlook is the ongoing integration of  Regal Rexnord Corporation (NYSE:RRX)’s acquisition of Altra Industrial Motion in 2022. While this acquisition initially increased Regal Rexnord Corporation (NYSE:RRX)’s debt, it is expected to generate synergies that enhance operational efficiency and long-term profitability, especially in the Automation & Motion Control segment. Furthermore, Regal Rexnord Corporation (NYSE:RRX)’s commitment to technological innovation, particularly through IoT and AI-driven products in power transmission and industrial automation, is likely to strengthen its competitive edge.

Regal Rexnord Corporation (NYSE:RRX)’s resilience against challenging macroeconomic conditions, such as fluctuating commodity prices and supply chain disruptions, underscores its robust market position. Regal Rexnord Corporation (NYSE:RRX) has been proactive in managing its debt and operational costs, setting a solid foundation for future earnings growth and capital returns to shareholders.

TimesSquare Capital U.S. Mid Cap Growth Strategy stated the following regarding Regal Rexnord Corporation (NYSE:RRX) in its Q2 2024 investor letter:

“Many of our Industrials positions provide necessary business-to-business operational services, highly technical components, automation & efficiency improvements, or essential infrastructure services. Here there was a -25% showing from Regal Rexnord Corporation (NYSE:RRX), which specializes in motion control systems, climate solutions, and similar mechanical components for a variety of end markets.

There were ongoing pressures on its Power Efficiency and Automation & Motion Control segments that related to destocking in the automation or HVAC end markets. Meanwhile the soon-to-be-divested Industrial Powertrain operations showed better-than-expected results, and the net results were inline revenues and earnings, though lower guidance to adjust for the divestiture. Regal’s management expects a recovery in orders later in 2024 and in the meanwhile will reduce its debt levels, so we added to our position.”