The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how Regal Rexnord (NYSE: RRX) and the rest of the engineered components and systems stocks fared in Q2.
Engineered components and systems companies possess technical know-how in sometimes narrow areas such as metal forming or intelligent robotics. Lately, automation and connected equipment collecting analyzable data have been trending, creating new demand. On the other hand, like the broader industrials sector, engineered components and systems companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.
The 13 engineered components and systems stocks we track reported a mixed Q2. As a group, revenues along with next quarter’s revenue guidance were in line with analysts’ consensus estimates.
In light of this news, share prices of the companies have held steady. On average, they are relatively unchanged since the latest earnings results.
Regal Rexnord (NYSE: RRX)
Headquartered in Milwaukee, Regal Rexnord (NYSE: RRX) provides power transmission and industrial automation products.
Regal Rexnord reported revenues of $1.50 billion, down 3.3% year on year. This print was in line with analysts’ expectations, but overall, it was a mixed quarter for the company with full-year EPS guidance slightly topping analysts’ expectations but a slight miss of analysts’ adjusted operating income estimates.
CEO Louis Pinkham commented, "Our team delivered strong performance in second quarter, which was modestly ahead of our expectations on sales and earnings. Our PES segment achieved 6.5% organic growth and a point of adjusted EBITDA margin expansion, aided by strong R-HVAC and C-HVAC markets. Our IPS segment also delivered over a point of adjusted EBITDA margin expansion, despite persistent end market headwinds. Our AMC segment met its sales goal for the quarter, but experienced temporary, mix-related margin pressure, primarily due to rare earth magnet availability, which is on track to improve in the back half and is expected to have an immaterial impact for the year."
Unsurprisingly, the stock is down 2.8% since reporting and currently trades at $141.20.
Read our full report on Regal Rexnord here, it’s free for active Edge members.
Best Q2: Arrow Electronics (NYSE: ARW)
Founded as a single retail store, Arrow Electronics (NYSE: ARW) provides electronic components and enterprise computing solutions to businesses globally.
Arrow Electronics reported revenues of $7.58 billion, up 10% year on year, outperforming analysts’ expectations by 5.9%. The business had an exceptional quarter with an impressive beat of analysts’ revenue estimates.
Arrow Electronics scored the biggest analyst estimates beat among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 7.6% since reporting. It currently trades at $120.07.
Is now the time to buy Arrow Electronics? Access our full analysis of the earnings results here, it’s free for active Edge members.
Weakest Q2: ESCO (NYSE: ESE)
A developer of the communication systems used in the Batmobile of “The Dark Knight,” ESCO (NYSE: ESE) is a provider of engineered components for the aerospace, defense, and utility sectors.
ESCO reported revenues of $296.3 million, up 13.6% year on year, falling short of analysts’ expectations by 7%. It was a disappointing quarter as it posted full-year revenue guidance missing analysts’ expectations significantly and full-year EPS guidance missing analysts’ expectations significantly.
ESCO delivered the weakest performance against analyst estimates in the group. Interestingly, the stock is up 12.9% since the results and currently trades at $214.77.
Read our full analysis of ESCO’s results here.
Applied Industrial (NYSE: AIT)
Formerly called The Ohio Ball Bearing Company, Applied Industrial (NYSE: AIT) distributes industrial products–everything from power tools to industrial valves–and services to a wide variety of industries.
Applied Industrial reported revenues of $1.22 billion, up 5.5% year on year. This result surpassed analysts’ expectations by 3.5%. It was a strong quarter as it also produced an impressive beat of analysts’ organic revenue estimates and a solid beat of analysts’ revenue estimates.
The stock is down 8.1% since reporting and currently trades at $253.50.
Read our full, actionable report on Applied Industrial here, it’s free for active Edge members.
RBC Bearings (NYSE: RBC)
With a Guinness World Record for engineering the largest spherical plain bearing, RBC Bearings (NYSE: RBC) is a manufacturer of bearings and related components for the aerospace & defense, industrial, and transportation industries.
RBC Bearings reported revenues of $436 million, up 7.3% year on year. This number topped analysts’ expectations by 0.8%. Overall, it was a strong quarter as it also put up and a solid beat of analysts’ adjusted operating income estimates.
The stock is up 2.5% since reporting and currently trades at $396.82.
Read our full, actionable report on RBC Bearings here, it’s free for active Edge members.
Market Update
Thanks to the Fed’s rate hikes in 2022 and 2023, inflation has been on a steady path downward, easing back toward that 2% sweet spot. Fortunately (miraculously to some), all this tightening didn’t send the economy tumbling into a recession, so here we are, cautiously celebrating a soft landing. The cherry on top? Recent rate cuts (half a point in September 2024, a quarter in November) have propped up markets, especially after Trump’s November win lit a fire under major indices and sent them to all-time highs. However, there’s still plenty to ponder — tariffs, corporate tax cuts, and what 2025 might hold for the economy.
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