Management released their 3Q results this morning. They are consistent with Gudovac's predictions from September and July. Regal Beloit has flat lined onto a reduced level of output and profits. Revenues and Operating Income are down 25% y.o.y. Gross margins are up due to a one time benefit from lower material prices. S, G, and A still has not been reduced in line with decrease in revenues. EBITDA for the quarter is on order of $50 million.
Most Troubling is the news that Emerging Markets orders are down 28%. This has profound implications for Regal's future growth. Every other industrial Enterprise Gudovac tracks has increased orders in Emerging Markets, despite the downturn. Regal is an outlier in this respect. If Regal can not compete in Emerging Markets, then Owners need to be very careful.
Back to the numbers - Owners can expect the new Regal Beliot to generate for the next 12 months between $130 and $150 million in FCF. This is in line with Gudovac's prediction of $144 million.
When to Buy Regal ?
The 3Q results indicate very little has changed since Gudovac established his $31 per common as a sensible price to buy. $31 remains a prudent purchase price.
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Don't Get Massacred !
Gudovac1941@gmail.com
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