Industrials products and automation company Regal Rexnord (NYSE:RRX). met Wall Street’s revenue expectations in Q2 CY2025, but sales fell by 3.3% year on year to $1.50 billion. Its non-GAAP profit of $2.48 per share was 1.5% above analysts’ consensus estimates.
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Regal Rexnord (RRX) Q2 CY2025 Highlights:
- Revenue: $1.50 billion vs analyst estimates of $1.50 billion (3.3% year-on-year decline, in line)
- Adjusted EPS: $2.48 vs analyst estimates of $2.44 (1.5% beat)
- Adjusted EBITDA: $329.7 million vs analyst estimates of $331.1 million (22% margin, in line)
- Management reiterated its full-year Adjusted EPS guidance of $10 at the midpoint
- Operating Margin: 12.2%, in line with the same quarter last year
- Free Cash Flow Margin: 33%, up from 8.1% in the same quarter last year
- Organic Revenue fell 1.2% year on year (-6.9% in the same quarter last year)
- Market Capitalization: $9.79 billion
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."
Company Overview
Headquartered in Milwaukee, Regal Rexnord (NYSE:RRX) provides power transmission and industrial automation products.
Revenue Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Luckily, Regal Rexnord’s sales grew at an incredible 15.2% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Regal Rexnord’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 2.6% over the last two years was well below its five-year trend. 
We can dig further into the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Regal Rexnord’s organic revenue averaged 5% year-on-year declines. Because this number is lower than its two-year revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline results. 
This quarter, Regal Rexnord reported a rather uninspiring 3.3% year-on-year revenue decline to $1.50 billion of revenue, in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 3.1% over the next 12 months, similar to its two-year rate. This projection is underwhelming and implies its newer products and services will not accelerate its top-line performance yet.
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Operating Margin
Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.
Regal Rexnord’s operating margin has been trending up over the last 12 months and averaged 9.9% over the last five years. Its solid profitability for an industrials business shows it’s an efficient company that manages its expenses effectively. This result isn’t too surprising as its gross margin gives it a favorable starting point.
Analyzing the trend in its profitability, Regal Rexnord’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.
This quarter, Regal Rexnord generated an operating margin profit margin of 12.2%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Regal Rexnord’s remarkable 14.2% annual EPS growth over the last five years aligns with its revenue performance. This tells us its incremental sales were profitable.
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For Regal Rexnord, its two-year annual EPS declines of 3.1% mark a reversal from its (seemingly) healthy five-year trend. We hope Regal Rexnord can return to earnings growth in the future.
In Q2, Regal Rexnord reported adjusted EPS at $2.48, up from $2.29 in the same quarter last year. This print beat analysts’ estimates by 1.5%. Over the next 12 months, Wall Street expects Regal Rexnord’s full-year EPS of $9.46 to grow 14%.
Key Takeaways from Regal Rexnord’s Q2 Results
It was good to see Regal Rexnord provide full-year EPS guidance that slightly beat analysts’ expectations. On the other hand, its organic revenue was in line. Zooming out, we think this was a mixed quarter. Investors were likely hoping for more, and shares traded down 6.3% to $136.14 immediately after reporting.
So do we think Regal Rexnord is an attractive buy at the current price? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.