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REGAL REXNORD CORP (RRX)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered modest outperformance vs internal expectations: net sales $1,496.1M (-3.3% Y/Y, -1.2% organic), adjusted EPS $2.48 (+8.3% Y/Y), adjusted EBITDA margin 22.0%; daily orders -2.5% Y/Y .
  • Versus Wall Street: EPS and revenue were slight beats; EPS $2.48 vs S&P Global consensus $2.44*, revenue $1,496.1M vs $1,494.3M*, while EBITDA missed S&P consensus (actual $299.4M vs $331.1M*), noting company emphasizes adjusted EBITDA of $329.7M .
  • FY 2025 guidance narrowed: adjusted EPS range to $9.70–$10.30 (midpoint unchanged), sales midpoint raised on FX/tariff pricing, adjusted EBITDA margin guide -50 bps on FX, tariffs, lower AMC margins; tariff mitigation remains on track to neutralize 2025 adjusted EBITDA/EPS impact .
  • Catalysts: $35M data center order booked in July with expected sales start by year-end, cross-sell funnel ~$300M, tracking to $170M synergies in 2025 and $250M by 2027 .

What Went Well and What Went Wrong

What Went Well

  • PES segment grew 6.5% organically with adjusted EBITDA margin expansion to 17.1% on strong residential and commercial HVAC demand .
  • IPS delivered >1 pt adjusted EBITDA margin expansion to 26.9% despite end-market headwinds; backlog up 15% YTD, reinforcing 2H outlook .
  • Management emphasized momentum: “Our team delivered strong performance… modestly ahead of our expectations on sales and earnings,” highlighting segment margin gains and robust orders funnel .

What Went Wrong

  • AMC met sales goals but faced mix-related margin pressure from rare earth magnet availability, delaying higher-margin shipments; adjusted EBITDA margin fell to 19.5% (vs 22.5% PY) .
  • Daily orders declined 2.5% Y/Y, reflecting softer general industrial demand and project timing (metals & mining) .
  • Adjusted EBITDA margin guide reduced ~50 bps due to FX headwinds, tariffs, and near-term AMC margin profile; EBITDA miss vs S&P consensus (company adjusted EBITDA $329.7M vs S&P standardized actual $299.4M*) .

Financial Results

Consolidated Performance (oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Net Sales ($USD Millions)$1,461.1 $1,418.1 $1,496.1
GAAP Diluted EPS ($)$0.62 $0.86 $1.19
Adjusted Diluted EPS ($)$2.34 $2.15 $2.48
Gross Margin %34.9% 37.2% 37.7%
Adjusted Gross Margin %37.1% 37.9% 38.2%
Adjusted EBITDA Margin %21.7% 21.8% 22.0%
Adjusted Free Cash Flow ($USD Millions)$185.3 $85.5 $493.0

Q2 2025 Actual vs S&P Global Consensus

MetricConsensus*Actual
Primary EPS ($)2.442.48
Revenue ($USD Millions)1,494.31,496.1
EBITDA ($USD Millions)331.1299.4
EPS - # of Estimates11—
Revenue - # of Estimates10—
*Values retrieved from S&P Global.

Segment Performance (Q2 2025 vs Q2 2024)

SegmentNet Sales Q2 2024 ($M)Net Sales Q2 2025 ($M)Adjusted EBITDA Margin Q2 2024Adjusted EBITDA Margin Q2 2025
Automation & Motion Control (AMC)$422.2 $411.1 22.5% 19.5%
Industrial Powertrain Solutions (IPS)$675.5 $649.8 25.8% 26.9%
Power Efficiency Solutions (PES)$410.9 $435.2 16.1% 17.1%

KPIs and Balance Sheet

KPIQ4 2024Q1 2025Q2 2025
Daily Orders Y/Y+4.4% +3.3% -2.5%
Cash from Operating Activities ($M)$213.2 $102.3 $523.2
Net Debt ($M)$5,064.2 $4,991.6 $4,534.7
Net Debt / Adjusted EBITDA (incl. synergies) (x)3.63 3.62 3.34

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPS ($)FY 2025$9.60–$10.40 $9.70–$10.30 Narrowed range; midpoint maintained
Sales ($B)FY 2025~$5.86 ~$5.95 Raised (FX/tariff pricing)
Adjusted EBITDA Margin (%)FY 2025~23.0% ~22.5% Lowered ~50 bps (FX, tariffs, AMC mix)
Net Interest ($M)FY 2025~$328 ~$326 Lowered (securitization savings)
Depreciation ($M)FY 2025~$163 ~$151 Lowered
Amortization ($M)FY 2025~$338 ~$344 Raised
Diluted Shares (M)FY 2025~66.5 ~66.5 Maintained
Adjusted ETR (%)FY 2025~22.5% ~22.5% Maintained
Dividend per Share ($)Quarterly$0.35 $0.35 Maintained

Segment outlook (3Q and FY 2025):

Segment3Q Sales ($M)3Q Adj. EBITDA MarginFY 2025 Sales Y/YFY 2025 Adj. EBITDA MarginNotes
AMC$390–$420 20.0%–23.0% ~Flat/+LSD 20.5%–22.5% Mix-positive backlog; rare earth magnet constraints easing by year-end; footprint optimization shift to 2026
IPS$645–$675 26.5%–27.5% ~Flat 26.5%–27.5% 2H weighted to longer-cycle shipments; synergies support margins
PES$425–$445 17.0%–18.0% +LSD 16.0%–17.0% R-HVAC/C-HVAC modestly positive; sluggish ISM-driven markets

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Data center demandProject timing; cautious outlook $35M order booked in July; sales start by EOY; AMC orders would be flat if included Improving
Rare earth magnetsNot prominent earlierSupply shortage caused delayed high-margin AMC shipments; margin impact; easing in H2 Temporary headwind
Tariffs & mitigationIntroduced guidance, mitigation plans; March update Neutralize 2025 adjusted EBITDA/EPS; margin neutrality by mid-2026; updated cost impacts Mitigation on track
HVACResi HVAC strong (low-20s in Q4) ; PES +8% organic in Q1 Ongoing strength in R-HVAC/C-HVAC; PES +6.5% organic Consistent strength
General industrial/ISMWeaker than expected in Q4; cautious No improvement assumed in 2025; expecting recovery into 2026 Stabilizing later
Cross-sell synergies$101M 2024; >$90M target beat Funnel ~$300M; on track $170M in 2025; $250M by 2027 Accelerating

Management Commentary

  • CEO: “Our team delivered strong performance in second quarter, which was modestly ahead of our expectations on sales and earnings… PES segment achieved 6.5% organic growth… IPS delivered over a point of adjusted EBITDA margin expansion… AMC… experienced temporary, mix-related margin pressure, primarily due to rare earth magnet availability” .
  • CEO: “We ended 2Q with a $300 million cross-sell opportunity funnel, and are on track to realize $170 million of cross-sell synergies this year, and $250 million by 2027” .
  • CFO/Call detail: “Primary driver of the shortfall was delayed shipments of high margin products containing rare earth magnets… we also encountered higher costs such as expedited freight” .
  • Securitization facility: $400M program; $368.5M proceeds used to repay bank debt; expected ~$4M net annualized interest savings; charges treated outside adjusted EBITDA but included in adjusted EPS .

Q&A Highlights

  • AMC margin outlook: near-term margin profile lower on rare earth supply constraints; management still sees path back to 24–26% over mid-term once headwinds pass .
  • Orders trajectory: 2H orders expected mid-single-digit up overall; AMC low double-digit driven by data center; PES flat to slightly up .
  • Macro/ISM: No step-up assumed in 2025 distribution sales; expectation for ISM >50 and industrial production improvement into 2026 .
  • Guidance confidence: Management expressed confidence in hitting the midpoint of adjusted EPS guidance .

Estimates Context

  • EPS: Beat by ~$0.04 ($2.48 actual vs $2.44 consensus*) driven by PES strength and cost discipline, despite AMC mix pressure .
  • Revenue: Beat by ~$1.8M ($1,496.1M actual vs $1,494.3M consensus*) aided by HVAC and aerospace; IPS softness from project timing .
  • EBITDA: Miss vs S&P Global standardized EBITDA ($299.4M actual vs $331.1M consensus*); note company reports adjusted EBITDA $329.7M and highlights mitigation actions and synergies .
    *Values retrieved from S&P Global.

Key Takeaways for Investors

  • Slight EPS and revenue beats with resilient margins underscore execution amid macro/tariff headwinds; adjusted margin guide trimmed but tariff mitigation remains neutral to 2025 adjusted EPS/EBITDA .
  • AMC headwinds are transitory (rare earth magnet supply); backlog mix improves into H2, with data center momentum and new leadership appointed to drive segment performance .
  • IPS margin performance strong and backlog up 15% YTD reinforces 2H shipment weighting; watch Q3/Q4 conversion and longer-cycle project cadence .
  • PES continues to outperform on HVAC strength; segment a key stabilizer for revenue/margins in 2025 .
  • Balance sheet delevering accelerated via securitization; net debt/adj EBITDA including synergies ~3.34x; interest savings support EPS and FCF .
  • Guidance implies flat-to-LSD organic growth, narrowed adjusted EPS range with unchanged midpoint; trading setups hinge on H2 orders inflection, AMC margin recovery, and tariff mitigation execution .
  • Dividend maintained at $0.35; ongoing cash generation and debt paydown remain strategic priorities .

Additional references and materials:

  • 8-K Item 2.02 furnished press release (Ex. 99.1) confirming Q2 metrics and guidance .
  • Q2 earnings slides with segment detail, tariff impacts, and securitization modeling considerations .
  • Prior quarter press releases for trend analysis (Q1 2025, Q4 2024) .