TimesSquare Capital Management, LLC on Regal Rexnord Corporation
Thesis
TimesSquare modestly added back to Regal Rexnord after concluding that the stock’s sharp decline was overly punitive. The company provides motion control, climate solutions and other mechanical components to diverse end markets. Reported results beat consensus only because of IEEPA tariff refunds, while underlying revenues and earnings were slightly below expectations. Residential HVAC and pool-pump demand was soft and input-cost inflation squeezed margins, prompting reduced guidance. However, accelerating order growth supports the manager’s view that the operating deterioration is not fully reflected in the company’s future opportunity.
“an overly punitive stock price reaction led us to modestly add back to our position”
Key risks
- Underlying revenues and earnings missed consensus estimates after removing tariff refunds.
- Residential HVAC and pool-pump demand is weak.
- Input-cost inflation is pressuring margins in two segments.
- Management reduced forward guidance.