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Why Regal Beloit Shares Got Crushed

By Brian D. Pacampara, CFA – May 1, 2013 at 2:54PM

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Is this meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of electric motor manufacturer Regal Beloit (RBC -0.11%) plummeted 19% today after its quarterly results and guidance missed Wall Street expectations.

So what: The stock has soared over the past year on improving profitability, but today's first-quarter results -- EPS fell 6% while revenue slipped 4% -- coupled with downbeat guidance is forcing Mr. Market to sober up. While the company managed to maintain operating margins, weaker-than-expected demand in the U.S. commercial and industrial market is weighing on revenue, triggering plenty of nervousness about its operating environment going forward.

Now what: Management now sees second-quarter adjusted EPS of $1.19-$1.27, well below Wall Street's view of $1.61. "As we look to the second quarter, sluggish demand in our North American commercial and industrial markets is impacting both our electrical and mechanical segments," Chairman and CEO Mark Glieve cautioned. "To a lesser extent, we are anticipating unfavorable market dynamics in the HVAC channel." Of course, with the stock now off about 30% from its 52-week highs and trading at a P/E in the low teens, those headwinds might finally be baked into the valuation.  

Motley Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Regal Beloit Corporation Stock Quote
Regal Beloit Corporation
$140.36 (-0.11%) $0.15

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