Power generation products manufacturer Regal Beloit Corp. (RBC) on Wednesday reported a 59% year-over-year drop in profit for the first quarter, hurt by lower margins as well as a 17.4% sales decline. The company also provided earnings forecast for the second quarter, which is in line with current analysts' expectations.
In a statement, chairman and chief executive officer, Henry Knueppel said, "While the first quarter proved to be as challenging as we anticipated, I am pleased with the response of our associates in delivering results consistent with our expectations. We have and will continue to take advantage of all available business opportunities and reduce costs throughout our Company while continuing to invest in high efficiency products and lean processes."
The Beloit, Wisconsin-based company reported net income of $12.79 million or $0.39 per share for the first quarter, down 59% from a restated $31.43 million or $0.95 per share in the prior-year quarter. On average, ten analysts polled by Thomson Reuters expected the company to report earnings of $0.39 per share for the first quarter.
Net sales for the quarter decreased 17.4% to $443.27 million from a restated $536.34 million in the same quarter last year, but marginally topped nine Wall Street analysts' consensus estimate of $441.62 million.
Sales for the first quarter include $29.7 million of sales attributable to the Hwada acquisition completed in April 2008, the Dutchi acquisition acquired in October 2008 and the Customer Power Technology acquisition completed on January 2009.
Sales for the electrical segment decreased 17.4% from the prior-year quarter to $391.36 million, while mechanical segment sales for the quarter totaled $51.91 million, down 17% from the corresponding quarter last year.
Income from operations for the first quarter dropped to $28.19 million from $57.61 million in the prior-year quarter, while total operating expenses was $62.38 million, down a tad from $64.49 million in the year-ago quarter.
Gross profit for the quarter was $90.57 million, down from $122.10 million in the comparable quarter a year ago, while gross profit margin declined 240 basis points to 20.4% from last year, due to higher commodity costs and the fixed cost absorption impact of lower sales volumes.
The company ended the first quarter with cash and cash equivalents of $82.08 million, compared to $50.53 million at end of the prior-year quarter.
Looking ahead to the second quarter, the company anticipates earnings in a range of $0.38 to $0.46 per share. Analysts expect the company to report earnings of $0.45 per share for the second quarter.
"As we move into the second quarter, the difficult sales environment is expected to continue. We do not believe that the normal seasonal pick up in sales will materialize and we believe that inventory liquidation by our customers will continue well into the second quarter," Knueppel added.
Last month, KeyBanc Capital downgraded Regal-Beloit shares to 'Hold' from 'Buy'. The brokerage maintained its 2009 EPS estimate of $2.35. Analyst Jeffrey Hammond downgraded the stock as risk-reward is more balanced.
RBC closed Wednesday's regular trading session at $41.29, up $0.12 or 0.29% on a volume of 0.35 million shares, lower than the three-month average volume of 0.57 million shares.
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