Dj Regal Beloit Corp, Inst Holders, 2Q 2025 (Rrx)

What Happened?

A number of stocks fell in the afternoon session after an unexpectedly sharp rise in wholesale inflation fueled concerns about rising costs and their impact on corporate profits. The primary catalyst was the July 2025 Producer Price Index (PPI), a measure of inflation at the wholesale level, which jumped 0.9% against forecasts of a 0.2% rise. This represents the most significant monthly increase in over three years, pointing to mounting cost pressures for manufacturers, with tariffs cited as a key factor. This data complicates the Federal Reserve's upcoming interest rate decisions, as persistent inflation may prevent rate cuts, creating a headwind for cyclical sectors like Industrials.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Construction Machinery company Manitowoc fell 4.3%. Is now the time to buy Manitowoc? Access our full analysis report here, it’s free.
• Engineered Components and Systems company Regal Rexnord fell 4.2%. Is now the time to buy Regal Rexnord? Access our full analysis report here, it’s free.
• Energy Products and Services company FTAI Infrastructure fell 3.5%. Is now the time to buy FTAI Infrastructure? Access our full analysis report here, it’s free.
• Engineered Components and Systems company Timken fell 4.3%. Is now the time to buy Timken? Access our full analysis report here, it’s free.
• Home Construction Materials company American Woodmark fell 3.9%. Is now the time to buy American Woodmark? Access our full analysis report here, it’s free.

Zooming In On Manitowoc (MTW)

Manitowoc’s shares are very volatile and have had 26 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 6 days ago when the stock dropped 16.9% on the news that its second-quarter 2025 earnings report, as investors looked past a significant profit beat to focus on a top-line miss and weakening underlying metrics. While the crane manufacturer's adjusted earnings per share of $2.80 crushed analyst expectations, its revenue told a different story. Net sales fell 4% year-over-year to $539.5 million, missing consensus estimates. Investor concerns were likely amplified by other signs of weakness, including a 12.8% year-over-year decline in the company's order backlog to $729.3 million. Furthermore, adjusted EBITDA missed estimates by over 30%, and free cash flow worsened significantly to a loss of $73.7 million. These results suggested that despite the strong bottom-line number, the company faces headwinds from slowing demand and operational challenges.

Manitowoc is up 5.5% since the beginning of the year, but at $9.39 per share, it is still trading 29.9% below its 52-week high of $13.39 from July 2025. Investors who bought $1,000 worth of Manitowoc’s shares 5 years ago would now be looking at an investment worth $885.85.

Wall Street has set ambitious price targets for the stocks in this article. While this suggests attractive upside potential, it’s important to remain skeptical because analysts face institutional pressures that can sometimes lead to overly optimistic forecasts.

At StockStory, we look beyond the headlines with our independent analysis to determine whether these bullish calls are justified. Keeping that in mind, here are three stocks where Wall Street may be overlooking some important risks and some alternatives with better fundamentals.

Five9 (FIVN)

Consensus Price Target: $36.38 (53.3% implied return)

Started in 2001, Five9 offers software-as-a-service that makes it easier for companies to set up and efficiently run call centers to offer more tailored customer support.

Why Does FIVN Give Us Pause?

• 16.5% annual revenue growth over the last three years was slower than its software peers
• Estimated sales growth of 8.1% for the next 12 months implies demand will slow from its three-year trend
• Sky-high servicing costs result in an inferior gross margin of 55.3% that must be offset through increased usage

Five9’s stock price of $23.73 implies a valuation ratio of 1.8x forward price-to-sales. Read our free research report to see why you should think twice about including FIVN in your portfolio.

Regal Rexnord (RRX)

Consensus Price Target: $180.70 (30.1% implied return)

Headquartered in Milwaukee, Regal Rexnord provides power transmission and industrial automation products.

Why Are We Cautious About RRX?

• Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
• Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
• Low returns on capital reflect management’s struggle to allocate funds effectively, and its decreasing returns suggest its historical profit centers are aging

Regal Rexnord is trading at $138.90 per share, or 12.8x forward P/E. To fully understand why you should be careful with RRX, check out our full research report (it’s free).

ManpowerGroup (MAN)

Consensus Price Target: $49 (22.8% implied return)

Founded during the post-World War II economic boom when businesses needed temporary workers, ManpowerGroup connects millions of people to employment opportunities through its global network of staffing, recruitment, and workforce management services.

Why Do We Pass on MAN?

• Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
• Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
• Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

At $39.90 per share, ManpowerGroup trades at 11.5x forward P/E. Check out our free in-depth research report to learn more about why MAN doesn’t pass our bar.

Stocks We Like More

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return).

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.

Industrials products and automation company Regal Rexnord . 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.

Is now the time to buy RRX? Find out in our full research report (it’s free).

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
• Organic Revenue fell 1.2% year on year (-6.9% in the same quarter last year)
• Market Capitalization: $9.16 billion

StockStory’s Take

Regal Rexnord’s second quarter saw results that met Wall Street revenue expectations, with adjusted earnings per share slightly ahead of consensus. Management attributed this performance to resilience in the company’s industrial and automation segments, despite lingering headwinds in metals, mining, and rare earth magnet availability. CEO Louis Pinkham highlighted that temporary delays in higher-margin shipments, particularly in medical and defense, were offset by strong demand in residential and commercial HVAC and aerospace. The team emphasized ongoing efforts to neutralize tariff impacts and maintain stable operating margins, while acknowledging that project timing and supply constraints weighed on some segments.

Looking ahead, Regal Rexnord’s guidance reflects optimism for gradual recovery and growth, driven by backlog expansion in key segments and recent large data center wins in the Automation and Motion Control (AMC) division. Management expects order momentum to translate into higher shippable backlog, especially in late 2025 and into 2026. CFO Rob Rehard pointed to progress on cost synergies and cross-sell initiatives, stating that, “We are confident we can create value for our shareholders in 2025 and many years to come,” but cautioned that rare earth magnet sourcing and tariff mitigation remain key execution risks.

Key Insights from Management’s Remarks

Management attributed the quarter’s results to strong execution in HVAC and aerospace, offsetting supply chain and project timing issues in other segments, and highlighted cross-sell synergy progress and backlog growth as positives for future quarters.

• Rare earth magnet disruption: Temporary shortages of rare earth magnets impacted AMC’s higher-margin medical and defense shipments, forcing a brief facility shutdown and delaying revenue. Management expects to recover lost sales in the back half of the year as sourcing improves.
• Data center order momentum: The company secured a major hyperscale data center switchgear order in July, with CEO Louis Pinkham indicating the potential for several similar contracts in the coming year. This win is seen as a key growth driver for AMC and is expected to boost backlog and mix going into 2026.
• Cross-sell synergies on track: Regal Rexnord reported $120 million in cross-sell synergies through last year and is targeting an incremental $50 million this year. Management noted that the funnel for cross-sell opportunities is growing, with higher-than-average win rates and a focus on larger engineered solutions.
• HVAC and aerospace strength: Despite broader industrial softness, residential and commercial HVAC as well as aerospace performed above expectations. Residential HVAC benefited from strong volume, while aerospace continued to outpace internal forecasts, helping to offset project delays elsewhere.
• Industrial Powertrain backlog growth: The IPS segment saw healthy growth in long-cycle project orders, particularly in metals and mining, contributing to a 15% year-to-date backlog increase. Management expects this backlog to convert into sales at an accelerating rate in late 2025 and into 2026.

Drivers of Future Performance

Regal Rexnord expects near-term growth to be driven by data center orders, backlog conversion in key segments, and continued cost synergy realization, though rare earth supply and tariffs remain risks.

• Data center and automation tailwind: Management anticipates that data center project wins in AMC, along with increased automation orders in IPS, will drive low single-digit revenue growth in the back half of 2025 and help sustain momentum into 2026.
• Margin recovery dependent on supply chain: The company’s outlook for margin improvement hinges on resolving rare earth magnet shortages and normalizing costs associated with expedited sourcing. Management believes these headwinds are temporary, with most margin benefit expected in the fourth quarter and beyond.
• Tariff and macroeconomic uncertainty: While current tariffs have only modestly impacted demand, management is closely monitoring potential changes. Efforts to mitigate tariff costs and optimize global sourcing will be critical to maintaining profitability as geopolitical and macro risks persist.

Catalysts in Upcoming Quarters

In future quarters, our analyst team will closely watch (1) the ramp and monetization of large data center orders in AMC, (2) the pace of backlog conversion in IPS and its impact on sales growth, and (3) the successful mitigation of rare earth supply and tariff challenges. Execution on remaining cost synergies and evidence of margin recovery in the second half will also be key markers of progress.

Regal Rexnord currently trades at $137.95, down from $145.28 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

Stocks That Trumped Tariffs

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return).

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.

Even if a company is profitable, it doesn’t always mean it’s a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.

A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. That said, here are three profitable companies that don’t make the cut and some better opportunities instead.

Frontdoor (FTDR)

Trailing 12-Month GAAP Operating Margin: 19.2%

Established in 2018 as a spin-off from ServiceMaster Global Holdings, Frontdoor is a provider of home warranty and service plans.

Why Are We Cautious About FTDR?

• Annual revenue growth of 6.8% over the last five years was below our standards for the consumer discretionary sector
• Performance surrounding its home service plans has lagged its peers
• Projected sales growth of 8.6% for the next 12 months suggests sluggish demand

Frontdoor is trading at $54.88 per share, or 15.2x forward P/E. If you’re considering FTDR for your portfolio, see our FREE research report to learn more.

Regal Rexnord (RRX)

Trailing 12-Month GAAP Operating Margin: 11%

Headquartered in Milwaukee, Regal Rexnord provides power transmission and industrial automation products.

Why Are We Hesitant About RRX?

• Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
• Earnings per share have contracted by 3.1% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
• Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its shrinking returns suggest its past profit sources are losing steam

At $139.10 per share, Regal Rexnord trades at 12.9x forward P/E. Read our free research report to see why you should think twice about including RRX in your portfolio.

Vontier (VNT)

Trailing 12-Month GAAP Operating Margin: 18%

A spin-off of a spin-off, Vontier provides electronic products and systems to the transportation, automotive, and manufacturing sectors.

Why Are We Out on VNT?

• Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
• Free cash flow margin shrank by 7 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
• Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Vontier’s stock price of $40.55 implies a valuation ratio of 12.4x forward P/E. Dive into our free research report to see why there are better opportunities than VNT.

High-Quality Stocks for All Market Conditions

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return).

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.