Regal Rexnord 2Q First Take: A Beat You Can’t Bank On: Strong AMC, Weaker Core Outlook

Research evidence excerpt

J P M O R G A N

North America Equity Research

05 August 2026

Regal Rexnord

2Q First Take: A Beat You Can’t Bank On: Strong AMC,

Weaker Core Outlook

Regal Rexnord's 2Q26 results were roughly in line with expectations, excluding

IEEPA tariff refunds, with AMC revenue, orders, and margins the clear bright spot,

offset by inflation, unfavorable mix, and rare-earth headwinds. Management held

2026 adjusted EPS guidance at the $10.60 midpoint despite the headline beat, but

lowered ex-IEEPA segment outlook across the board (except for AMC revenue

raise), implying softer core earnings power. The setup echoes recent years:

productivity benefits pushed out, price realization lagging inflation, and mix

pressure. We expect shares to trade lower on the print, as ex-IEEPA guidance

underwhelmed, though strong order momentum could limit downside and support

sentiment into the second half.

AMC Drives, but Refunds Polish the Beat: RRX reported 2Q adjusted EPS

of $2.99 (vs. consensus $2.58) and net sales of $1,558M (vs. consensus

$1,578M), supported by ~3.3% organic YoY growth. AMC beat expectations

with $478M revenue, up 15.6% organically. That strength was offset by misses

in PES at $411M, down ~6.6% organically on Resi-HVAC and pool weakness,

and IPS at $669M, up 2.0% organically. Adjusted EBITDA was $367M (vs.

consensus $339M), with margin up ~150bps to 23.5%, and, ex-$32M refund,

margin was 21.5% and adj. EBITDA missed consensus.

Cash Flow Normalizes; Sub-3x Leverage in Sight: RRX generated

operating cash flow of $177M (vs. $523M in 2Q25, which included $369M of

A/R securitization proceeds) and free cash flow (FCF) of $154M (vs. $493M

in 2Q25). FCF equated to ~9.9% of sales and ~77% conversion of adjusted net

income, with capex of $23M (vs. $30M in 2Q25). Net debt was $4,170M, and

net leverage (including synergies) ended the quarter at 3.06x. Management

expects leverage to move below 3.0x in 2H26, supported by continued cash

generation and balance-sheet focus.

Midpoint Held: Core Earnings Power Softens: Management narrowed

2026 adjusted EPS guidance to $10.35-$10.85, holding the $10.60 midpoint,

and now embeds $0.57 of IEEPA refund benefits, implying a lower core

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