Financial Analysis: Regal Beloit (RBC) vs. AZZ (AZZ)

Regal Beloit (NYSE: RBC) and AZZ (NYSE:AZZ) are both industrial products companies, but which is the superior business? We will compare the two companies based on the strength of their institutional ownership, earnings, profitability, analyst recommendations, dividends, valuation and risk.

Institutional and Insider Ownership

93.8% of Regal Beloit shares are owned by institutional investors. Comparatively, 88.0% of AZZ shares are owned by institutional investors. 2.2% of Regal Beloit shares are owned by company insiders. Comparatively, 0.0% of AZZ shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Dividends

Regal Beloit pays an annual dividend of $1.04 per share and has a dividend yield of 1.3%. AZZ pays an annual dividend of $0.68 per share and has a dividend yield of 1.3%. Regal Beloit pays out 22.6% of its earnings in the form of a dividend. AZZ pays out 34.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Regal Beloit has increased its dividend for 7 consecutive years and AZZ has increased its dividend for 3 consecutive years. Regal Beloit is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings & Valuation

This table compares Regal Beloit and AZZ’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Regal Beloit $3.22 billion 1.06 $203.40 million $4.60 16.83
AZZ $858.93 million 1.56 $60.92 million $1.97 26.14

Regal Beloit has higher revenue and earnings than AZZ. Regal Beloit is trading at a lower price-to-earnings ratio than AZZ, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of recent ratings for Regal Beloit and AZZ, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Regal Beloit 0 5 5 0 2.50
AZZ 0 1 0 0 2.00

Regal Beloit presently has a consensus target price of $86.63, indicating a potential upside of 11.92%. AZZ has a consensus target price of $52.00, indicating a potential upside of 0.97%. Given Regal Beloit’s stronger consensus rating and higher possible upside, equities analysts plainly believe Regal Beloit is more favorable than AZZ.

Profitability

This table compares Regal Beloit and AZZ’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Regal Beloit 6.28% 9.76% 4.84%
AZZ 6.27% 9.65% 5.13%

Volatility and Risk

Regal Beloit has a beta of 1.48, meaning that its share price is 48% more volatile than the S&P 500. Comparatively, AZZ has a beta of 1.55, meaning that its share price is 55% more volatile than the S&P 500.

Summary

Regal Beloit beats AZZ on 13 of the 17 factors compared between the two stocks.

About Regal Beloit

Regal Beloit Corporation is a manufacturer of electric motors, electrical motion controls, power generation and power transmission products. The Company operates through three segments: the Commercial and Industrial Systems segment, with its principal line of business in medium and large electric motors, power generation products, high-performance drives and controls and capacitors; the Climate Solutions segment, with its principal line of business in small motors, controls and air moving products, and the Power Transmission Solutions segment, with its principal line of business in power transmission gearing, hydraulic pump drives, open gearing and specialty mechanical products which control motion and torque. It sells its products directly to original equipment manufacturers (OEMs), distributors and end users. It operates distribution facilities in Plainfield, Indiana; McAllen, Texas; LaVergne, Tennessee, and Florence, Kentucky.

About AZZ

AZZ Inc. is a provider of galvanizing services, welding solutions, specialty electrical equipment and engineered services to the power generation, transmission, distribution, refining and industrial markets. The Company operates through two segments: Energy segment and Galvanizing segment. Its Energy segment provides products and services designed to support industrial, nuclear and electrical applications. Its product offerings include custom switchgear, electrical enclosures, medium and high voltage bus ducts, explosion proof and hazardous duty lighting, nuclear safety-related equipment and tubular products. Its Galvanizing segment provides hot dip galvanizing to the steel fabrication industry through facilities located throughout the United States and Canada. It serves fabricators or manufacturers that provide services to the electrical and telecommunications, bridge and highway, petrochemical and general industrial markets and various original equipment manufacturers.

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