Key Takeaways:
Regal Rexnord Corp. surged 8.3% to $238.19 after Kerrisdale Capital revealed a long position, citing the company's exposure to data centers and robotics as undervalued growth drivers.
"Despite an impressive strategic and financial transformation and exposure to a wealth of popular secular growth drivers, Regal is one of the cheapest industrial stocks in the market today," Kerrisdale Capital wrote in a June 30 report. "Where's the love? A sum-of-the-parts analysis to properly match segment growth profile to valuation multiple yields 81% upside in Regal shares."
The stock touched $239.00 during the session, approaching its 52-week high. Volume exceeded the 20-day average as the move pushed the company's year-to-date gain past 70%. Kerrisdale's analysis values Regal at 11.5 times anticipated 2027 EBITDA, with the firm arguing the valuation gap versus peers RBC Bearings and Parker-Hannifin has widened even as share prices have risen.
The rally positions Regal as a direct beneficiary of the data center buildout, a theme that has driven multiple expansion across industrial suppliers. The company reports fiscal second-quarter earnings in the coming weeks, with analysts projecting revenue of $1.58 billion, up 5.4% year over year, and EPS of $2.60, a 4.8% increase.
Kerrisdale's thesis centers on two growth engines. The Automation & Motion Control segment benefits from strength in data center infrastructure and discrete automation, while the Industrial Powertrain Solutions unit is seeing recovery in food and beverage markets. Robotics exposure — motors and linear motion products used in conveyor systems and warehouse automation — accounts for 21% of total revenue, according to the firm.
The stock trades at 55.4 times trailing earnings, well above its five-year median of 30.3 times, though the forward multiple of 22.4 times reflects expectations of accelerating earnings growth. Consensus estimates for the upcoming quarter have been revised marginally higher over the past 30 days, according to Zacks data.
Insiders sold $8.3 million worth of shares over the past three months with no buying recorded, according to GuruFocus data, a signal that may temper enthusiasm around the rally.
The 8.3% gain puts Regal among the best-performing industrial stocks on the session. The next catalyst for the stock will be the company's quarterly earnings report, where investors will look for evidence that data center and automation momentum is translating into margin expansion.
This article is for informational purposes only and does not constitute investment advice.
