Regal Rexnord Corporation

Second-quarter sales were up 4.2% year over year, and up 3.3% on an organic basis; excluding residential HVAC and pool, sales were up 6.1%. Adjusted gross margin was 39.8%, or 37.8% excluding the $32 million of IEEPA tariff refunds recorded in the quarter. Adjusted EBITDA margin was 23.5%, or 21.5% excluding refunds. Adjusted EPS was $2.99, or $2.60 excluding the refund benefit, which management said equated to 5% adjusted earnings growth ex-refunds. Adjusted free cash flow was $154 million. For 2026, sales guidance remains $6.2 billion and adjusted EPS midpoint remains $10.60, with the range narrowed to $10.35 to $10.85. Adjusted EBITDA margin is now expected to be 22.1% for the year, or 21.3% excluding refunds. Full-year cash flow guidance was lowered to $600 million from the prior target, and the company expects $48 million of refund benefits to EBITDA, or $0.57 per share.

Aamir Paul used the call to set an early tone around listening, integration, and execution. He said he sees Regal Rexnord as a company with strong channels, manufacturing scale, trusted brands, and exposure to attractive end markets such as factory automation, aerospace and defense, data center, robotics, and eVTOL. He emphasized that his near-term priority is to learn from customers, employees, and partners, while continuing to build “one Regal Rexnord” and improve cross-selling and operational alignment.

Rob Rehard said the quarter was solid operationally, with orders up 8.8% daily and sales up 4.2% year over year. He pointed to margin pressure from inflation, tariffs, rare earth magnets, and mix, partly offset by volume leverage and synergies, while noting adjusted free cash flow of $154 million benefited from higher EBITDA, lower interest costs, and seasonality. On guidance, he said the company now expects $48 million of tariff refunds in 2026, sales of $6.2 billion, adjusted EBITDA margin of 22.1% (21.3% excluding refunds), and cash flow of $600 million, with leverage expected to fall below 3x in the second half.

Analysts focused on the gap between strong orders and slower revenue conversion, and management said much of the lag is timing, especially in IPS projects that should benefit 2027. Questions also centered on service levels, and management said they are not seeing declining service levels; rather, they are slowing some productivity actions to protect service. Analysts pressed on ePOD, data center switchgear, price/cost, and rare earth supply; management said the ePOD facility is nearly ready, switchgear remains on track at about $180 million this year moving to roughly $240 million to $250 million next year, price increases are being implemented, and commercial rare earth sourcing should be mostly mitigated within the quarter while defense approvals remain slower.