Regal Rexnord NYSE: RRX reported second-quarter results marked by higher orders, organic sales growth and continued momentum in data center, automation and energy-related markets, while lowering certain segment outlooks amid inflation, pricing lags and weakness in residential HVAC and pool markets.
The company also introduced Aamir Paul on his first earnings call as chief executive officer. Paul, who joined Regal Rexnord on July 1, said his initial focus has been listening to employees, customers, channel partners, suppliers and investors. He previously held leadership roles at Dell Technologies and Schneider Electric.
“I came to Regal Rexnord because I see tremendous opportunities across the company’s portfolio, strong channel positions, manufacturing scale, and healthy balance sheet,” Paul said. He cited factory automation, aerospace and defense, air moving, robotics, eVTOL and data centers as attractive areas for the company.
Orders and Sales Rise
Daily orders increased 8.8% from the prior-year period during the second quarter, or 8.1% excluding data center activity, according to Chief Financial Officer Rob Rehard. Orders excluding the company’s consumer-oriented residential HVAC and pool businesses rose at a low-double-digit rate.
Enterprise sales increased 4.2% year over year, including 3.3% organic growth. Excluding residential HVAC and pool, sales rose 6.1%. Rehard said growth was broad-based, with notable strength in data centers, commercial HVAC, discrete automation and energy markets.
Adjusted gross margin was 39.8%, or 37.8% excluding $32 million in IEEPA tariff refunds recorded during the quarter. Adjusted EBITDA margin was 23.5%, or 21.5% excluding the refunds. Adjusted earnings per share totaled $2.99, or $2.60 excluding the refund benefit. The latter figure represented 5% adjusted earnings growth from the prior year, Rehard said.
Adjusted free cash flow was $154 million, improving sequentially on higher EBITDA, lower interest costs and normal seasonality. Rehard noted that second-quarter 2025 cash flow had benefited from $369 million of proceeds from the company’s accounts-receivable securitization program.
Automation & Motion Control Leads Growth
Automation & Motion Control, or AMC, posted 15.6% organic sales growth in the second quarter. The segment benefited from data center, discrete automation, aerospace and defense demand. Orders rose 17.1%, or 15% excluding data center, while book-to-bill was 1.02.
AMC adjusted EBITDA margin was 21.1%, or 19.9% excluding tariff refunds. Rehard said volume gains were partly offset by growth investments. He added that nearly half of AMC’s first-half order growth was tied to longer-cycle projects and blanket orders expected to support revenue in 2027 and, in some cases, 2028.
The company expects AMC sales to be modestly lower sequentially in the third quarter because certain project activity moved out of the period, with some shifting into the second quarter and some into the fourth quarter. Regal Rexnord expects $15 million of ePOD revenue in the fourth quarter. The company’s new ePOD production facility is nearing completion and is expected to be ready to support customer production schedules.
Management maintained its prior estimate that ePODs could carry an approximately 20% margin profile, though Rehard said the company has not yet produced an ePOD. Paul said the business was developed in response to customer demand for modular data-center infrastructure that can accelerate “time to power.”
IPS and PES Face Uneven Markets
Industrial Powertrain Solutions, or IPS, recorded 2% organic sales growth, led by energy markets and power generation activity associated with data centers. Machinery off-highway markets, including agriculture, were an area of weakness.
IPS daily orders rose 6.7%, with distributor-channel orders up 8%, short-cycle OEM orders up 4% and large-project orders up 8%. Its book-to-bill ratio was 1.06. Rehard said large project wins in metals and mining helped lift the segment’s shippable 2027 backlog by more than 20% compared with the level of its 2026 shippable backlog at the same time last year.
Power Efficiency Solutions, or PES, saw organic sales decline 6.6% as residential HVAC and pool markets remained weak. Management attributed residential HVAC softness to housing conditions, consumer confidence and remaining pockets of elevated channel inventory. Commercial HVAC remained a source of strength, aided by data-center construction and regional growth initiatives.
PES daily orders rose 3.5% in the second quarter, as commercial HVAC strength was largely offset by residential HVAC and pool weakness. The segment’s adjusted EBITDA margin was 20.5%, or 16.2% excluding tariff refunds.
Guidance Holds on Sales and EPS, While Margin Outlook Declines
Regal Rexnord maintained its 2026 sales outlook of $6.2 billion and 4.5% growth. The outlook now assumes stronger AMC growth but weaker contributions from IPS and PES.
The company expects adjusted EBITDA margin of 22.1% for the full year, or 21.3% excluding tariff refunds. The lower ex-refund margin outlook reflects a longer timeline for productivity savings, price realization lagging inflation and revised segment mix assumptions.
Management now expects $48 million of tariff-refund benefits to EBITDA, or $0.57 per share, for the year. This includes $32 million recognized in the second quarter and $8 million expected in each of the final two quarters.
Adjusted EPS guidance was narrowed to $10.35 to $10.85, with an unchanged midpoint of $10.60. Free-cash-flow guidance was lowered by $50 million to $600 million, primarily because higher growth in AMC is expected to require additional working-capital investment.
Rehard said the company expects net debt leverage to fall below three times during the second half of 2026.
About Regal Rexnord (NYSE:RRX)
Regal Rexnord Corporation NYSE: RRX is a global industrial manufacturer specializing in electric motors, power generation equipment and automated motion control systems. The company designs, engineers and produces a broad portfolio of products that includes energy-efficient electric motors, variable frequency drives, gearboxes, couplings, bearings and power transmission components. These offerings support critical applications in industries such as heating, ventilation and air conditioning (HVAC), refrigeration, data centers, water treatment, food and beverage processing, mining, oil and gas, and material handling.
The company's operations are organized into multiple business segments that address distinct customer needs.
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