Industrials products and automation company Regal Rexnord (NYSE: RRX) missed Wall Street’s revenue expectations in Q2 CY2026 as sales rose 4.2% year on year to $1.56 billion. Its non-GAAP profit of $2.99 per share was 15.7% above analysts’ consensus estimates.

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Company Overview

Headquartered in Milwaukee, Regal Rexnord (NYSE: RRX) provides power transmission and industrial automation products.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, Regal Rexnord’s sales grew at an excellent 13.3% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Regal Rexnord’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 2.4% over the last two years.

We can dig further into the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Regal Rexnord’s organic revenue was flat. Because this number is better than its two-year revenue growth, we can see that some mixture of divestitures and foreign exchange rates dampened its headline results.

This quarter, Regal Rexnord’s revenue grew by 4.2% year on year to $1.56 billion, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 9.4% over the next 12 months, an improvement versus the last two years. This projection is noteworthy and suggests its newer products and services will spur better top-line performance.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses — everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Regal Rexnord has managed its cost base well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 10.1%. This result isn’t too surprising as its gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Regal Rexnord’s operating margin rose by 1 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q2, Regal Rexnord generated an operating margin profit margin of 13.8%, up 1.6 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth — for example, a company could inflate its sales through excessive spending on advertising and promotions.

Regal Rexnord’s EPS grew at an unimpressive 5.6% compounded annual growth rate over the last five years, lower than its 13.3% annualized revenue growth. However, its operating margin actually improved during this time, telling us that non-fundamental factors such as interest expenses and taxes affected its ultimate earnings.

We can take a deeper look into Regal Rexnord’s earnings to better understand the drivers of its performance. A five-year view shows Regal Rexnord has diluted its shareholders, growing its share count by 63.2%. This dilution overshadowed its increased operational efficiency and has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Regal Rexnord, its two-year annual EPS growth of 8.4% was higher than its five-year trend. Accelerating earnings growth is almost always an encouraging data point.

In Q2, Regal Rexnord reported adjusted EPS of $2.99, up from $2.48 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Regal Rexnord’s full-year EPS to grow 18.6% from $10.18 to $12.08.

Key Takeaways from Regal Rexnord’s Q2 Results

We were impressed by how significantly Regal Rexnord blew past analysts’ EBITDA expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its revenue slightly missed and its organic revenue fell slightly short of Wall Street’s estimates. Zooming out, we think this was a mixed quarter. Investors were likely hoping for more, and shares traded down 8.1% to $202.26 immediately following the results.

Should you buy the stock or not? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).