Regal Rexnord Corporation (RRX): A Bull Case Theory

We came across a bullish thesis on Regal Rexnord Corporation on Valueinvestorsclub.com by Highwind. In this article, we will summarize the bulls’ thesis on RRX. Regal Rexnord Corporation's share was trading at $143.37 as of December 2nd. RRX’s trailing and forward P/E were 37.47 and 13.46 respectively according to Yahoo Finance.

Regal Rexnord Corporation (RRX) is a diversified powertrain and automation solutions leader serving industrial, HVAC, aerospace, food & beverage, and automation markets. The company operates through three segments—Automation & Motion Control (AMC), Industrial Powertrain Solutions (IPS), and Power Efficiency Systems (PES). It has transformed from a cyclical motor manufacturer into a high-margin automation and powertrain platform.

Following years of restructuring, product pruning, and the 2024 acquisition of Altra Industrial Motion, Regal is now positioned to demonstrate its true earnings power as industrial markets recover. With EBITDA margins improving to 22% and leverage trending toward 3.5x, the company’s balance sheet is strengthening, and free cash flow generation remains robust, exceeding $1B, including its recent $400M A/R securitization.

The AMC segment, driven by automation and robotics, is the growth engine with mid- to high-single-digit expansion potential and higher margins than the group average. RRX also holds asymmetric optionality in emerging markets such as humanoid robotics and advanced air mobility, where it supplies critical mechanical and motion components and has early partnerships with Honeywell and ABB Robotics.

Though these opportunities remain nascent, they underscore Regal’s strategic positioning in long-duration growth themes without incremental capital needs. Near-term, the market’s concerns about leverage and weak industrial demand have overshadowed the company’s structural improvements, creating a compelling entry point. As end-market activity rebounds, RRX’s margin expansion and earnings recovery should drive multiple re-rating toward historical levels (~20x P/E), implying 60–70% upside to ~$240 per share. Catalysts include industrial production recovery, improved operating leverage, and validation of its emerging automation opportunities.

Previously we covered a bullish thesis on AMETEK, Inc. (AME) by An Investing Life in March 2025, which highlighted the company’s leadership in electronic instruments, recurring revenue, disciplined acquisitions, and strong free cash flow. The stock has appreciated by 12% since our coverage. The thesis still stands. Highwind shares a similar perspective but emphasizes Regal Rexnord’s automation transformation, robotics exposure, and re-rating potential.

Regal Rexnord Corporation is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 43 hedge fund portfolios held RRX at the end of the second quarter which was 38 in the previous quarter. While we acknowledge the potential of RRX as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.