RRX Q1 Earnings Call: Tariff Mitigation and Automation Momentum Drive Guidance Reaffirmation

Industrials products and automation company Regal Rexnord (NYSE: RRX). reported Q1 CY2025 results beating Wall Street’s revenue expectations, but sales fell by 8.4% year on year to $1.42 billion. Its non-GAAP profit of $2.15 per share was 17.7% above analysts’ consensus estimates.

Is now the time to buy RRX? Find out in our full research report (it’s free).

StockStory’s Take

Regal Rexnord’s first quarter results for 2025 reflected a combination of recovering end-market demand and ongoing cost initiatives. Management cited sequential improvements in orders across all business segments, with CEO Louis Pinkham noting that “all of our segments outperformed the targets we set last quarter.” Pinkham also highlighted the company’s ability to generate $86 million in free cash flow in a seasonally weak quarter, attributing this to operational discipline and progress on synergy targets.

Looking ahead, the company reaffirmed its full-year adjusted EPS guidance, despite persistent macroeconomic uncertainty and evolving U.S. trade policy. Management acknowledged the heightened uncertainty from tariffs, yet CFO Rob Rehard stated, “We expect our mitigation actions to fully neutralize current tariff impacts on our 2025 EBITDA and earnings.” The leadership team emphasized ongoing execution of supply chain realignments and pricing actions as key levers to offset tariff-related cost pressures.

Key Insights from Management’s Remarks

Regal Rexnord’s management discussed several key themes on the earnings call, focusing on operational resilience, strategic positioning, and segment-specific performance.

• Orders Momentum Across Segments: Management observed continued positive order trends, particularly in Industrial Powertrain Solutions (IPS), where orders grew nearly 9%, and Automation & Motion Control (AMC), supported by larger long-cycle project wins.
• Humanoid Robot Market Entry: The company spotlighted its expanding presence in the humanoid robotics sector, leveraging its automation portfolio to secure recent solution sales and accumulate a $100 million opportunity pipeline. CEO Louis Pinkham referenced wins with leading manufacturers worth over $20 million annually, set to ramp up over the next 12 to 18 months.
• Tariff Mitigation Strategy: Regal Rexnord is implementing a combination of supply chain realignments, production relocations, and pricing adjustments to offset the $130 million gross impact from recently expanded tariffs. Management expects these actions to achieve EBITDA neutrality by mid-2026.
• Cost Synergies Realization: The company achieved $18 million in cost synergies during the quarter—one-third of its full-year target. These efforts contributed to margin expansion and are expected to continue driving profitability through ongoing integration initiatives.
• Segment-Specific Growth Drivers: Residential HVAC within Power Efficiency Solutions (PES) saw nearly 30% growth, attributed to a strong furnace season and some pre-tariff buying. Discrete automation in AMC returned to growth after seven quarters, signaling a positive shift in end-market demand.

Drivers of Future Performance

Management’s outlook for the remainder of 2025 centers on order backlog, successful tariff mitigation, and further growth in automation, while recognizing macroeconomic and policy uncertainties.

• Tariff Impact and Mitigation: The company’s ability to offset higher input costs from tariffs through supply chain realignment, production moves, and selective pricing will be critical to maintaining profit margins.
• Automation and Robotics Expansion: Growth in the automation and humanoid robotics markets is expected to contribute significantly to future revenue, supported by new solution sales and a growing project opportunity funnel.
• End-Market Recovery and Backlog: The visibility provided by strong backlogs in AMC and IPS, especially in long-cycle projects, underpins management’s confidence in achieving flat or modest growth, despite anticipated headwinds in segments like Residential HVAC and weaker demand outside North America.

Top Analyst Questions

• Mike Halloran (Baird): Asked about the balance of long-cycle versus short-cycle business momentum. Management highlighted strong long-cycle project wins, especially in IPS, and stable trends in short-cycle segments.
• Julian Mitchell (Barclays): Inquired about the step-up in EBITDA margins for the second half of the year. Management cited product mix improvements and the recovery of discrete automation as key drivers.
• Jeff Hammond (KeyBanc): Sought more detail on the breakdown of tariff mitigation actions. Management prioritized supply base realignments and production relocations over pricing, but confirmed all methods would be used.
• Kyle Menges (Citi): Asked if strong orders in certain segments were driven by pre-tariff buying. Management attributed some prebuying to Residential HVAC, but indicated IPS order strength was mainly due to longer-cycle projects.
• Christopher Glynn (Oppenheimer): Queried about tariff-related share gain opportunities. Management noted active negotiations with customers and highlighted the company’s in-region, for-region sourcing as a competitive advantage.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team is monitoring (1) the pace and scale of tariff mitigation execution, especially as new trade policies evolve; (2) sustained order growth and backlog conversion in automation and industrial powertrain segments; and (3) the commercialization progress of humanoid robotics solutions. Successful synergy capture and further debt reduction will also be important milestones for tracking Regal Rexnord’s strategy execution.

Regal Rexnord currently trades at a forward P/E ratio of 14×. Should you double down or take your chips? Find out in our free research report.

Stocks That Trumped Tariffs in 2018

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.