What Happened?

Shares of industrials products and automation company Regal Rexnord (NYSE: RRX). jumped 6.7% in the pre-market session after the company reported mixed fourth-quarter results, where a slight earnings beat seemed to overshadow misses on revenue and guidance. 

The company posted an adjusted profit of $2.51 per share, which was just above Wall Street's expectation of $2.48. However, revenue for the quarter came in at $1.52 billion, falling short of the $1.54 billion consensus estimate. Looking ahead, Regal Rexnord provided full-year adjusted EPS guidance with a midpoint of $10.60, which was also slightly below analyst forecasts. Despite the weaker top-line results and cautious outlook, investors may have focused on positive aspects such as the year-over-year expansion in the company's operating margin, which grew from 8.8% to 10.8%.

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What Is The Market Telling Us

Regal Rexnord’s shares are somewhat volatile and have had 14 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 28 days ago when the stock gained 3.5% on the news that markets rotated out of tech names to position themselves for a massive injection of government spending. 

The sector was ignited by President Trump's call for a $1.5 trillion defense budget for 2027, a significant increase that sent defense contractors surging. Northrop Grumman jumped over 10% and Lockheed Martin gained nearly 8%, acting as the primary engine for the sector's outperformance. Beyond the immediate defense rally, the industrial sector benefited from a broader stabilization in energy costs, with crude prices rebounding. This combination of policy-driven demand and stabilizing input costs made heavy industry an attractive destination.

Regal Rexnord is up 39.6% since the beginning of the year, and at $203.90 per share, has set a new 52-week high. Investors who bought $1,000 worth of Regal Rexnord’s shares 5 years ago would now be looking at an investment worth $1,552.

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