Analyzing Ferguson (NYSE:FERG) & Regal Rexnord (NYSE:RRX)

Regal Rexnord (NYSE:RRX) and Ferguson (NYSE:FERG) are both large-cap industrials companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, institutional ownership, valuation, dividends, risk, analyst recommendations and earnings.

Volatility & Risk

Regal Rexnord has a beta of 1.12, indicating that its stock price is 12% more volatile than the S&P 500. Comparatively, Ferguson has a beta of 1.18, indicating that its stock price is 18% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Regal Rexnord and Ferguson, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Regal Rexnord	0	3	7	0	2.70
Ferguson	0	6	11	2	2.79

Regal Rexnord presently has a consensus target price of $179.63, suggesting a potential upside of 13.09%. Ferguson has a consensus target price of $253.00, suggesting a potential upside of 0.42%. Given Regal Rexnord’s higher possible upside, analysts clearly believe Regal Rexnord is more favorable than Ferguson.

Profitability

This table compares Regal Rexnord and Ferguson’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Regal Rexnord	4.38%	9.64%	4.52%
Ferguson	6.28%	35.73%	11.82%

Dividends

Regal Rexnord pays an annual dividend of $1.40 per share and has a dividend yield of 0.9%. Ferguson pays an annual dividend of $3.56 per share and has a dividend yield of 1.4%. Regal Rexnord pays out 36.2% of its earnings in the form of a dividend. Ferguson pays out 36.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Ferguson is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares Regal Rexnord and Ferguson”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Regal Rexnord	$6.03 billion	1.75	$196.20 million	$3.87	41.04
Ferguson	$30.76 billion	1.60	$1.86 billion	$9.90	25.45

Ferguson has higher revenue and earnings than Regal Rexnord. Ferguson is trading at a lower price-to-earnings ratio than Regal Rexnord, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

99.7% of Regal Rexnord shares are held by institutional investors. Comparatively, 82.0% of Ferguson shares are held by institutional investors. 0.8% of Regal Rexnord shares are held by insiders. Comparatively, 0.2% of Ferguson shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Summary

Ferguson beats Regal Rexnord on 12 of the 17 factors compared between the two stocks.

About Regal Rexnord

Regal Rexnord Corporation manufactures and sells industrial powertrain solutions, power transmission components, electric motors and electronic controls, air moving products, and specialty electrical components and systems worldwide. The Industrial Powertrain Solutions segment provides mounted and unmounted bearings, couplings, mechanical power transmission drives and components, gearboxes, gear motors, clutches, brakes, special, and industrial powertrain components and solutions for food and beverage, bulk material handling, eCommerce/warehouse distribution, energy, mining, marine, agricultural machinery, turf and garden, and general industrial markets. The Power Efficiency Solutions segment offers AC and DC motors, electronic variable speed controls, and blowers for residential, commercial HVAC, water heaters, commercial refrigeration, commercial building ventilation, pool and spa, irrigation, agriculture, conveying, and general commercial equipment markets. The Automation and Motion Control segment provides conveyor products, conveying automation subsystems, aerospace components, rotary precision motion solutions, high-efficiency miniature motors, motion controls, automation transfer switches, and switchgear for industrial applications and automation systems for material handling, aerospace and defense, factory automation, data centers, medical device, packaging, printing, semiconductor, robotic, industrial power tool, mobile off-highway, food and beverage processing, and other applications. The Industrial Systems segment offers integral motors, alternators, and aftermarket parts and kits for agriculture, marine, mining, oil and gas, food and beverage, data centers, prime and standby power, and general industrial equipment markets. It sells its products directly to original equipment manufacturers, distributors, and end-users. The company was formerly known as Regal Beloit Corporation. The company was founded in 1955 and is based in Milwaukee, Wisconsin.

About Ferguson

Ferguson Enterprises Inc. distributes plumbing and heating products in North America. The company provides expertise, solutions, and products, including infrastructure, plumbing, appliances, fire, and fabrication, as well as heating, ventilation, and air conditioning (HVAC) to residential and non-residential customers. It also supplies specialist water and wastewater treatment products to residential, commercial, and infrastructure contractors, as well as supplies pipe, valves, and fittings solutions to industrial customers. In addition, it offers customized solutions, such as virtual design, fabrication, valve actuation, pre-assembly, kitting, installation, and project management services, as well as after-sales support that comprises warranty, credit, project-based billing, returns and maintenance, and repair and operations support. The company sells its products through a network of distribution centers, branches, counter service and specialist sales associates, showroom consultants, and e-commerce channels. Ferguson Enterprises Inc. was founded in 1953 and is headquartered in Newport News, Virginia.