Should Rexnord Corporation (RXN) Be in Your Portfolio Now?

On May 23, 2016, Zacks Investment Research downgraded Rexnord Corporation RXN to a Zacks Rank #3 (Hold) from a Zacks Rank #2 (Buy). Going by the Zacks model, companies carrying a Zacks Rank #3 have chances of performing in line with the broader market over the upcoming quarters.

Why Down to Hold?

Rexnord Corporation offers its services in the global construction, general industrial, mining and aerospace markets. Activities in these markets are largely influenced by the economic health of the country or the global market at large. Therefore, any downturn in one or more of these markets could unfavorably impact the company's business. Moreover, Rexnord Corporation's huge international presence exposes it to risks associated with negative foreign currency translation and geo-political issues. For instance, the strengthening U.S. dollar is currently weighing on the company's foreign revenues and margins. At the same time, extensive business rivalry within the industry raises concerns of market share loss going forward.  

However, we note certain optimistic aspects of this Zacks Rank #3 (Hold) stock. Growing demand for clean water, water infrastructure and non-residential construction market services are expected to boost the company's top line and bottom line in the near future. Also, the company's newly launched supply-chain optimization and footprint-repositioning program are expected to enhance margins in the upcoming quarters.

Other Stocks to Consider

Some better-ranked stocks in the industry include Eaton Corporation plc ETN, ESCO Technologies Inc. ESE and Powell Industries, Inc. POWL. All the companies presently hold a Zacks Rank #2 (Buy).

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