Morgan Stanley on Regal-Beloit: "The Danger of Trying To Catch A Falling Knife"

Morgan Stanley's Nigel Coe downgraded

from Overweight to Equal Weight while decreasing the price target from $65.00 to $62.00. The analyst rating change came in response to the company's "sizeable" 1Q16 miss and "downward revision" to FY16 guidance. Seasonality is among the analyst's major concerns as "RBC's climate sales have been heavily impacted by the unseasonably warm winter." In addition, industrial weakness in the US and China "suggest caution is still warranted."

"The -13% organic decline, by far the sharpest under coverage this quarter… is suggestive of structural pressures either at the market or company level" Coe explained. Past performance and Rregal-Beloit's "aggressive" FY16 plan raised doubt on whether RBC share price can fully recover. Due to these concerns, Morgan Stanley cut its 2016 estimates for EPS from $4.93 to $4.51.