Rexnord To Exit Product Line, Expects To Deliver Full Year Adjusted EPS Above Estimations

Rexnord Corporation RXN revealed its decision to exit a product line in its Water Management platform and the contribution of this product line to consolidated operating results in its fourth quarter and full year. Rexnord said that as it became clear in the fourth quarter that efforts to transition the RHF flow control gate operations to a less-vertically-integrated operating model would not deliver acceptable near-term and longer-term returns, it decided to exit this product line. The company's President and CEO, Todd Adams, said that "We would like to thank our dedicated employees for their efforts to develop a sustainable model for RHF going forward, but we are convinced that the planned exit from this non-strategic product line will be in the best interest of Rexnord's shareholders. In order to provide investors with a more representative view of our operating results, we intend to exclude RHF results from our reporting of year-over-year core growth rates, Adjusted EBITDA, and Adjusted Earnings per Share and from our guidance going forward." Rexnord indicated that its original guidance for the fourth quarter included related RHF revenue and Adjusted EBITDA of approximately $14 million and $0, respectively. The company added that its preliminary RHF operating results for the quarter included related revenue of about $7 million and a loss of approximately $10 million of Adjusted EBITDA. The company stated that after excluding RHF results from its full-year operating results it now expects core growth of about minus -3% and adjusted EPS in $1.45-1.46 range for the fiscal year 2016. Street expects $1.40 a share. However, Rexnord expects adjusted earnings of $0.35 - $0.36 a share for the fourth quarter on revenues of about $492 million, which included shortfall of RHF revenue. Analysts project the company to deliver earnings of $0.37 a share and revenue of $503.97 million. On Monday, the stock traded 3% down.