Regal Rexnord shares rose 8% on Tuesday following a public disclosure by Kerrisdale Capital that it holds a long position in the industrial equipment manufacturer. The investment firm framed its position around what it describes as a strategic transformation driven by two major acquisitions and subsequent integration.
Acquisitions and market positioning
Kerrisdale emphasized Regal Rexnord’s acquisitions of Rexnord’s Process & Motion Control business for $3.7 billion in 2021 and Altra Industrial Motion for $5.1 billion in 2023. The firm said those transactions repositioned the combined company into higher-growth end markets, including data centers, industrial automation, aerospace and defense, and robotics.
Operational momentum and orders
The investor pointed to growth in the company’s switchgear business, which Kerrisdale reported has expanded at a 30% compound annual growth rate over the past five years and that it expects to double in size over the next two years. Kerrisdale also highlighted Regal Rexnord’s entry into the data-center power equipment modules market in early 2025, reporting that the business had secured $735 million in orders by the end of the fourth quarter.
Profitability and valuation
According to Kerrisdale, Regal Rexnord has seen meaningful margin improvement since 2018, with gross margins up by 11 percentage points and EBITDA margins up by 7 percentage points. The firm attributed the margin expansion to the acquisitions and integration of the combined product portfolios. Kerrisdale values the company at a market capitalization of $15 billion and notes that the stock currently trades at 11.5 times 2027 estimated EBITDA. The firm indicated upside potential, seeing the shares as able to rise 100% from current levels.
Balance sheet and investor sentiment
Kerrisdale acknowledged that the acquisitions initially increased leverage at a time of soft industrial demand, which weighed on investor sentiment. Nevertheless, the firm argued that exposure to secular growth markets should position the company for improved financial results going forward.
Summary: Kerrisdale Capital’s disclosure of a long position in Regal Rexnord coincided with an 8% stock move. The activist investor cites transformative acquisitions, notable margin expansion since 2018, strong switchgear growth and substantial early orders in data-center power equipment as the basis for its bullish view.
Key points
- Two acquisitions in 2021 and 2023 repositioned the company toward data centers, automation, aerospace and robotics.
- Switchgear grew at a 30% CAGR over the past five years and is forecast to double in two years, per Kerrisdale.
- Regal Rexnord booked $735 million in data-center power equipment orders by the end of the fourth quarter after launching the product line in early 2025.
Risks and uncertainties
- Acquisition-related debt burden raised leverage during a period of weak industrial demand, which has affected investor sentiment.
- Projected future performance and the pace of margin improvement depend on integration success and continued demand in targeted end markets.