Head-To-Head Survey: Regal Rexnord (NYSE:RRX) and Illinois Tool Works (NYSE:ITW)

Regal Rexnord (NYSE:RRX) and Illinois Tool Works (NYSE:ITW) are both industrials companies, but which is the better investment? We will contrast the two companies based on the strength of their valuation, analyst recommendations, profitability, dividends, earnings, risk and institutional ownership.

Earnings & Valuation

This table compares Regal Rexnord and Illinois Tool Works”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Regal Rexnord	$6.03 billion	1.57	$196.20 million	$3.87	36.97
Illinois Tool Works	$15.90 billion	4.59	$3.49 billion	$10.31	24.41

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

Analyst Recommendations

This is a breakdown of current ratings for Regal Rexnord and Illinois Tool Works, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Regal Rexnord	1	2	7	0	2.60
Illinois Tool Works	4	7	2	0	1.85

Regal Rexnord presently has a consensus price target of $179.63, indicating a potential upside of 25.55%. Illinois Tool Works has a consensus price target of $259.25, indicating a potential upside of 3.01%. Given Regal Rexnord’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Regal Rexnord is more favorable than Illinois Tool Works.

Dividends

Regal Rexnord pays an annual dividend of $1.40 per share and has a dividend yield of 1.0%. Illinois Tool Works pays an annual dividend of $6.44 per share and has a dividend yield of 2.6%. Regal Rexnord pays out 36.2% of its earnings in the form of a dividend. Illinois Tool Works pays out 62.5% 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. Illinois Tool Works has increased its dividend for 55 consecutive years. Illinois Tool Works is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk & Volatility

Regal Rexnord has a beta of 1.11, indicating that its share price is 11% more volatile than the S&P 500. Comparatively, Illinois Tool Works has a beta of 1.14, indicating that its share price is 14% more volatile than the S&P 500.

Profitability

This table compares Regal Rexnord and Illinois Tool Works’ 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%
Illinois Tool Works	19.05%	93.26%	19.30%

Institutional and Insider Ownership

99.7% of Regal Rexnord shares are held by institutional investors. Comparatively, 79.8% of Illinois Tool Works shares are held by institutional investors. 0.8% of Regal Rexnord shares are held by company insiders. Comparatively, 0.9% of Illinois Tool Works shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Summary

Illinois Tool Works beats Regal Rexnord on 11 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 Illinois Tool Works

Illinois Tool Works Inc. manufactures and sells industrial products and equipment in the United States and internationally. It operates through seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products. The Automotive OEM segment offers plastic and metal components, fasteners, and assemblies for automobiles, light trucks, and other industrial uses. The Food Equipment segment provides warewashing, refrigeration, cooking, and food processing equipment; kitchen exhaust, ventilation, and pollution control systems; and food equipment maintenance and repair services. The Test & Measurement and Electronics segment produces and sells equipment, consumables, and related software for testing and measuring of materials and structures, as well as equipment and consumables used in the production of electronic subassemblies and microelectronics. The Welding segment produces arc welding equipment; and metal arc welding consumables and related accessories. The Polymers & Fluids segment produces adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for auto aftermarket maintenance and appearance. The Construction Products segment offers engineered fastening systems and solutions for the residential construction, renovation/remodel, and commercial construction markets. The Specialty Products segment provides beverage packaging equipment and consumables, product coding and marking equipment and consumables, and appliance components and fasteners. It serves the automotive OEM and tiers, MRO, commercial food equipment, construction, general industrial, industrial capital goods, consumer durables, automotive aftermarket end, and other markets. The company distributes its products directly to industrial manufacturers, as well as through independent distributors. Illinois Tool Works Inc. was founded in 1912 and is based in Glenview, Illinois.