On Jul 19, 2013, we initiated coverage on
RBC Bearings Incorporated
) with a Neutral recommendation. Based in Oxford, Connecticut,
RBC Bearings manufacturers and distributes plain, roller and ball
RBC Bearings achieves a significant portion of its revenues
from the aircraft industry, with the segment generating 52% of
total revenue in fiscal 2013. The advancements in the commercial
aircraft industry in fiscal 2013 are expected to be accretive to
RBC Bearings' revenues.
For a company like RBC Bearings, backlog plays a very crucial
role. As on Mar 30, 2013, the company had roughly $216.5 million
in its backlog, which is expected to be converted to revenue
within the next twelve months. This makes us hopeful of the
The company follows a consistent policy of utilizing its cash
primarily for acquisitions or reinvestment in the business for
organic growth. Also, the company is keen on rewarding its
shareholders through share buybacks. In Feb 2013, RBC Bearings
announced its plans to repurchase shares worth $50.0 million. RBC
Bearings has a strong cash position, with roughly $114.5 million
in cash and cash equivalents exiting fiscal 2013.
RBC Bearing's Industrial segment has been facing headwinds
over the past few quarters. Revenue generation in fiscal 2013 was
negatively impacted by an 8.2% decline in the diversified
industrial sales due to lower movements in the mining and
military markets. Moreover, the rising price of steel, which is
used as a major raw material, worries us.
The company's overseas operations expose it to foreign
currency fluctuations. For fiscal 2013, 12.0% of net sales were
negatively impacted due to currency fluctuations. It is
apprehended that this risk will continue to hover around the
company's financials as it plans to penetrate the foreign markets
Other Stocks to Consider
RBC Bearings currently carries a Zacks Rank #4 (Sell). Other
stocks worth a watch in the industry are
Horsehead Holding Corp.
Precision Castparts Corp.
Norsk Hydro ASA
), each carrying a Zacks Rank #2 (Buy).
NORSK HYDRO ADR (NHYDY): Get Free Report
PRECISION CASTP (PCP): Free Stock Analysis
RBC BEARINGS (ROLL): Free Stock Analysis
HORSEHEAD HLDG (ZINC): Free Stock Analysis
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