On Nov 14, 2013, we retained our Neutral recommendation on
RBC Bearings Inc.
), based on its mixed results for the second quarter of fiscal
2014. The company reported improved year-over-year results for
earnings and revenues but missed the Zacks Consensus Estimate for
Why the Reiteration?
RBC Bearings has a strong foothold on the aircraft and defense
products industry, and has been experiencing rising sales for the
same in the past few quarters. Revenues for aircraft and defense
products increased 15.2% year over year in the reported quarter.
As a result, RBC Bearings recorded revenues of $102.0 million,
which reflected 1.6% year over year increase.
In the quarter, RBC Bearings reported adjusted earnings per
share of 64 cents, increasing 6.7% year over year. The results
were due to the company's organic as well as inorganic growth.
Inorganic growth has been an influential source of its growth
trend. The company completed the acquisition of TCI, Climax Metal
and Western Precision this year in October, August and March,
respectively. These acquisitions are expected to contribute
roughly $25 million annually.
However, RBC Bearings' dependence on a handful of customers
makes us cautious. In fiscal 2013, the company derived roughly
29% of the total revenue from its top 10 customers. A change in
the spending pattern of these clients may have an adverse impact
on the company's financials.
Additionally, the company's overseas operations expose it to
various currencies including the Swiss Franc, Euro and British
Pound Sterling, leading to foreign currency fluctuation risks.
Moreover, geo-political as well as economic situations of the
region of operation affect the company. These risks will continue
impacting the company's financials negatively, as it plans to
further penetrate foreign markets.
Other Stocks to Consider
RBC Bearings currently carries a Zacks Rank #3 (Hold). Other
stocks to watch out for in the industry include
CIRCOR International, Inc.
Dynamic Materials Corp.
). Each of these carry a Zacks Rank #1 (Strong Buy).
DYNAMIC MATLS (BOOM): Free Stock Analysis
CIRCOR INTL (CIR): Free Stock Analysis Report
NN INC (NNBR): Free Stock Analysis Report
RBC BEARINGS (ROLL): Free Stock Analysis
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