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RBC Bearings (ROLL) Q4 Earnings Top Estimates, View Bleak

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Zacks Equity Research
·4 min read
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RBC Bearings Incorporated‘s ROLL second-quarter fiscal 2021 (ended Sep 26, 2020 earnings surpassed the Zacks Consensus Estimate by 4.5%. This is the second consecutive quarter of impressive earnings results.

The machinery company’s adjusted earnings in the reported quarter amounted to 93 cents per share, above the consensus mark of 89 cents. However, the bottom line declined 28.5% from the year-ago quarter’s figure of $1.30 due to weak sales generation and fall in operating margin.

Revenue Details

In the quarter under review, RBC Bearings’ revenues of $146.3 million declined 19.6% on a year-over-year basis. Organic sales in the quarter fell 19.8% year over year.

The company’s overall aerospace business experienced a 25.8% decline in revenues. In addition, the company’s business in industrial markets suffered due to the pandemic and recorded 8.3% year-over-year decline in revenues.

Also, revenues lagged the Zacks Consensus Estimate of $51 million.

Exiting the reported quarter, the company had backlog of $403 million, down 14.8% year over year.

RBC Bearings reports net sales under four heads/segments that are discussed below:

Revenues in Plain bearings totaled $71.1 million, down 21.1% year over year, while the same in Roller bearings declined 33.8% year over year to $21.6 million. Ball bearings’ revenues of $21.1 million were up 21.1% year over year. Revenues in Engineered products summed $32.6 million, down 22.2% year over year.

Margin Profile

In the reported quarter, RBC Bearings’ cost of sales decreased 19% year over year to $89.7 million, representing 61.3% of net sales compared with 60.9% a year ago. Adjusted gross profit decreased 17.7% year over year to $58.6 million. Margin inched up 90 basis points (bps) to 40%.

Selling, general and administrative expenses of $26 million were down 15.4% year over year, accounting for 17.8% of net sales. Adjusted operating income declined 22.1% year over year to $29.9 million. Adjusted margin inched down 70 bps year over year to 20.4%. Interest expense, net, declined 27.5% year over year to $343 million in the quarter.
Effective tax rate was 20.9% in the quarter under review compared with 14.7% in the prior-year quarter.

Balance Sheet and Cash Flow

Exiting the fiscal second quarter, RBC Bearings had cash and cash equivalents of $166.4 million, up 15.8% from $143.6 million recorded at the end of the previous quarter. Long-term debt was $13.8 million, down 40.4% sequentially.

In the first half of fiscal 2021, the company generated net cash of $74.5 million from operating activities, up 15.3% from $64.6 million in the year-ago quarter. Capital spending of $6 million fell 70.3% year over year.

During the fiscal first half, the company repurchased shares worth $4.4 million, down from $9.9 million in the previous-year period.

Outlook

RBC Bearings is focused on developing new products and maintaining a healthy balance sheet. For the third quarter of fiscal 2021 (ending December 2020), the company anticipates net sales to be $140-$145 million, down from $177 million generated in the year-ago quarter.

RBC Bearings Incorporated Price, Consensus and EPS Surprise

RBC Bearings Incorporated Price, Consensus and EPS Surprise
RBC Bearings Incorporated Price, Consensus and EPS Surprise

RBC Bearings Incorporated price-consensus-eps-surprise-chart | RBC Bearings Incorporated Quote

Zacks Rank & Other Stocks to Consider

RBC Bearings currently has a market capitalization of $3 billion and carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the industry are Altra Industrial Motion Corp. AIMC, EnPro Industries, Inc. NPO and Graco Inc. GGG. While both Altra Industrial and EnPro Industries sport a Zacks Rank #1 (Strong Buy), Graco carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 30 days, earnings estimate for Altra Industrial and Graco improved for the current year, while the same remained stable for EnPro Industries. Further, earnings surprise for the last reported quarter was 77.55% for Altra Industrial, 980% for EnPro Industries and 40.48% for Graco.

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