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A month has gone by since the last earnings report for RBC Bearings (ROLL). Shares have added about 13.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is RBC Bearings due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
RBC Bearings Q3 Earnings Top Estimates, Q4 View Weak
RBC Bearings delivered better-than-expected results for the third quarter of fiscal 2021 (ended Dec 26, 2020), with earnings surpassing estimates by 5.88%. This was the company’s third consecutive quarter of impressive earnings results. Also, its quarterly sales beat estimates by 2.56%.
Adjusted earnings in the reported quarter were 90 cents per share, surpassing the Zacks Consensus Estimate of 85 cents. Also, the bottom line decreased 26.2% from the year-ago quarter’s figure of $1.22 on weak sales and margin decline.
In the reported quarter, RBC Bearings’ net sales were $145.9 million, declining 17.6% year over year due to the adverse impacts of the pandemic on operations.
The company’s overall aerospace business experienced a 29.7% decline in revenues. On the other hand, its business in industrial markets improved and recorded a 5.5% year-over-year increase in revenues.
However, the top line surpassed the Zacks Consensus Estimate of $142 million.
Exiting the reported quarter, the company had a backlog of $393.9 million, down 2.2% year over year.
RBC Bearings reports net sales under four heads/segments that are discussed below:
Revenues in Plain bearings totaled $69.3 million, down 20.2% year over year, while that for Roller bearings declined 29.6% year over year to $22.4 million. Ball bearings’ revenues of $20.7 million were up 11.8% year over year. Revenues in Engineered products summed $33.5 million, down 16% year over year.
In the reported quarter, RBC Bearings’ cost of sales decreased 15.1% year over year to $90.3 million, representing 61.9% of net sales compared with 60.1% a year ago. Adjusted gross profit decreased 20.4% year over year to $56.4 million. Margin slipped 140 basis points (bps) to 38.7%.
Selling, general and administrative expenses of $25.7 million were down 16.2% year over year, accounting for 17.7% of net sales. Adjusted operating income declined 26.2% year over year to $27.9 million. Adjusted margin decreased 230 bps year over year to 19.1%. Interest expenses, net, declined 29.8% year over year to $0.3 million in the quarter.
Effective tax rate was 17.9% in the quarter under review compared with 17% in the prior-year quarter.
Balance Sheet and Cash Flow
Exiting the fiscal third quarter, RBC Bearings had cash and cash equivalents of $126.2 million, down 24.2% from $166.4 million recorded at the end of the previous quarter. Long-term debt was $14.4 million, up 4.1% sequentially.
In the first nine months of fiscal 2021, the company generated net cash of $110.6 million from operating activities, down 0.5% from $111.2 million in the year-ago comparable period. Capital spending of $8.8 million fell 68% year over year.
During the fiscal first nine months, the company repurchased shares worth $6.2 million, down from $11.6 million in the previous-year period.
For the fourth quarter of fiscal 2021 (ending March 2021), RBC Bearings anticipates net sales of $155-$160 million, suggesting a decline from $185.8 million generated in the year-ago quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
At this time, RBC Bearings has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, RBC Bearings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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