It has been about a month since the last earnings report for RBC Bearings (ROLL - Free Report) . Shares have added about 3.1% 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 Q1 Earnings Top Estimates, Decline Y/Y
RBC Bearings reported better-than-expected results for the first quarter of fiscal 2021 (ended Jun 27, 2020), wherein both earnings and revenues surpassed the consensus estimate.
On a GAAP basis, net earnings in the quarter were $22.7 million or 91 cents per share compared with a net income of $30.5 million or $1.23 per share in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate of 87 cents by 4.6%.
The machinery company’s adjusted earnings in the reported quarter were 95 cents per share, down 22.8% on a year-over-year basis.
In the quarter under review, RBC Bearings’ revenues of $156.5 million reflected a year-over-year decline of 14.3%. Organic sales in the quarter were down 15.5% year over year.
The company noted that the aerospace end-markets in the quarter were adversely impacted by the pandemic. Its overall aerospace business experienced a 14.9% decrease in revenues. In addition, the company’s business in industrial markets recorded a 13.3% year-over-year decline in revenues.
Revenues surpassed the Zacks Consensus Estimate of $153 million by 2.5%.
Exiting the reported quarter, the company had backlog of $431.9 million, down 6% year over year.
RBC Bearings reports net sales under four heads/segments that are discussed below:
Revenues from Plain bearings totaled $78.9 million, down 9.8% year over year, while the same from Roller bearings declined 37.9% year over year to $22.9 million. Ball bearings’ revenues of $18.8 million were up 6.2% year over year. Revenues from Engineered products summed $35.9 million, down 11.5% year over year.
In the reported quarter, RBC Bearings’ cost of sales moved down 13.4% year over year to $97 million, representing 62% of net sales compared with 61.2% a year ago. Gross profit decreased 15.9% year over year to $59.5 million. Margin moved down 70 basis points (bps) to 38%.
Selling, general and administrative expenses of $26.8 million were down 11% year over year, accounting for 17.1% of net sales. Operating income declined 25.2% year over year to $28.8 million. Operating margin moved down 270 bps year over year at 18.4%. Interest expenses, net, declined 22.3% year over year to $425 million in the quarter.
Effective tax rate was 20% in the quarter under review compared with 19.3% in the prior-year quarter.
Balance Sheet and Cash Flow
Exiting the fiscal first quarter, RBC Bearings had cash and cash equivalents of $143.6 million, up from $103.3 million recorded at the end of the previous quarter. Total debt was $ 23.1 million, up 0.4% sequentially.
The company also noted that it has outstanding revolving credit facilities of $259.3 million.
In the first three months of fiscal 2021, it generated net cash of $48.4 million from operating activities, up 20.7% from $40.1 million a year ago. Capital spending of $3.9 million fell 67.5% year over year. The company repurchased shares worth $4.4 million, reflecting a decline from $9.5 million in the previous year’s comparable period.
For second-quarter fiscal 2021 (ending September 2020), it predicts revenues of $148-$152 million, suggesting a decline from $181.9 million in the year-ago quarter.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
At this time, RBC Bearings has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise RBC Bearings has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.