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RBC Bearings (ROLL) Up 47.1% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for RBC Bearings (ROLL - Free Report) . Shares have added about 47.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.

RBC Bearings Q2 Earnings Top Estimates, View Bleak

RBC Bearings’ 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 $151 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.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -6.62% due to these changes.

VGM Scores

At this time, RBC Bearings has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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