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RBC Bearings (ROLL) Exhibits Solid Prospects, Risks Persist

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RBC Bearings Incorporated (ROLL - Free Report) stands to benefit from strength in its industrial business, driven by strong demand for its products across end markets like mining, energy, marine, and general industrial. In second-quarter fiscal 2022 (ended Oct 2, 2021), sales at the company’s industrial business increased 31.1% on a year-over-year basis. In the quarters ahead, a solid backlog level along with improvement in demand for commercial aircraft components is likely to drive its performance. For third-quarter fiscal 2022 (ending December 2021), its sales are expected to be $245-$255 million.

ROLL believes in strengthening its businesses through the addition of assets. In November 2021, it acquired Asea Brown Boveri Ltd’s DODGE mechanical power transmission division. The buyout is expected to expand the company's exposure in markets (especially in industrial, aerospace, and defense), product offerings and customer base. However, the company funded the DODGE buyout through a mix of equity and debts. An increase in equity might positively influence earnings.

RBC Bearings focuses on rewarding its shareholders handsomely through share buyback programs. In the first six months of fiscal 2022, it used $6.4 million for repurchasing shares, higher than $4.4 million in the year-ago period. Exiting the fiscal second quarter, shares worth $81.2 million were left for repurchase under its May 2019 share repurchase program.

However, RBC Bearings has been witnessing persistent weakness across its defense and commercial aerospace end markets. In fiscal second quarter, sales at its aerospace business declined 4.4% on a year-over-year basis. Headwinds from reduced air travel and production rate changes might continue to adversely impact its sales in the near term. Also, supply chain constraints and raw-material inflation might be spoilsports.

Zacks Investment ResearchImage Source: Zacks Investment Research

In the past six months, this Zacks Rank #3 (Hold) stock has returned 14.7% compared with the industry’s growth of 0.3%.

Zacks Rank & Stocks to Consider

ROLL currently carries a Zacks Rank #3 (Hold).

Some better-ranked companies from the Zacks Industrial Products sector are discussed below.

Heritage-Crystal Clean, Inc (HCCI - Free Report) presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Its earnings surprise for the last four quarters was 62.29%, on average.

Heritage-Crystal’s earnings estimates increased 9.3% for 2021 and 23.1% for 2022 in the past 30 days. Its shares have gained 20.1% in the past three months.

Casella Waste Systems, Inc. (CWST - Free Report) presently carries a Zacks Rank #1. Its earnings surprise in the last four quarters was 42.11%, on average.

Casella Waste’s earnings estimates have increased 11.4% for 2021 and 10.1% for 2022 in the past 30 days. Its shares have gained 28.7% in the past three months.

Energy Recovery, Inc. (ERII - Free Report) presently carries a Zacks Rank #2. Its earnings surprise in the last four quarters was 123.33%, on average.

In the past 30 days, Energy Recovery’s earnings estimates have increased 18.2% for 2021 and 39.3% for 2022. Its shares have gained 22.5% in the past three months.