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RBC Bearings Incorporated (RBC - Free Report) is benefiting from the strong performance of the Aerospace/Defense segment. Strength in commercial aerospace, driven by the recovery in build rates from large OEMs (original equipment manufacturer), and stability in the aftermarket are driving the Aerospace/Defense segment. The company is also poised to benefit from its product development initiatives and robust demand for large planes like the Airbus 737, 787, A320 and A330 principally, in the quarters ahead. Additional volume increases, driven by RBC Bearings’ space initiatives, are also likely to be beneficial.
RBC has been strengthening its business through acquisitions. The company acquired Carson City, NV-based precision bearings manufacturer Specline, Inc. in August 2023. The transaction was valued at $18.7 million. Specline’s unique bearing and manufacturing processes expanded RBC Bearings’ aerospace product offerings and boosted the company’s production capacity.
The company remains committed to rewarding its shareholders through dividend payments and share buybacks. In the first nine months of fiscal 2024 (ended December 2023), the company paid dividends of $17.3 million, almost flat year over year, and repurchased shares for $7.6 million, increasing 15.4% year over year. RBC Bearings repurchased shares worth $7.7 million and distributed preferred dividends worth $22.9 million in fiscal 2023.
However, weakness in the semiconductor market is worrisome for RBC Bearings’ Industrial segment. The segment’s revenues decreased 0.6% year over year in the fiscal third quarter. Also, weakness in the aggregate and general industrial end markets is concerning as well.
RBC Bearings is currently dealing with the rising cost of sales. In the first nine months of fiscal 2024, the company’s cost of sales jumped 2.8% year over year due to increasing raw material costs. Selling, general and administrative expenses increased 11.2%, year over year, in the same period due to increased personnel costs, freight costs, IT costs and other professional fees. In fiscal 2023, its cost of sales increased 47.6% year over year, while selling, general and administrative expenses were up 37.1%. High costs and expenses, if uncontrolled, may adversely impact the company’s margins and profitability in the quarters ahead.
In the past year, this current Zacks Rank #3 (Hold) company’s shares have gained 14.3% compared with the industry’s 29% growth.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked companies from the Industrial Products sector are discussed below:
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RBC Bearings (RBC) Exhibits Strong Prospects Despite Headwinds
RBC Bearings Incorporated (RBC - Free Report) is benefiting from the strong performance of the Aerospace/Defense segment. Strength in commercial aerospace, driven by the recovery in build rates from large OEMs (original equipment manufacturer), and stability in the aftermarket are driving the Aerospace/Defense segment. The company is also poised to benefit from its product development initiatives and robust demand for large planes like the Airbus 737, 787, A320 and A330 principally, in the quarters ahead. Additional volume increases, driven by RBC Bearings’ space initiatives, are also likely to be beneficial.
RBC has been strengthening its business through acquisitions. The company acquired Carson City, NV-based precision bearings manufacturer Specline, Inc. in August 2023. The transaction was valued at $18.7 million. Specline’s unique bearing and manufacturing processes expanded RBC Bearings’ aerospace product offerings and boosted the company’s production capacity.
The company remains committed to rewarding its shareholders through dividend payments and share buybacks. In the first nine months of fiscal 2024 (ended December 2023), the company paid dividends of $17.3 million, almost flat year over year, and repurchased shares for $7.6 million, increasing 15.4% year over year. RBC Bearings repurchased shares worth $7.7 million and distributed preferred dividends worth $22.9 million in fiscal 2023.
However, weakness in the semiconductor market is worrisome for RBC Bearings’ Industrial segment. The segment’s revenues decreased 0.6% year over year in the fiscal third quarter. Also, weakness in the aggregate and general industrial end markets is concerning as well.
RBC Bearings is currently dealing with the rising cost of sales. In the first nine months of fiscal 2024, the company’s cost of sales jumped 2.8% year over year due to increasing raw material costs. Selling, general and administrative expenses increased 11.2%, year over year, in the same period due to increased personnel costs, freight costs, IT costs and other professional fees. In fiscal 2023, its cost of sales increased 47.6% year over year, while selling, general and administrative expenses were up 37.1%. High costs and expenses, if uncontrolled, may adversely impact the company’s margins and profitability in the quarters ahead.
In the past year, this current Zacks Rank #3 (Hold) company’s shares have gained 14.3% compared with the industry’s 29% growth.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked companies from the Industrial Products sector are discussed below:
Applied Industrial Technologies, Inc. (AIT - Free Report) presently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter average earnings surprise of 10.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for AIT’s fiscal 2024 earnings has increased 2.5% in the past 60 days. The stock has gained 38.5% in the past year.
Caterpillar Inc. (CAT - Free Report) presently carries a Zacks Rank #2 (Buy) and a trailing four-quarter earnings surprise of 19.7%, on average.
CAT’s earnings estimates have increased 0.7% for 2024 in the past 60 days. Shares of Caterpillar have risen 61.5% in the past year.
A. O. Smith Corporation (AOS - Free Report) presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 12%.
The Zacks Consensus Estimate for AOS’ 2024 earnings increased 0.5% in the past 60 days. Shares of A. O. Smith have soared 26% in the past year.