On May 25, we issued an updated research report on premium industrial goods firm, RBC Bearings Inc. (ROLL - Free Report) .
The company intends to become the leading provider of precision engineered components and bearings in the market. In sync with this, this Zacks Rank #3 (Hold) company acquires potential businesses, enlarges its customer base, deploys capital for innovation investments and expands business in new end-markets.
The company believes robust industrial original equipment manufacturers’ (OEM) demand, and higher industrial distribution and aftermarket sales will drive its industrial sales in the quarters ahead. In addition, elevated Aero OEM’s demand and augmented build rates of single-aisle planes are expected to bolster the company’s aerospace revenues. Notably, RBC Bearings currently anticipates to report revenues in the range of $172-$175 million in fourth-quarter fiscal 2018 (ended March 2018).
Per our estimates, the stock’s projected year-over-year sales growth for fiscal 2019 is currently pegged at 9.1%.
RBC Bearings has been strengthening its bottom-line performance on the back of higher revenues and wider margins. Cost-reduction initiatives, consolidation programs and production-process improvements are expected to aid in widening the company’s margins in the upcoming quarters. Also, we believe lower corporate tax rates will help boost the company’s profitability, going forward.
Per our estimates, the stock’s projected year-over-year earnings growth for fiscal 2019 is currently pegged at 19.8%.
Furthermore, RBC Bearings has been improving its liquidity on the back of increased cash generation for the past few quarters. The company intends to lower its debt burden, fund new growth-oriented investments and provide higher returns to shareholders with these proceeds.
Over the past month, RBC Bearings’ shares have rallied 4.4%, outperforming 1.9% growth recorded by the industry.
However, Overseas business expansion exposes RBC Bearings to risks associated with adverse foreign currency translation. Appreciation of the U.S. dollar compared to the currencies of other international markets, such as Canada and Europe, has been hurting the company’s top-line performance for the past few quarters.
Unfavorable foreign currency-translation impact dragged down the company’s net sales by 11% in the first nine months of fiscal 2018. The company believes fluctuating foreign currency exchange rates will continue to weigh over its revenues even in the quarters ahead.
Also, on a Price/Earnings (TTM) basis, RBC Bearings’ shares look overvalued compared with the industry, with the respective tallies of 33.7x and 22.6x for the last three months. Notably, the stock is currently trading higher than the median P/E (TTM) range.
Stocks to Consider
Some better-ranked stocks in the industry are listed below:
Applied Industrial Technologies, Inc. (AIT - Free Report) sports a Zacks Rank #1 (Strong Buy). The company earnings per share (EPS) are predicted to grow 12% in the next three to five years. You can see the complete list of today’s Zacks #1 Rank stocks here.
Graco Inc. (GGG - Free Report) carries a Zacks Rank #1. The company’s EPS is projected to be up 10.33% over the next three to five years.
Ingersoll-Rand PLC (IR - Free Report) holds a Zacks Rank #2 (Buy). The company’s EPS is estimated to rise 10.98%, in the next three to five years.
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