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RBC Bearings to Divest Avborne Accessory Business to AerSale

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RBC Bearings Incorporated (ROLL - Free Report) recently announced the divestiture of its wholly-owned subsidiary — Avborne Accessory Group, Inc. to AerSale, Inc. for $21.5 million. The deal is subject to working capital adjustments. Notably, Lazard is acting as the exclusive financial advisor for the deal.

Avborne Accessory Group provides repair, maintenance, and overhaul services for different types of aircraft accessories. It also offers repair services for bearings, mechanical components, hydraulics, electro-mechanical components, pneumatics, electric power products, instruments, avionics, fuel components and rewind products. Additionally, certain inventory management services, lease packages and by-the-hour support programs are provided by this Miami, FL based company. Avborne Accessory Group offers its premium services in the global military and commercial aviation industry.

Our Take

We believe that aforementioned divestiture will aid in improving RBC Bearings’ liquidity going forward. The company intends to lower debt burden, fund new growth-oriented investments and provide higher returns to shareholders with improved cash generation.

On a year-to-date basis, RBC Bearings’ shares rallied 19.9%, against 4.6% decline recorded by the industry.

The company is poised to grow on the back of sturdier industrial and aerospace end-markets’ demand, greater operational excellence, reduced tax expenses and stronger liquidity. However, material price inflation and higher personnel costs are likely to elevate the company’s aggregate costs, in turn weigh on its profitability in the quarters ahead. Moreover, certain supply-chain constraints for instance lack of engine availability, unfavorable contract timing and short-term aircraft build rates, might continue to depress productivity in some manufacturing facilities. This in turn is likely to hurt the aerospace sales of this Zacks Rank #3 (Hold) stock in the near term.

Stocks to Consider

Some better-ranked stocks within the same space include:

DXP Enterprises, Inc. (DXPE - Free Report) sports a Zacks Rank #1 (Strong Buy). The company has delivered a positive average earnings surprise of 112.62% for the past four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Luxfer Holdings PLC (LXFR - Free Report) flaunts a Zacks Rank of 1. The company has successfully pulled off a positive average earnings surprise of 24.27% for the past four quarters.

Applied Industrial Technologies, Inc. (AIT - Free Report) carries a Zacks Rank #2 (Buy). The company has recorded a positive average earnings surprise of 11.67% for the past four quarters.

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