It has been about a month since the last earnings report for RBC Bearings (ROLL - Free Report) . Shares have added about 2.8% 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 Q3 Earnings Top Estimates, Up Y/Y on Sales
RBC Bearings reported better-than-expected results for the third quarter of fiscal 2019 (ended Dec 29, 2018), delivering a positive earnings surprise of 0.9%. This was the company’s third consecutive quarter of impressive results.
This machinery company’s adjusted earnings in the reported quarter were $1.15 per share, surpassing the Zacks Consensus Estimate of $1.14. Also, the bottom line increased 9.5% from the year-ago quarter’s number of $1.05 on the back of healthy sales growth, margin improvement and lower taxes.
Organic Sales Drive Revenues
In the quarter under review, RBC Bearings’ revenues totaled $171.5 million, reflecting year-over-year growth of 2.8%. Organic sales in the quarter grew 6.5% year over year on the back of 6.4% growth in aerospace markets and 6.7% increase in industrial markets.
However, the top line lagged the Zacks Consensus Estimate of $176.2 million by 2.7%.
Exiting the reported quarter, the company had backlog of $428.2 million, up 9.1% year over year.
RBC Bearings reports net sales under four heads/segments. The segmental results are briefly discussed below:
Revenues from Plain bearings totaled $79.3 million, up 13.7% year over year while that from Roller bearings increased 7.3% year over year to $34.8 million. Ball bearings’ revenues were $16.7 million, up 1.4% year over year. Revenues from Engineered products totaled $40.6 million, down 15.6% year over year.
Margins Improve Y/Y
In the reported quarter, RBC Bearings’ cost of sales grew 1.2% year over year to $103.3 million. It represented 60.2% of net sales versus 61.2% recorded in the year-ago quarter. Gross profit in the quarter increased 5.2% year over year to $68.1 million. Margin in the quarter grew 90 basis points (bps) to 39.7%.
Selling, general and administrative expenses of $29.1 million increased 3.5% year over year, and represented 17% of net sales versus 16.9% in the year-ago quarter. Adjusted operating income in the reported quarter increased 6.6% year over year to $6.6 million. Adjusted margin was 21.4% versus 20.6% in the year-ago quarter.
Effective tax rate was 15% in the quarter under review, lower than 23.9% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the fiscal third quarter, RBC Bearings had cash and cash equivalents of $81.7 million, increasing 35.3% from $60.4 million recorded at the previous quarter end. Total debt was $114.1 million, down 8% sequentially.
In the first nine months of fiscal 2019, the company generated net cash of $79 million from operating activities, down 14.6% from $92.5 million recorded in the year-ago comparable period. Capital spending totaled $29.2 million, increasing 20.5% year over year.
During the period, the company repurchased shares worth $4.7 million while backlog at the end of the period was $428.2 million.
RBC Bearings anticipates net sales of $178-$180 million for the fourth quarter of fiscal 2019 (ending March 2019).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -9.76% due to these changes.
Currently, RBC Bearings has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
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.