A month has gone by since the last earnings report for RBC Bearings (ROLL - Free Report) . Shares have lost about 0.6% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is RBC Bearings due for a breakout? 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 Q1 Earnings Top Estimates, Revenues Lag
RBC Bearings reported better-than-expected results for the first quarter of fiscal 2020 (ended Jun 29, 2019), delivering a positive earnings surprise of 3.36%.
The machinery company’s adjusted earnings in the reported quarter were $1.23 per share, surpassing the Zacks Consensus Estimate of $1.19. Also, the bottom line rose 7% from the year-ago quarter’s number of $1.15 on healthy sales growth and margin improvement.
Organic Sales Drive Revenues
In the quarter under review, RBC Bearings’ revenues totaled $182.7 million, reflecting year-over-year growth of 3.8%. Organic sales in the quarter grew 6.5% year over year on healthy growth in aerospace markets.
However, the company’s revenues lagged the Zacks Consensus Estimate of $183 million by 0.23%.
Exiting the reported quarter, it had backlog of $459.4 million, up 9.6% year over year.
RBC Bearings reports net sales under four heads/segments. The segmental results are briefly discussed below:
Revenues from Plain bearings totaled $87.5 million, up 11.4% year over year, while that from Roller bearings grew 2.7% year over year to $36.9 million. Ball bearings’ revenues were $17.7 million, down 2% year over year. Revenues from Engineered products totaled $40.6 million, down 6.6% year over year.
Margins Improve Y/Y
In the reported quarter, RBC Bearings’ cost of sales grew 3.5% year over year to $112 million. It represented 61.3% of net sales versus 61.5% recorded in the year-ago quarter. Gross profit in the quarter rose 4.4% year over year to $70.7 million. Margin in the quarter grew 20 basis points (bps) to 38.7%.
Selling, general and administrative expenses of $30.1 million rose 1.7% year over year, and represented 16.5% of net sales versus 16.8% in the year-ago quarter. Operating income in the reported quarter grew 6.9% year over year to $38.5 million. Adjusted margin was 21.1% versus 20.5% in the year-ago quarter.
Effective tax rate was 19.3% in the quarter under review versus 17.4% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the fiscal first quarter, RBC Bearings had cash and cash equivalents of $32.7 million, rising 9.5% from $29.9 million recorded at the previous quarter end. Total debt was $26.3 million, down 39.2% sequentially.
In the first quarter of fiscal 2020, the company generated net cash of $40.1 million from operating activities, up 18.6% from $33.8 million recorded in the year-ago comparable quarter. Capital spending totaled $12 million, rising 72.2% year over year.
During the quarter, the company repurchased shares worth $9.5 million.
RBC Bearings anticipates net sales of $180-$180 million for the second quarter of fiscal 2019 (ending September 2019). The projection reflects growth of 4.1-5.3% from the year-ago quarter.
How Have Estimates Been Moving Since Then?
Estimates review followed a downward path over the past two months.
Currently, RBC Bearings has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the fifth quintile 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.
RBC Bearings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.