Key Takeaways RBC Bearings sees strong Aerospace/Defense growth from OEM and aftermarket demand.Acquisitions of VACCO and Specline expand RBC's defense, space and aerospace offerings.Higher material and personnel costs are lifting expenses and could weigh on profitability.RBC Bearings Incorporated (RBC) has been witnessing solid momentum in the Aerospace/Defense segment. Strength in the commercial aerospace market, driven by strong growth in orders from the OEM (original equipment manufacturer) and the afte ...

Key Takeaways RBC's Aerospace/Defense segment revenues rose 10.4% year over year in fiscal Q1 2026.Commercial aerospace sales grew 9.6%, while defense market revenues climbed 11.9%.Backlog of $1.02B and strong demand in OEM and aftermarket support future growth.RBC Bearings Incorporated (RBC) is benefiting from solid momentum in aerospace and defense markets. Strength in the commercial aerospace market, driven by strong growth in orders from the OEM (original equipment manufacturer) and the aftermarket vert ...

Group 1 - Royal Bank of Canada (RBC) is the largest lender in Canada, offering a diverse range of financial services including banking, investing, and insurance [1] - The company has a long history, being founded in the 19th century, and continues to generate revenue through various channels [1] Group 2 - The latest quarterly report from RBC has been released, indicating the company's ongoing performance in the financial sector [1]

Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying stocks that can fulfill their growth potential is challenging [1] Group 1: Company Overview - RBC Bearings is identified as a cutting-edge growth stock with a favorable Growth Score and a top Zacks Rank [2] - The company has a historical EPS growth rate of 25.7%, with projected EPS growth of 15.3% this year, significantly higher than the industry average of 7.5% [5] Group 2: Financial Metrics - RBC Bearings has a year-over-year cash flow growth of 8.3%, surpassing the industry average of 2.9% [6] - The company's annualized cash flow growth rate over the past 3-5 years is 21.3%, compared to the industry average of 9% [7] Group 3: Earnings Estimates - There has been a positive trend in earnings estimate revisions for RBC Bearings, with the Zacks Consensus Estimate for the current year increasing by 2.2% over the past month [8] - The company has earned a Growth Score of B and holds a Zacks Rank 2 due to positive earnings estimate revisions, indicating potential for outperformance [10]

Core Insights - RBC Bearings Incorporated (RBC) is positioned to benefit from strong performance across its business segments, synergies from acquisitions, and shareholder-friendly policies, focusing on growth opportunities and long-term market strength [1] End-Market Strength - The Aerospace/Defense segment is experiencing strong performance, with revenues increasing by 10.4% year-over-year in the first quarter of fiscal 2026, driven by robust growth in orders from both OEM and aftermarket verticals [2] - The backlog for the Aerospace/Defense segment reached $1.02 billion at the end of the first quarter of fiscal 2026, indicating strong future demand [2] - The Industrial segment also shows strength, with revenues up 5.5% year-over-year in the first quarter of fiscal 2026, supported by stable demand in various markets [3] - For the second quarter of fiscal 2026, RBC anticipates net sales between $445 million and $455 million, reflecting a year-over-year increase of 11.8% to 14.4% [3] Acquisition Benefits - RBC has been enhancing its business through acquisitions, including the purchase of VACCO Industries for approximately $275 million in cash, which will expand its offerings in defense, space, and commercial markets [4] Price Performance - Over the past year, RBC's shares have increased by 35.5%, significantly outperforming the industry average growth of 8.4% [6] Shareholder-Friendly Policies - RBC is committed to increasing shareholder value through dividend payments and share repurchases, having paid $17.2 million in preferred stock dividends and repurchased shares worth $9.5 million in fiscal 2025 [6] Estimate Revisions - The Zacks Consensus Estimate for RBC's fiscal 2026 earnings has increased by 1.6% in the past 30 days, while the estimate for fiscal 2027 has been revised upward by 3.8% [9]

Core Viewpoint - Investors are increasingly seeking growth stocks that demonstrate above-average growth potential, with RBC Bearings identified as a strong candidate due to its favorable growth metrics and Zacks Rank [2][9]. Earnings Growth - RBC Bearings has a historical EPS growth rate of 25.7%, with projected EPS growth of 14.7% for the current year, significantly outperforming the industry average of 7% [5]. Cash Flow Growth - The company exhibits a year-over-year cash flow growth of 8.3%, surpassing the industry average of 2.9%. Additionally, its annualized cash flow growth rate over the past 3-5 years stands at 21.3%, compared to the industry average of 9% [6][7]. Earnings Estimate Revisions - There has been a positive trend in earnings estimate revisions for RBC Bearings, with the Zacks Consensus Estimate for the current year increasing by 0.9% over the past month, indicating strong near-term stock price potential [8]. Overall Assessment - RBC Bearings has achieved a Growth Score of B and holds a Zacks Rank of 2, suggesting it is a solid choice for growth investors and a potential outperformer in the market [9][10].

Core Insights - RBC Bearings Incorporated reported adjusted earnings of $2.84 per share for Q1 fiscal 2026, exceeding the Zacks Consensus Estimate of $2.74, and reflecting an 11.8% increase from the previous year's adjusted earnings of $2.54 per share, driven by higher revenues [1][10] Revenue Details - RBC Bearings' revenues reached $436 million, marking a 7.3% year-over-year increase and surpassing the Zacks Consensus Estimate of $432 million [2] - The company ended the quarter with a backlog of $1.02 billion, up from $940.7 million at the end of Q4 fiscal 2025 [2] Segmental Performance - Industrial segment revenues were $271.4 million, accounting for 62.2% of total revenues, and increased by 5.5% year over year, exceeding the consensus estimate of $265 million [3] - Aerospace/Defense segment revenues totaled $164.6 million, representing 37.8% of total revenues, and grew by 10.4% year over year, slightly below the consensus estimate of $167 million [4] Margin Profile - Cost of sales rose by 8.3% year over year to $240.8 million, while gross profit increased by 6.1% to $195.2 million, resulting in a gross margin contraction of 50 basis points to 44.8% [5] - Adjusted gross margin improved by 20 basis points to 45.4% [5] - Selling, general and administrative expenses (SG&A) were $73.9 million, up 9.2% year over year, with adjusted EBITDA rising 5.6% to $141.5 million, leading to an adjusted EBITDA margin of 32.5%, down 50 basis points year over year [5] Operating Income and Interest Expenses - Adjusted operating income increased by 8% year over year to $105.3 million, with an adjusted margin of 24.2%, up 20 basis points [6] - Net interest expenses decreased to $12.2 million from $17.2 million in the same quarter last year [6] Balance Sheet and Cash Flow - At the end of Q1 fiscal 2026, RBC had cash and cash equivalents of $132.9 million, significantly up from $36.8 million at the end of fiscal 2025 [7] - Long-term debt decreased to $913.8 million from $918.4 million at the end of fiscal 2025 [7] - The company generated net cash of $120 million from operating activities, a 23.2% increase year over year, while capital expenditure rose by 73% to $15.7 million [8] Outlook - For Q2 fiscal 2026, management forecasts revenues between $445 million and $455 million, indicating an increase of 11.8% to 14.4% from the prior-year figure of $397.9 million [11] - Gross margin is expected to be in the range of 44% to 44.25%, with SG&A as a percentage of net sales projected between 17% and 17.25% [11]

Core Insights - RBC Bearings reported Q1 FY2026 results showing revenue and earnings growth compared to Q1 FY2025, but both GAAP revenue and non-GAAP EPS missed Wall Street forecasts [1][5][12] - The company highlighted solid demand in core markets, particularly aerospace and defense, despite some capacity bottlenecks [1][4][6] Financial Performance - Non-GAAP EPS for Q1 FY2026 was $2.84, slightly below the $2.88 estimate, while GAAP revenue was $436.0 million, missing the $480.6 million consensus [1][2] - Year-over-year revenue increased by 7.3% from $406.3 million in Q1 FY2025 [2][5] - Free cash flow rose to $104.3 million, an 18.0% increase from $88.4 million in Q1 FY2025 [1][8] Segment Performance - The Aerospace/Defense segment saw GAAP sales increase by 10.4% year-over-year to $164.6 million, driven by a rebound in commercial aerospace builds and strong defense orders [6] - The Industrial segment, contributing 62.3% of total revenue, grew by 5.5%, with growth concentrated in mining, aggregates, and logistics [6] Strategic Focus - RBC Bearings is focusing on market diversification across industrial and aerospace sectors, emphasizing technological innovation and disciplined capacity management [4][3] - The company is managing production resources to match strong demand and mitigate supply constraints, particularly in aerospace and defense [4][5] Management Outlook - Management anticipates Q2 FY2026 net sales between $445 million and $455 million, indicating growth of 11.8% to 14.4% over the prior year's Q2 [12] - The company aims for a gross margin of 44.0% to 44.25% in Q2 FY2026, with SG&A expenses projected at 17.0% to 17.25% of net sales [12]

[Part I - Financial Information](index=3&type=section&id=Part%20I%20-%20FINANCIAL%20INFORMATION) [Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents the unaudited interim consolidated financial statements for RBC Bearings Incorporated, including balance sheets, income statements, cash flows, and detailed notes Key Financial Highlights (Q1 FY2026 vs Q1 FY2025) | Metric | Q1 FY2026 (ended June 28, 2025) ($) | Q1 FY2025 (ended June 29, 2024) ($) | Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $436.0 million | $406.3 million | +7.3% | | **Gross Margin** | $195.2 million | $184.0 million | +6.1% | | **Operating Income** | $101.1 million | $97.5 million | +3.7% | | **Net Income** | $68.5 million | $61.4 million | +11.6% | | **Diluted EPS** | $2.17 | $1.90 | +14.2% | Balance Sheet Summary | Account | June 28, 2025 ($) | March 29, 2025 ($) | | :--- | :--- | :--- | | **Total Assets** | $4,789.7 million | $4,685.2 million | | **Total Liabilities** | $1,673.3 million | $1,653.8 million | | **Total Stockholders' Equity** | $3,116.4 million | $3,031.4 million | Cash Flow Summary (Three Months Ended) | Activity | June 28, 2025 ($) | June 29, 2024 ($) | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $120.0 million | $97.4 million | | **Net Cash used in Investing Activities** | ($15.7 million) | ($9.0 million) | | **Net Cash used in Financing Activities** | ($7.9 million) | ($74.7 million) | | **Cash Increase/(Decrease)** | $96.1 million | $13.3 million | - Subsequent to the quarter's end, on July 18, 2025, the company acquired VACCO Industries for **$275.0 million** in cash, funded by a **$200.0 million** drawdown on its Revolving Credit Facility and cash on hand[100](index=100&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 FY2026 financial performance, highlighting a 7.3% net sales increase, segment growth, liquidity, and Q2 FY2026 outlook - Net sales for Q1 FY2026 increased **7.3%** YoY to **$436.0 million**, driven by a **10.4%** increase in the Aerospace/Defense segment and a **5.5%** increase in the Industrial segment[112](index=112&type=chunk)[117](index=117&type=chunk) - The company's backlog grew to **$1,017.3 million** as of June 28, 2025, up from **$940.7 million** at the end of the previous fiscal year (March 29, 2025)[112](index=112&type=chunk) - For the second quarter of fiscal 2026, the company projects net sales to be between **$445.0 million** and **$455.0 million**, representing an increase of **11.8% to 14.4%** compared to the prior year's second quarter[114](index=114&type=chunk) Q1 FY2026 vs Q1 FY2025 Performance | Metric | Q1 FY2026 ($) | Q1 FY2025 ($) | Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $436.0 million | $406.3 million | +7.3% | | **Gross Margin** | $195.2 million (44.8%) | $184.0 million (45.3%) | +6.1% | | **SG&A** | $73.9 million (16.9%) | $67.6 million (16.6%) | +9.3% | | **Interest Expense, Net** | $12.2 million | $17.2 million | -29.1% | | **Net Income (to common stockholders)** | $68.5 million | $55.7 million | +23.0% | [Segment Information](index=27&type=section&id=Segment%20Information) Aerospace/Defense net sales grew 10.4% to $164.6 million, while Industrial segment net sales increased 5.5% to $271.4 million Aerospace/Defense Segment Performance (Q1 FY2026 vs Q1 FY2025) | Metric | Q1 FY2026 ($) | Q1 FY2025 ($) | Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $164.6 million | $149.1 million | +10.4% | | **Gross Margin** | $70.2 million | $63.1 million | +11.3% | | **Gross Margin %** | 42.6% | 42.3% | +30 bps | - Within Aerospace/Defense, commercial aerospace markets (OEM and aftermarket) grew **9.6%**, while defense markets grew **11.9%**, driven by marine and missiles[128](index=128&type=chunk) Industrial Segment Performance (Q1 FY2026 vs Q1 FY2025) | Metric | Q1 FY2026 ($) | Q1 FY2025 ($) | Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $271.4 million | $257.2 million | +5.5% | | **Gross Margin** | $125.0 million | $120.9 million | +3.4% | | **Gross Margin %** | 46.1% | 47.0% | -90 bps | - The Industrial segment's gross margin was impacted by **$2.9 million** in restructuring costs related to inventory rationalization at a manufacturing plant[132](index=132&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with $132.9 million cash, $120.0 million operating cash flow, and available credit facilities - Generated **$120.0 million** in cash from operating activities during the first three months of fiscal 2026, a **$22.6 million** increase from the prior year period[158](index=158&type=chunk) - As of June 28, 2025, the company had **$132.9 million** in cash and **$496.3 million** available for borrowing under its Revolving Credit Facility[138](index=138&type=chunk)[145](index=145&type=chunk) - Total debt outstanding was **$915.6 million** as of June 28, 2025, consisting primarily of a **$413.0 million** Term Loan and **$500.0 million** in Senior Notes[84](index=84&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk) - Capital expenditures for fiscal 2026 are projected to be between **3.0% and 3.5%** of net sales[162](index=162&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages market risks from interest rates and foreign currency fluctuations through swaps, with 66% of debt fixed and 11% of sales exposed to currency - The company is exposed to interest rate risk on its variable-rate Term Loan. An interest rate swap is used to manage this exposure, and as of June 28, 2025, approximately **66%** of the company's debt bears interest at a fixed rate[167](index=167&type=chunk) - Foreign currency exchange rate fluctuations impact approximately **11%** of net sales. The company is exposed to changes in the Australian dollar, Canadian dollar, Chinese yuan, euro, British pound, Indian rupee, Mexican peso, Polish zloty, and Swiss franc[168](index=168&type=chunk) - A cross-currency swap is utilized to hedge the company's net investment in its European subsidiary, Schaublin, against adverse changes in the Swiss franc/U.S. dollar exchange rate[170](index=170&type=chunk)[156](index=156&type=chunk) [Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 28, 2025, with no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 28, 2025[171](index=171&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[172](index=172&type=chunk) [Part II - Other Information](index=34&type=section&id=Part%20II%20-%20OTHER%20INFORMATION) [Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) No new reportable legal proceedings or material developments in previously disclosed cases occurred during the quarter - No legal proceeding became a reportable event during the quarter[174](index=174&type=chunk) [Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors have been reported since the last Annual Report on Form 10-K - No material changes to risk factors were reported since the last Annual Report[175](index=175&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not issue unregistered equity securities but repurchased 33,281 shares for tax obligations, with no buybacks under the $100.0 million program - During the first quarter of fiscal 2026, the company did not issue any common stock that was not registered under the Securities Act of 1933[176](index=176&type=chunk) - A total of **33,281 shares** were repurchased from employees at an average price of **$365.64** per share to fund tax withholding obligations upon the vesting of equity awards[178](index=178&type=chunk) - As of June 28, 2025, the company has not repurchased any shares under its **$100.0 million** stock repurchase program authorized in 2019[179](index=179&type=chunk) [Defaults Upon Senior Securities](index=35&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section is not applicable for the current reporting period [Mine Safety Disclosures](index=35&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable for the current reporting period [Other Information](index=35&type=section&id=Item%205.%20Other%20Information) This section is not applicable for the current reporting period [Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including CEO/CFO certifications and Inline XBRL data files

Financial Data and Key Metrics Changes - First quarter sales were $436 million, a 7.3% increase year over year, driven by strong performance in Aerospace and Defense (A&D) and solid industrial business performance [5][15] - Consolidated gross margin for the quarter was 44.8%, down from 45.3% in the same period last year, while adjusted diluted EPS was $2.84, up from $2.54, representing an 11.8% year-over-year growth [5][17] - Free cash flow reached a record $104.3 million, with a conversion rate of 152%, compared to $88.4 million and 144% last year [5][18] Business Line Data and Key Metrics Changes - A&D sales increased by 10.4% year over year, with commercial aerospace growing by 9.6% and defense by 11.9% [6] - The industrial segment grew by 5.5% year over year, with distribution and aftermarket up by 10% [6][7] - Industrial gross margins were 46%, while A&D margins were 42.3%, with adjusted industrial gross margins at 47.1% [15][16] Market Data and Key Metrics Changes - The backlog exceeded $1 billion for the first time, with $100 million attributed to industrial products [8] - The U.S. GDP expansion of 3% confirmed a strong industrial economy during the period [7] - Demand for products in the defense sector is expected to expand in the high single to low double digits for many quarters [10] Company Strategy and Development Direction - The company is focused on organic growth through product innovation and market development, identifying new opportunities monthly [9] - The recent acquisition of VAACO is expected to enhance capacity and meet expanding customer requirements, particularly in the marine business [11][12] - The company has a well-defined five-year outlook and is positioned to achieve growth objectives through operational excellence and innovative product development [13][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing unprecedented demand in several market areas and a strong balance sheet [13] - The company anticipates revenue growth of $445 million to $455 million for the next quarter, representing year-over-year growth of 11.8% to 14.4% [18] - Management noted that the recent tax treatment for capacity investment is expected to positively influence demand for products in the industrial sector [8][26] Other Important Information - Interest expense decreased by 29.1% year over year to $12.2 million due to debt payments and reduced interest rates [17] - The company plans to use generated cash to pay off a $200 million drawdown by the end of the fiscal year [18] Q&A Session Summary Question: What parts of the five-year outlook can you share? - The company aligns historical sales by account with customer outlooks, focusing on major aerospace customers and planning capacity to meet demand [22][23] Question: Will you need to spend more on CapEx? - The company is currently airfreighting manufacturing equipment to expand capacity and expects to maintain CapEx in the 3% to 4% range [26] Question: How will the infrastructure bill impact your business? - The bill is expected to positively affect demand from smaller industrial customers, while its impact on larger aerospace customers may be limited [28] Question: Can you provide details on VACCO's revenue contribution? - VACCO is expected to contribute approximately $10 million to $11 million monthly, with all revenue going into the A&D segment [31][35] Question: What are the trends in commercial aerospace? - The company expects to expand content per build rate and is negotiating contracts with OEMs for the next five years [36][37] Question: What is the duration of the $1 billion backlog? - The backlog is expected to last multiple years, with a chance of doubling in the next twelve months, primarily driven by defense programs [46][47] Question: How do you see the integration of VACCO progressing? - The integration is expected to improve margins over 18 to 24 months, similar to past acquisitions [50][52] Question: Are there any supply chain constraints anticipated? - The company has secured extensive inventories of exotic materials and does not foresee significant issues in production capacity [62]