RBC Bearings surges after crushing Q3 estimates, backlog soars to $2.1bn
Aerospace and defense demand drives record order book as industrial components maker raises guidance
RBC Bearings shares rallied in morning trading Wednesday after the precision components manufacturer delivered stronger-than-expected fiscal third quarter results, with earnings per share beating analyst estimates by 6.2% and a record backlog that has more than doubled in the past year.
The Oxford, Connecticut-based company reported adjusted earnings of $3.04 per share, well ahead of the $2.86 consensus forecast from Wall Street analysts. Revenue climbed 17% year-over-year to $461.6 million, extending the company's streak of double-digit top-line growth.
The standout performance came from RBC's aerospace and defense segment, which surged 41.5% amid what executives described as robust demand from both commercial and military customers. The division's strength helped drive the company's total backlog to $2.1 billion, a dramatic increase from $900 million in the prior-year period.
"We continue to see significant opportunities across our served markets, particularly in aerospace and defense where our robust, growing backlog positions us well for sustained growth," said Michael Hartnett, RBC Bearings' chief executive officer, in the earnings announcement.
The company's guidance for the fiscal fourth quarter calls for revenue between $495 million and $505 million, representing growth of 13.1% to 15.4% compared with the same period last year. The upbeat outlook reflects management's confidence in the company's ability to convert its bulging order book into sales.
Free cash flow generation improved markedly during the quarter, rising 35% to $99.1 million with a conversion rate of 147%. The strong cash performance underscores the operational leverage in RBC's business model as it benefits from higher volumes and improved productivity across its manufacturing facilities.
Investors have been closely watching RBC Bearings as a bellwether for industrial demand, particularly given the company's exposure to both commercial aerospace recovery and increased military spending. The 133% surge in backlog suggests customers are locking in capacity amid supply chain constraints that have persisted across the manufacturing sector.
The stock, which trades on the New York Stock Exchange under the symbol RBC, has been one of the better performers in the industrial machinery sector over the past year, though it remains below its 52-week high of $521.09 reached in January. Analysts covering the company maintain a predominantly positive outlook, with six analysts rating the shares as buy or strong buy and just two recommending hold, according to market data.
RBC's forward price-to-earnings multiple of approximately 14.5 times reflects the market's expectations for continued earnings growth, particularly as the company's sizable backlog begins to convert to revenue in coming quarters. The company's trailing P/E ratio of 61.7 appears elevated but is largely a function of the recent earnings surge rather than historical averages.
The industrial components maker's performance contrasts with broader concerns about slowing manufacturing activity in other sectors. While some industrials have reported softening demand as customers work through excess inventory, RBC's aerospace and defense exposure has provided insulation from those cyclical headwinds.
Looking ahead, investors will focus on RBC's ability to execute on its record backlog while maintaining profit margins. The company has historically demonstrated strong pricing power in its specialized bearings market, though input cost inflation remains a potential risk factor to monitor in subsequent quarters.
RBC Bearings operates more than 50 manufacturing facilities globally and employs approximately 4,000 people. The company's products are used in a wide range of applications, from aircraft engines and wind turbines to construction equipment and medical devices, giving it diversified exposure across multiple end markets.