RBC Bearings' Growth Prospects Dimmed By Near-Term Risks

We issued an updated research report on RBC Bearings Incorporated (NASDAQ:ROLL) on Jul 4, 2016. The $1.7 billion company mainly engages in manufacturing and distributing bearings. The company offers solid long-term growth potential, but certain near-term risks might restrict its growth momentum.

Below we briefly discuss the RBC Bearings’ tailwinds and headwinds.

Growth Drivers

Solid Product Portfolio & End-Market Diversification: Over time, RBC Bearings has been benefiting from its solid product portfolio, including plain, roller and ball bearings as well as collets. These products are widely used in the aerospace, heavy truck manufacturing, industrial, defense and machinery manufacturing industries. The combined impact of solid products and vast customer base in various end-markets is likely to boost the company’s organic growth.

Inorganic Growth: RBC Bearings has long been expanding its businesses through meaningful acquisitions. For instance, the company acquired Sargent Aerospace & Defense business in fiscal 2016. The business generated roughly $173 million in revenues in the year. In the quarters ahead, the company aims to generate more revenues and improve its margins from its acquired assets.

Solid Results and Promising Future: In fourth-quarter fiscal 2016 (ended Mar 2016), the company recorded an earnings beat of 3.61%. Also, earnings per share and revenues improved 17.8% and 43.1% year over year respectively on the back of improved aerospace business. In the quarters ahead, the company anticipates an increase in demand for its products given a solid backlog, to drive its top line growth.

Near-Term Headwinds

Risks Arising from International Operations & Global Uncertainties: International expansion of businesses has exposed RBC Bearings to risks arising from foreign currency translations and other geopolitical issues. In addition, machinery companies like RBC Bearings are highly susceptible to global economic conditions as well as level of industrial activities in the U.S.

Stiff Competition: RBC Bearings faces stiff competition from other players in the industry, exposing it to the risks of market share loss. The company’s primary competitors include Kadant Inc. (NYSE:KAI) , Manitex International, Inc. (NASDAQ:MNTX) and Nordson Corporation (NASDAQ:NDSN) .

Other Headwinds: RBC Bearings is also exposed to risks arising from volatilities in input price & supply and difficulties or delays in production and providing services. Also, unfavorable seasonal conditions might adversely impact its results.


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NORDSON CORP (NDSN): Free Stock Analysis Report

KADANT INC (KAI): Free Stock Analysis Report

RBC BEARINGS (ROLL): Free Stock Analysis Report

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