RBC Bearings Keeps Rolling Higher

Making precision bearings and components isn't a sexy business, but it has been a lucrative one for RBC Bearings (NASDAQ: ROLL). The company has targeted the industrial, defense, and aerospace industries with its essential parts, and coming into Thursday's fiscal second-quarter financial report, RBC Bearings shareholders were hoping the company would still be able to post the growth they've gotten used to seeing. RBC had a solid quarter, and in general, investors seemed pleased with what they saw.

Let's take a closer look at how RBC Bearings did and whether it can keep up the pace for the rest of its fiscal year and beyond.

Image source: RBC Bearings.

RBC Bearings keeps churning out growth

RBC Bearings' fiscal second-quarter results were solid. Revenue climbed by 3.5% to $153.9 million, and that was just a bit higher than what most investors were expecting from the bearings manufacturer. Adjusted net income climbed to $18.4 million, up just over 3% from year-ago levels, and that produced adjusted earnings of $0.78 per share, topping the consensus forecast by $0.01 per share.

Taking a closer look at RBC Bearings' financials, growth came from a fairly diverse set of areas. The company's aerospace-related sales grew at a slightly slower pace than sales in its industrial markets, but both showed healthy increases. Drilling down on particular product categories, the ball-bearings business grew by the largest percentage, climbing 11% from year-ago figures. The engineered-products segment also continued to do well, posting revenue gains of 7%, outpacing the plain bearings business and its revenue gains of about 2%. Only the roller bearings business lost ground, with sales declines of just over 1%.

However, as we've seen in past quarters, margin figures have suffered as RBC has gotten bigger. Gross margin was down a full percentage point from year-ago levels, hitting 36.9%, and operating margin also fell slightly on an adjusted basis. Yet RBC was still able to boost its net profit margin, and that reflected the efforts the company has made to try to reduce expenses and taxes wherever it can.

CEO Michael Hartnett was quite comfortable with RBC's quarterly results. "We are seeing solid customer acceptance of our aerospace and defense products," Hartnett said, which is leading to a number of large opportunities for the business and provides an excellent path for [original equipment manufacturer] aerospace growth in future years." The CEO also was pleased that RBC was able to find pockets of strength even in some industries that have suffered economically in the recent past.

Can RBC Bearings keep climbing?

For the most part, RBC seems optimistic about its future prospects. Yet one area investors have kept an eye on recently is RBC's ability to keep its order flows strong. Backlogs of $341.8 million were down from year-ago levels, but only by $6 million, and that suggests that RBC is managing to replace most of its used-up backlog each quarter through new orders.

Another thing to notice is that RBC Bearings didn't make any stock repurchases during the quarter. Activity has been limited at best, recently, with the company spending just $3.5 million in the fiscal first quarter. However, a complete lack of buybacks does show that RBC isn't making capital return a priority for its use of capital.

RBC Bearings investors reacted favorably to the report, sending the stock up about 3.5% at midday following the announcement. Because its key markets are continuing to perform well, RBC is inspiring confidence among its shareholders that it can keep producing the solid results they've come to expect from the company.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends RBC Bearings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.