RBC Bearings Inc (RBC) Q2 2025 Earnings Call Highlights: Strong A&D Growth Amid Industrial ...

Nov 07, 2024

Net Sales: $398 million, a 3.2% increase year-over-year.

A&D Sales Growth: 12.5% year-over-year, with defense up 17.3% and commercial aerospace up 10.3%.

Industrial Segment Sales: Down 1.4% year-over-year; OEM down 2.5%, aftermarket down 0.9%.

Gross Margin: $173.8 million or 43.7% of sales, a 55 basis point increase year-over-year.

Net Income: $67 million, up 6% year-over-year.

Adjusted EPS: $2.29 per share, compared to $2.17 per share last year.

Cash from Operations: $43 million, compared to $53 million last year.

Debt Reduction: Over $35 million in the quarter, with a year-to-date total of $128.7 million.

Adjusted EBITDA: $123.4 million, up 1.1% year-over-year; margin of 31%.

Interest Expense: $15.6 million, down 22% year-over-year.

Tax Rate: 22.1%, consistent with last year's rate.

Free Cash Flow Conversion: Approximately 100% of net income for the first six months of fiscal 2025.

Third Quarter Revenue Guidance: $390 million to $400 million, representing 4.3% to 7% year-over-year growth.

Third Quarter Gross Margin Guidance: 42.5% to 43.5%, an increase of roughly 70 basis points year-over-year at the midpoint.

Warning! GuruFocus has detected 6 Warning Sign with RBC.

Release Date: November 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

RBC Bearings Inc (NYSE:RBC) reported a 3.2% increase in net sales for the second quarter, driven by strong performance in the Aerospace and Defense (A&D) segment.

The A&D segment saw a 12.5% year-over-year growth, with defense sales up 17.3% and commercial aerospace sales up 10.3%.

Gross margin improved to 43.7% of sales, a 55 basis point increase year-over-year, attributed to increased absorption in A&D capacity and ongoing synergies from the Dodge acquisition.

Net income rose by 6% year-over-year, translating into an adjusted EPS of $2.29 per share, up from $2.17 per share last year.

RBC Bearings Inc (NYSE:RBC) reduced its debt by over $35 million in the quarter, with a year-to-date debt reduction of $128.7 million, positioning the balance sheet well for future acquisitions.

The industrial segment experienced a 1.4% decline year-over-year, with OEM sales down 2.5% and aftermarket sales down 0.9%.

Unexpected headwinds, including a Boeing strike and the impact of Hurricane Beryl, resulted in a revenue impact of $4 million to $5 million during the period.

Cash from operations decreased to $43 million compared to $53 million last year, primarily due to the timing and scope of cash tax payments.

Adjusted EBITDA margin decreased by 66 basis points year-over-year to 31%, despite being above the full-year 2024 margin.

The company faces uncertainty regarding Boeing's production rates, particularly for the 737, which could impact future revenue projections.

Q: Can you quantify the impact of the Boeing strike and the hurricane on gross margins? A: Michael Hartnett, CEO: While it's possible to quantify, I can't do it here. The consolidated gross margin reflects those impacts, and using it for EPS contribution is fair.

Q: Has the exposure to Boeing decreased further, and is there a risk of destocking once production ramps up? A: Michael Hartnett, CEO: Our exposure is at a low point. Once Boeing resumes production, they will likely create a strong demand, so I don't foresee a destocking issue.

Q: Are you seeing any slowdown in defense bookings due to the continuing resolution for the Department of Defense? A: Michael Hartnett, CEO: No, our defense bookings are primarily with OEMs, not directly with the Department of Defense, and they are firm contracts extended over many years.

Q: What is driving the confidence in industrial sales growth for the next quarter, and do you expect both OEM and aftermarket to return to positive growth? A: Daniel Bergeron, COO: Growth is driven by mining, multi-industrial, food and beverage, and warehousing sectors. We expect oil and gas and semiconductor sectors to recover in the fourth quarter or first quarter.

Q: How is the M&A landscape, and are there opportunities due to stress in the Boeing supply chain? A: Michael Hartnett, CEO: We see opportunities, especially in A&D, but competition from private equity is strong. Many businesses have significant challenges that require a comprehensive approach to resolve.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.