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Here's Why Should You Add RBC Bearings to Your Portfolio Now

Zacks Equity Research
Updated

Trump’s long-awaited $1.5-trillion infrastructure plan, rising employment levels, upbeat wage rates, increasing consumer confidence and a modest inflation will likely bring to the forefront some bullish stocks within the industrial products market.

The Zacks Industrial Products sector flaunts a Zacks Rank #1, at present (out of 16 sectors). Hence, top-performing stocks from this sector will make valuable additions to any portfolio.

Among the numerous potential gainers, adding RBC Bearings Incorporated ROLL to your portfolio will be a promising move.

Over the last month, shares of this Zacks Rank #1 (Strong Buy) company have rallied 8.1%, outperforming 4.9% growth recorded by the industry.



Promising Aspects

Tactical Business Strategy: RBC Bearings intends to become the leading provider of precision engineered components and bearings in the market. The company intends to meet this goal backed by strategic acquisitions, customer-base enlargement, business expansion in new end-markets, higher aftermarket sales and development of innovative solutions.

Top-Line Prospects: RBC Bearings believes robust industrial original equipment manufacturers’ (OEM) demand, and higher industrial distribution and aftermarket sales will drive its industrial sales in the quarters ahead. On the other hand, elevated Aero OEM’s demand and augmented build rates of single-aisle planes are expected to bolster the company’s aerospace revenues.

The company intends to report revenues in the range of $172-$175 million in fourth-quarter fiscal 2018 (estimating year-over-year increment of 7.4-9.2%).

Notably, the stock’s projected sales growth rates for fiscal 2018 and 2019 are pegged at 8.84% and 9.14%, respectively.

Profitability: RBC Bearings has been strengthening its bottom-line performance with higher revenues and wider margins.

The above graph shows that the company’s earnings per share (EPS) have been improving for the last few quarters. Notably, we notice that in the fiscal third quarter, the company’s adjusted earnings per share was up 43.8% year over year and also surpassed the Zacks Consensus Estimate by 22.09%.

During the fiscal third quarter, the company’s adjusted gross margin expanded 90 basis points year over year. Per management, this upside stemmed from the company’s cost-reduction initiatives, consolidation programs and production-process improvements. These moves will likely continue to enhance RBC Bearings’ profitability in the near term.

Also, we believe lower corporate tax rates (as a result of the Tax Cut and Jobs Act) will help boost the company’s profitability.

Liquidity: RBC Bearings has been improving its liquidity on the back of increased cash generation over the past few quarters. The company intends to lower its debt burden, fund new growth-oriented investments and provide higher returns to shareholders with these proceeds. For instance, in third-quarter fiscal 2018, RBC Bearings lowered its debt by $73.1 million.

Upward Estimate Revisions: Over the past 60 days, the Zacks Consensus Estimate for RBC Bearings moved 8% upward to $3.91 and 13% to $4.68 for fiscal 2018 and fiscal 2019, respectively.

The positive earnings estimate revision indicates upbeat sentiments and substantiates the Zacks Rank #1 for this stock.

The stock’s projected EPS growth rates for fiscal 2018 and fiscal 2019 are pegged at 23.3% and 19.8%, respectively.

Other Stocks to Consider

Some other top-ranked stocks in the same space are listed below:

Applied Industrial Technologies, Inc. AIT flaunts a Zacks Rank of 1. The company’s EPS is projected to be up 12% in the next three to five years. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dover Corporation DOV also sports a Zacks Rank of 1. The company’s EPS is estimated to rise 13% over the next three to five years.

Roper Technologies, Inc. ROP sports a Zacks Rank of 1. The company’s EPS is predicted to be up 12.3% during the same time frame.

The Hottest Tech Mega-Trend of All                 

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See Zacks' 3 Best Stocks to Play This Trend >>              


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Roper Technologies, Inc. (ROP) : Free Stock Analysis Report
 
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RBC Bearings Incorporated (ROLL) : Free Stock Analysis Report
 
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Zacks Investment Research