RBC Bearings Incorporated (ROLL) Bundle
Understanding RBC Bearings Incorporated (ROLL) Revenue Streams
Understanding RBC Bearings Incorporated’s Revenue Streams
Revenue Breakdown by Segment:
| Segment | Net Sales (Q2 2024) | Net Sales (Q2 2023) | Change ($) | Change (%) |
|---|---|---|---|---|
| Aerospace/Defense | $143.2 million | $127.3 million | $15.9 million | 12.5% |
| Industrial | $254.7 million | $258.3 million | $(3.6) million | (1.4%) |
| Total | $397.9 million | $385.6 million | $12.3 million | 3.2% |
Year-over-Year Revenue Growth Rate:
For the six-month period ended September 28, 2024, total net sales were $804.2 million, compared to $772.7 million for the same period last year, reflecting a growth of $31.5 million or 4.1% year-over-year.
Contribution by Business Segment:
- Aerospace/Defense Segment contributed $292.3 million for the six months ended September 28, 2024, representing an increase of 18.0% year-over-year.
- Industrial Segment reported $511.9 million in net sales for the same period, a decrease of 2.5% year-over-year.
Revenue Changes Analysis:
The Aerospace/Defense segment's growth was driven by a 27.3% increase in the defense market, with OEM sales reaching $75.7 million and aftermarket sales at $23.8 million for the first six months of fiscal 2025. In contrast, the Industrial segment faced a 2.5% decline, with OEM sales at $164.5 million and aftermarket sales at $347.4 million.
Geographic Revenue Breakdown:
| Geographic Region | Net Sales (Q2 2024) | Net Sales (Q2 2023) |
|---|---|---|
| United States | $352.4 million | $342.0 million |
| International | $45.5 million | $43.6 million |
In the second quarter of fiscal 2025, the United States accounted for a significant portion of net sales, totaling $352.4 million, while international sales reached $45.5 million.
Conclusion of Revenue Analysis:
Overall, the company's revenue streams demonstrate a healthy growth trajectory in the Aerospace/Defense sector, while the Industrial segment shows signs of volatility, reflecting broader market conditions.
A Deep Dive into RBC Bearings Incorporated (ROLL) Profitability
A Deep Dive into RBC Bearings Incorporated's Profitability
Gross Profit Margin: For the six months ended September 28, 2024, the gross margin was $119.9 million on total net sales of $292.3 million, resulting in a gross profit margin of 41.0%. This is an increase from 39.5% in the same period last year.
Operating Profit Margin: The operating income for the first six months of fiscal 2025 was $86.1 million, with total operating expenses of $87.7 million, leading to an operating profit margin of approximately 10.6%.
Net Profit Margin: The net income attributable to common stockholders for the six months ended September 28, 2024, was $104.2 million, which translates to a net profit margin of 12.9% against total net sales of $804.2 million.
Trends in Profitability Over Time
Comparing the six-month periods, net income increased from $90.2 million in the previous year to $104.2 million in 2024, reflecting a growth rate of 15.5%. The gross margin also improved from 43.2% to 44.5% during the same timeframe.
Comparison of Profitability Ratios with Industry Averages
The average gross profit margin in the manufacturing sector is approximately 34%. RBC Bearings' gross profit margin of 41.0% indicates a strong competitive position. The operating profit margin of 10.6% compares favorably against the industry average of around 8%. The net profit margin of 12.9% also exceeds the industry average, which typically hovers around 7%.
Analysis of Operational Efficiency
The selling, general, and administrative (SG&A) expenses for the first six months of fiscal 2025 were $137.1 million, or 17.0% of net sales, up from 16.2% the previous year. This increase was primarily due to higher personnel and professional costs. Despite this, the gross margin improved due to enhanced manufacturing efficiencies and a favorable product mix.
| Metric | Six Months Ended September 28, 2024 | Six Months Ended September 30, 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Total Net Sales | $804.2 million | $772.7 million | $31.5 million | 4.1% |
| Gross Margin | $357.8 million | $334.2 million | $23.6 million | 7.1% |
| Net Income | $104.2 million | $90.2 million | $14.0 million | 15.5% |
| SG&A | $137.1 million | $125.2 million | $11.9 million | 9.5% |
The operational efficiency is highlighted by the increase in gross margin percentage from 43.2% to 44.5%, showcasing effective cost management strategies.
Debt vs. Equity: How RBC Bearings Incorporated (ROLL) Finances Its Growth
Debt vs. Equity: How RBC Bearings Incorporated Finances Its Growth
As of September 28, 2024, the company reported a total long-term debt of $1,099.7 million and a current portion of long-term debt of $1.8 million. This signifies a decrease in long-term debt from $1,188.1 million as of March 30, 2024. The total current liabilities amounted to $293.9 million.
The debt-to-equity ratio stands at approximately 0.38, calculated from total liabilities of $1,829.5 million and total stockholders’ equity of $2,883.3 million. This ratio is notably lower than the industry average of around 1.0, indicating a conservative approach to leveraging.
In recent activity, the company issued $500.0 million in 4.375% Senior Notes due in 2029, with net proceeds of approximately $492.0 million being allocated for acquisitions. As of the latest reporting period, the company has maintained compliance with its credit agreement, which includes a maximum total net leverage ratio of 5.00:1.00 and a minimum interest coverage ratio of 2.00:1.00.
To manage its debt effectively, the company has engaged in interest rate swaps, with approximately 82% of its debt bearing interest at a fixed rate. This hedging strategy helps mitigate interest rate risk, particularly on its variable-rate Term Loan, which had a balance of $600.0 million as of September 28, 2024.
| Debt Type | Amount (in millions) |
|---|---|
| Long-term Debt | $1,099.7 |
| Current Portion of Long-term Debt | $1.8 |
| Total Current Liabilities | $293.9 |
| Total Liabilities | $1,829.5 |
| Total Stockholders’ Equity | $2,883.3 |
| Debt-to-Equity Ratio | 0.38 |
| Senior Notes Issued | $500.0 |
The company continues to balance its financing strategies between debt and equity, utilizing operating cash flows and available credit to support growth initiatives. As of September 28, 2024, cash and cash equivalents amounted to $89.1 million, providing a solid liquidity buffer for ongoing operations.
Assessing RBC Bearings Incorporated (ROLL) Liquidity
Assessing RBC Bearings Incorporated's Liquidity
As of September 28, 2024, the liquidity position of RBC Bearings Incorporated can be assessed through several key financial metrics.
Current and Quick Ratios
The current ratio, which measures the company's ability to cover its short-term liabilities with its short-term assets, is:
- Current Assets: $646.7 million
- Current Liabilities: $156.7 million
- Current Ratio: 4.13
The quick ratio, which excludes inventory from current assets to provide a stricter measure of liquidity, is calculated as follows:
- Cash and Cash Equivalents: $89.1 million
- Accounts Receivable: $145.4 million
- Current Liabilities: $156.7 million
- Quick Ratio: 1.49
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, is a critical indicator of liquidity. The working capital for the company is:
- Working Capital: $646.7 million - $156.7 million = $490.0 million
This figure indicates a strong liquidity position, suggesting that the company can easily meet its short-term obligations.
Cash Flow Statements Overview
Examining the cash flow statements provides insight into the company's operational efficiency and liquidity trends:
| Cash Flow Type | Six Months Ended September 28, 2024 (in millions) | Six Months Ended September 30, 2023 (in millions) |
|---|---|---|
| Operating Cash Flow | $140.4 | $114.8 |
| Investing Cash Flow | ($25.2) | ($14.2) |
| Financing Cash Flow | ($89.0) | ($90.4) |
Potential Liquidity Concerns or Strengths
As of the latest reporting period, the company had cash and cash equivalents of $89.1 million, of which approximately $22.8 million was held by foreign subsidiaries. The available credit under the revolving credit facility, which totals $500.0 million, provides additional liquidity support. Furthermore, the company has a term loan of $1,300.0 million, with no required principal payments for fiscal 2025 and fiscal 2026, indicating a manageable debt service requirement.
Overall, RBC Bearings Incorporated's liquidity position appears robust, with strong current and quick ratios, significant working capital, and positive cash flow trends from operations.
Is RBC Bearings Incorporated (ROLL) Overvalued or Undervalued?
Valuation Analysis
To determine whether RBC Bearings Incorporated is overvalued or undervalued, we will analyze key financial ratios including the Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios, along with stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio for RBC Bearings is 82.45, based on a trailing twelve-month (TTM) earnings per share (EPS) of $3.55 and a stock price of $293.50 as of October 2024.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 3.22, calculated from a book value per share of $91.17 and the current stock price of $293.50.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is 23.9, derived from an Enterprise Value of $2.5 billion and EBITDA of $104.2 million for the latest fiscal year.
Stock Price Trends
| Date | Stock Price | Change (%) |
|---|---|---|
| October 2023 | $223.30 | - |
| January 2024 | $240.00 | 7.53% |
| April 2024 | $250.00 | 4.17% |
| July 2024 | $275.00 | 10.00% |
| October 2024 | $293.50 | 6.73% |
Dividend Yield and Payout Ratios
The current dividend yield for RBC Bearings is 0.65%, with an annual dividend of $1.90 per share. The payout ratio is approximately 53.38%, indicating that the company distributes over half of its earnings as dividends.
Analyst Consensus on Stock Valuation
The consensus among analysts is a Hold rating. Of the analysts covering the stock, 60% recommend holding, while 30% suggest buying and 10% recommend selling based on current market conditions and valuation metrics.
Key Risks Facing RBC Bearings Incorporated (ROLL)
Key Risks Facing RBC Bearings Incorporated
The financial health of RBC Bearings Incorporated is influenced by various internal and external risk factors. Understanding these risks is essential for investors considering their investment strategy.
Industry Competition
The bearing and engineered products industries are highly competitive. This competition could reduce profitability or limit growth potential. In fiscal 2024, the company reported a 2.5% decrease in total net sales in the Industrial segment, indicating pressure from competitors.
Regulatory Changes
Changes in U.S. government spending and regulatory requirements can adversely affect the company's operations. The effective income tax rate for the six-month period ended September 28, 2024, was 22.6%, slightly increased from 22.3% in the previous year. Compliance with government regulations is critical; failure to adhere could materially reduce revenues and profitability.
Market Conditions
Fluctuating supply and costs of raw materials can significantly impact financial performance. The company has highlighted weakness in the semiconductor and oil and gas markets, contributing to a 2.5% decline in Industrial net sales year-over-year.
Operational Risks
Unexpected equipment failures or catastrophic events could lead to increased costs and reduced sales. For instance, shipping delays due to Hurricane Helene impacted net sales by an estimated $4.0 to $5.0 million in the quarter ending September 28, 2024.
Financial Risks
The company is exposed to interest rate fluctuations. Approximately 82% of the debt bears interest at a fixed rate after considering an interest rate swap. Increases in interest rates could increase the cost of servicing the Term Loan, potentially reducing profitability.
Strategic Risks
Acquisition-related risks remain a concern. The company incurred substantial debt for acquisitions, which could constrain business operations and expose it to default risks. Goodwill and indefinite-lived intangibles comprise a significant portion of total assets, which could be adversely affected by impairment.
Mitigation Strategies
The company is actively managing risks through strategic planning and operational improvements. This includes maintaining a diversified customer base and improving manufacturing efficiencies, which have helped increase gross margins to 46.5% for the first six months of fiscal 2025.
| Risk Factor | Description | Impact | Current Status |
|---|---|---|---|
| Industry Competition | High competition in the bearing industry | Potential reduction in profitability | 2.5% decrease in Industrial sales |
| Regulatory Changes | Changes in government spending and regulations | Adverse effects on operations | Effective tax rate increased to 22.6% |
| Market Conditions | Fluctuating raw material costs | Impact on financial performance | Weakness in semiconductor market noted |
| Operational Risks | Equipment failures and catastrophic events | Increased costs and reduced sales | Shipping delays impacted sales by $4.0-$5.0M |
| Financial Risks | Interest rate fluctuations | Increased debt servicing costs | 82% of debt at fixed rates |
| Strategic Risks | Risks associated with acquisitions | Potential for defaults | Significant goodwill on balance sheet |
Future Growth Prospects for RBC Bearings Incorporated (ROLL)
Future Growth Prospects for RBC Bearings Incorporated
Analysis of Key Growth Drivers
The company continues to focus on product innovation, market expansion, and strategic acquisitions to drive growth. Recent advancements in the Aerospace/Defense segment, with a 12.5% increase in net sales for the quarter ended September 28, 2024, indicates robust demand, particularly in defense sales which rose 17.3% compared to the previous year.
Future Revenue Growth Projections and Earnings Estimates
For the third quarter of fiscal 2025, net sales are projected to be between $390.0 million and $400.0 million, reflecting an increase of 4.3% to 7.0% compared to the same period last fiscal year. Over the first six months of fiscal 2025, total net sales reached $804.2 million, marking a 4.1% increase year-over-year.
Strategic Initiatives or Partnerships
The company has been active in expanding its operational capabilities, with recent capital expenditures of $25.2 million in the first half of fiscal 2025, compared to $14.2 million in the same period of the prior year. This reflects ongoing investments in manufacturing and infrastructure to support growth initiatives.
Competitive Advantages
RBC Bearings maintains a competitive edge through its strong gross margin performance, which improved to 46.5% for the first six months of fiscal 2025, up from 45.0% in the previous year. The company’s ability to achieve operational efficiencies and a favorable product mix positions it advantageously against competitors.
| Metric | Q2 FY2025 | Q2 FY2024 | Year-over-Year Change |
|---|---|---|---|
| Total Net Sales | $397.9 million | $385.6 million | +3.2% |
| Aerospace/Defense Net Sales | $143.2 million | $127.3 million | +12.5% |
| Industrial Net Sales | $254.7 million | $258.3 million | -1.4% |
| Net Income Attributable to Common Stockholders | $48.5 million | $45.9 million | +5.6% |
| Gross Margin (%) | 46.5% | 45.0% | +1.5% |
As of September 28, 2024, the company reported cash and cash equivalents of $89.1 million, which indicates strong liquidity to support further growth initiatives. The backlog of orders stood at $864.0 million, up from $821.5 million in March 2024, suggesting sustained demand in the marketplace.
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Article updated on 8 Nov 2024
Resources:
- RBC Bearings Incorporated (ROLL) Financial Statements – Access the full quarterly financial statements for Q2 2024 to get an in-depth view of RBC Bearings Incorporated (ROLL)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View RBC Bearings Incorporated (ROLL)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.