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RBC Bearings INC (RBC)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY2026 delivered solid growth: revenue $436.0M (+7.3% YoY), adjusted diluted EPS $2.84 (+11.8% YoY), and adjusted EBITDA $141.5M; backlog crossed $1.0B for the first time, ending at $1,017.3M .
  • Both revenue and adjusted EPS modestly beat S&P Global consensus (Rev: $436.0M vs $432.3M*; EPS: $2.84 vs $2.742*). Gross margin held at 44.8% (adjusted 45.4%) despite mix-driven pressures . Values retrieved from S&P Global.
  • Q2 FY2026 guidance: net sales $445–$455M, gross margin 44.0–44.25%, SG&A 17.0–17.25%; management expects VACCO to contribute ~$15–$20M revenue at ~25–30% gross margin in Q2 .
  • Catalysts: growing A&D demand (A&D sales +10.4% YoY; aircraft aftermarket +22.6%), record free cash flow ($104.3M; 152% conversion), and expected content gains on Pratt & Whitney GTF Advantage engines .

What Went Well and What Went Wrong

What Went Well

  • Robust segment growth: Aerospace/Defense +10.4% YoY; Industrial +5.5% YoY; aircraft aftermarket +22.6% and defense aftermarket strong; distribution/aftermarket up 10% .
  • Balance sheet and cash generation: record free cash flow $104.3M (conversion 152.3%); interest expense down to $12.2M on deleveraging/lower rates .
  • Strategic momentum and pipeline: backlog >$1.0B with management seeing a chance to double over 12 months; content expected to increase substantially on GTF Advantage over 2026–2030 .

What Went Wrong

  • Gross margin was flat-to-slightly down on GAAP (44.8% vs 45.3% YoY), reflecting mix and restructuring costs; adjusted gross margin 45.4% was only marginally higher YoY .
  • Other non-operating expense rose to $1.2M; SG&A grew to $73.9M (16.9% of sales) due to personnel/fringe and IT investments .
  • End-market pockets of weakness noted (oil & gas and semiconductors) and ongoing materials lead-time risks (exotic alloys up to ~60 weeks) requiring proactive inventory planning .

Financial Results

MetricQ3 2025Q4 2025Q1 2026
Revenue ($USD Millions)$394.4 $437.7 $436.0
Diluted EPS (GAAP) ($)$1.82 $2.30 $2.17
Adjusted Diluted EPS ($)$2.34 $2.83 $2.84
Gross Margin (%)44.3% 44.2% 44.8%
Operating Margin (%)21.7% 23.0% 23.2%
Adjusted EBITDA ($USD Millions)$122.6 $139.8 $141.5

Estimates vs Actuals (S&P Global)

MetricQ3 2025Q4 2025Q1 2026
Revenue (Estimate* / Actual, $USD Millions)$394.0* / $394.4 $440.3* / $437.7 $432.3* / $436.0
Primary EPS (Estimate* / Actual, $)$2.201* / $2.34 $2.703* / $2.83 $2.742* / $2.84
EBITDA (Estimate* / Actual†, $USD Millions)$118.5* / $141.5 $134.7* / $139.8 $135.0* / $141.5

† Actual shown is RBC’s Adjusted EBITDA per company disclosure; S&P Global’s “actual” EBITDA methodology may differ. Values retrieved from S&P Global.

Segment Breakdown

Segment Net External Sales ($USD Millions)Q3 2025Q4 2025Q1 2026
Aerospace & Defense$143.2 $157.3 $164.6
Industrial$251.2 $280.4 $271.4
Total$394.4 $437.7 $436.0

KPIs

KPIQ3 2025Q4 2025Q1 2026
Backlog at Period-End ($USD Millions)$896.5 $940.7 $1,017.3
Free Cash Flow Conversion (%)127% —152.3%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Millions)Q2 FY2026—$445.0–$455.0 Initiated
Gross Margin (%)Q2 FY2026—44.0%–44.25% Initiated
SG&A (% of Sales)Q2 FY2026—17.0%–17.25% Initiated

Note: Q1 FY2026 actuals exceeded prior guidance (net sales guided $424–$434M vs actual $436.0M; gross margin guided 44.25–44.75% vs actual 44.8%; SG&A guided 16.75–17.25% vs actual 16.9%) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q1 FY2026)Trend
Commercial Aerospace ProductionQ3 FY2025: OEM strike headwinds but robust demand; preparing for recovery . Q4 FY2025 steady A&D growth (+10.6% YoY) .Aftermarket strong (+22.6%); management “cheers” Boeing progress .Improving aftermarket; OE stabilizing .
Backlog TrajectoryQ3: $896.5M ; Q4: $940.7M .Q1: $1,017.3M; potential to double over next 12 months .Accelerating, multi‑year visibility .
Industrial DemandQ3: +2.7% YoY, return to growth . Q4: +3.3% YoY .+5.5% YoY; distribution/aftermarket +10%; GDP 3% cited; weak in oil & gas, semis .Broadening improvement; pockets of weakness .
Tariffs & Pricing—Primarily U.S.-centric; pass-throughs/contract adjustments neutralize tariff impacts .Managed exposure .
Supply Chain & Materials—Exotic alloys lead times up to ~60 weeks; proactive inventory; LA footprint supports VACO integration .Improved vs prior; still long lead items .
M&A Integration (VACCO)Agreement announced May; closed July .~$15–$20M Q2 revenue; 25–30% GM; margin ramp in 18–24 months (Sargent playbook) .Accretive revenue; margin improvement workplan .
Product/Content Expansion—“Increase content substantially” on GTF Advantage starting 2026, ramping to 2030 .Positive content gains .
Deleveraging & Capital AllocationQ3: net leverage ~1.8x; strong FCF . Q4: continued debt paydown .Drew $200M revolver for VACCO; plan to repay by FY year-end; FCF conversion 152% .Near-term leverage up; targeted deleveraging .

Management Commentary

  • “Total A&D sales were up 10.4%... aircraft aftermarket expanded 22.6%... We cheer the progress Boeing is making on aircraft production” — Dr. Michael J. Hartnett .
  • “Backlog... exceeded $1 billion... We think we have an honest to goodness chance of doubling that over the next 12 months” — Dr. Hartnett .
  • “Adjusted diluted EPS of $2.84... free cash flow $104.3M... conversion of 152%... Looking ahead... use cash to pay off the $200M we drew by the end of the fiscal year” — CFO Rob Sullivan .
  • “GTF Advantage... we’re going to increase our content substantially... start slowly in calendar 2026 and ramp through 2030” — Dr. Hartnett .

Q&A Highlights

  • VACCO modeling: Q2 contribution ~$15–$20M revenue; 25–30% gross margin; all in A&D; margin dilution near-term but still YoY GM expansion; margin ramp expected in 18–24 months (Sargent playbook) .
  • Industrial stimulus (“Big Beautiful Bill”): small customers likely to accelerate capex given expensing; distribution up 10% signals strengthening demand .
  • Supply chain and materials: exotic alloys require long planning (~60 weeks), mitigated via inventory and West Coast capacity; tariffs largely neutralized via pricing/contract terms .
  • Pricing and long-term agreements: reputation for quality and on-time delivery supports favorable contract renewals amid stabilizing production rates .

Estimates Context

  • Q1 FY2026 beat consensus: revenue $436.0M vs $432.3M*, EPS $2.84 vs $2.742*; prior two quarters also above EPS consensus (Q4: $2.83 vs $2.703*; Q3: $2.34 vs $2.201*) . Values retrieved from S&P Global.
  • Given Q2 guidance ($445–$455M revenue; 44.0–44.25% GM), Street models may need to incorporate VACCO adds and maintained GM discipline; note EBITDA definition differences between RBC’s adjusted disclosure and SPGI’s series .

Key Takeaways for Investors

  • Quality beat: modest revenue/adj EPS beats vs consensus with resilient margins and record free cash flow, supporting confidence in execution .
  • A&D upcycle intact: double-digit A&D growth, strengthening aftermarket, and expected GTF Advantage content expansion provide multi-year growth drivers .
  • Backlog inflection: >$1.0B backlog, with management pointing to potential doubling over 12 months, increases visibility and supports premium valuation narratives .
  • Industrial breadth: distribution/aftermarket strength offsets pockets of weakness (oil & gas, semis), suggesting diversified demand resilience .
  • M&A lever: VACCO adds incremental revenue near term and a credible path to margin improvement following the Sargent playbook, though near-term GM dilution is possible .
  • Capital strategy: near-term leverage uptick from VACCO funding, but FCF conversion and explicit deleveraging plan to repay revolver by year-end reduce balance sheet risk .
  • Guidance setup: Q2 outlook implies double-digit YoY growth with margins maintained, a constructive setup for ongoing estimate support .

Values retrieved from S&P Global.