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RBC Bearings INC (RBC)·Q2 2026 Earnings Summary

Executive Summary

  • Q2 FY26 revenue was $455.3M (+14.4% YoY) with adjusted EPS of $2.88; both exceeded Wall Street consensus estimates, driven by a 38.8% YoY surge in Aerospace/Defense and stable Industrial (+0.7%) . Estimates context: revenue $450.3M* and EPS $2.735*, implying a beat of ~$5.0M and ~$0.15, respectively (Values retrieved from S&P Global).
  • Adjusted EBITDA reached $145.3M (31.9% margin), and free cash flow was $71.7M (119.5% conversion), reflecting strong execution and working-capital discipline .
  • Backlog accelerated to $1.6B (from $1.0B in Q1 and ~$0.94B in Q4), with management signaling potential approach to ~$2B by year-end, supported by defense and commercial aero rate ramps and VACCO acquisition .
  • Q3 FY26 guidance: net sales $454–$462M (YoY +15.1–17.1%), adjusted gross margin 44.0–44.25%, SG&A 17.0–17.25%; organic sales growth expected 7.4–9.5% . Key stock catalysts: Boeing/Airbus rate increases, defense program ramp (submarines), VACCO integration synergies, and Boeing/Airbus contract repricing benefits beginning Jan 1 shipments .

What Went Well and What Went Wrong

What Went Well

  • Aerospace/Defense strength: A&D sales up 38.8% YoY; commercial aerospace +21.6% and defense +73.3% YoY, with management highlighting “unprecedented levels” of demand and entry into a “unique period” poised to deliver a record year .
  • Margin and cash flow execution: Adjusted gross margin expanded to 44.9% (+120 bps YoY); adjusted EBITDA margin held at 31.9%; free cash flow conversion rose to 119.5% (vs 49.4% last year) on improved earnings and working capital .
  • Backlog momentum and pricing: Backlog hit $1.6B; management expects ~$2B by year-end; renegotiated airframe contracts to see benefits on shipments after Jan 1, supporting margins .

What Went Wrong

  • Capacity constraints capped revenue in A&D despite strong demand; management is adding shifts/manpower/capex to expand throughput, implying near-term production bottlenecks .
  • Industrial OEM softness persisted (OEM off 4.7%), with weakness in oil, semiconductor machinery, and European machine tools; sequential decline noted in Industrial distribution (seasonal/lumpy orders) .
  • Higher tax rate impacted GAAP results: Q2 effective tax rate 28.0% (vs 21.9% LY), including ~$2.3M deferred tax expense related to VACCO acquisition .

Financial Results

Summary vs Prior Periods

MetricQ4 FY25Q1 FY26Q2 FY26
Revenue ($M)$437.7 $436.0 $455.3
Gross Margin % (GAAP)44.2% 44.8% 44.1%
Adjusted Gross Margin %44.2% 45.4% 44.9%
Operating Income % (GAAP)23.0% 23.2% 21.5%
Adjusted Operating Income %23.2% 24.2% 23.1%
Diluted EPS (GAAP)$2.30 $2.17 $1.90
Adjusted Diluted EPS$2.83 $2.84 $2.88
Adjusted EBITDA ($M)$139.8 $141.5 $145.3
Adjusted EBITDA Margin %31.9% 32.5% 31.9%
SG&A % of Sales16.5% 16.9% 17.0%
Backlog ($B)$0.94 $1.02 $1.60

Segment Breakdown

SegmentQ4 FY25 ($M)Q1 FY26 ($M)Q2 FY26 ($M)
Aerospace/Defense Sales$157.3 $164.6 $198.8
Industrial Sales$280.4 $271.4 $256.5
YoY Growth – A&D+10.6% +10.4% +38.8%
YoY Growth – Industrial+3.3% +5.5% +0.7%

KPIs

KPIQ1 FY26Q2 FY26
Free Cash Flow ($M)$104.3 $71.7
FCF Conversion (%)152.3% 119.5%
Backlog ($B)$1.02 $1.60

Performance vs Estimates

MetricQ1 FY26 Estimate*Q1 FY26 ActualQ2 FY26 Estimate*Q2 FY26 Actual
Revenue ($M)432.3*$436.0 450.3*$455.3
EPS (Primary)2.742*$2.84 (Adj) 2.735*$2.88 (Adj)
EBITDA ($M)135.0*$141.5 (Adj) 137.2*$145.3 (Adj)

Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($M)Q3 FY26N/A (prior period guided Q2: $445–$455M) $454–$462M Raised vs prior quarter’s guided range midpoint
Adjusted Gross Margin %Q3 FY2644.0–44.25% (Q2 guidance) 44.0–44.25% Maintained
SG&A % of SalesQ3 FY2617.0–17.25% (Q2 guidance) 17.0–17.25% Maintained
Organic Net Sales Growth YoYQ3 FY26N/A7.4–9.5% New disclosure

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 FY26)Current Period (Q2 FY26)Trend
Aerospace/Defense demandA&D up 10.4% YoY; defense high single/low double-digit growth expected; backlog >$1B A&D up 38.8% YoY; defense +73.3%; backlog $1.6B with potential ~$2B by year-end Strongly improving
Capacity expansionPlanning 5-year capacity; capex roughly 3–4% of revenue; accelerating equipment additions Plants at ~100% utilization; adding shifts/manpower/capex; margin uplift from absorption Accelerating
Boeing/Airbus contract renegotiationNegotiations to expand content and LTAs; optimistic tone Two-year weekly negotiations concluded; benefits on shipments post Jan 1 Pricing tailwind commencing
VACCO integrationClose in July; ~$15–$20M revenue expected in Q2; 25–30% GM; A&D classification $24.7M revenue in Q2; mid-20% margins; synergy plans to lift margins to RBC levels Integration progressing
Industrial end marketsDistribution +10% in Q1; OEM mixed; oil/semiconductor weak Distribution +3.3% YoY; OEM –4.7%; Europe machine tools weak; sequential softness Mixed/soft
Materials/supply chainExotics lead times ~60 weeks; inventory strategies mitigate risks Exotic stainless issues improved; minimal rare earth impact Improving
Tariffs/macroNeutralized via pricing/contract adjustments; USA oriented No material impact; pass-through where possible Stable
AI/technologyNot discussed substantively in Q1Active engineering use of AI (e.g., tribology design insights); productivity aid Emerging adoption

Management Commentary

  • “Our performance during the second quarter achieved a very high standard as demand from many of our core markets reached unprecedented levels… Clearly, we have entered a unique period in our business cycle and look forward to delivering a record year to our shareholders.” – Dr. Michael J. Hartnett .
  • “Backlog is up to $1.6 billion today… We fully expect to approach $2 billion in backlog by year's end.” – Dr. Hartnett .
  • “We should see most, if not all [contract repricing] right away on the shipments that start after January 1.” – Dr. Hartnett on Boeing/Airbus LTAs .
  • “Adjusted EBITDA of $145.3 million… represents an approximate 17.7% increase in EBITDA dollars compared to last year… Free cash flow in the quarter came in at $71.7 million, with conversion of 119.5%.” – Rob Sullivan .

Q&A Highlights

  • Backlog drivers and composition: ~+$500M increase due to VACCO; >90% backlog A&D; negotiations expected to round backlog to ~$2B near year-end .
  • Capacity plan and margin implications: Plants at ~100% utilization; adding shifts/manpower/capex; improved overhead absorption to expand margins .
  • VACCO margins and synergy: Currently mid-20% adjusted gross margins; management expects margin expansion through operational synergies and West Coast capacity; renegotiating space contracts .
  • Boeing/Airbus repricing: After two years of weekly negotiations, benefits largely effective for shipments post Jan 1; neither side fully satisfied, but RBC “wasn't disappointed” .
  • Macro/tariffs/materials: No rare earth impact; exotic stainless supply improved; tariffs neutralized through pricing/contract terms; defense programs insulated from shutdown .

Estimates Context

  • Q2 FY26 vs consensus: Revenue $455.3M vs $450.3M* – beat of ~$5.0M (+1.1%); adjusted EPS $2.88 vs $2.735* – beat of ~$0.15 (+5.3%); adjusted EBITDA $145.3M vs $137.2M* – beat of ~$8.1M . Values retrieved from S&P Global.
  • Q1 FY26 vs consensus: Revenue $436.0M vs $432.3M*; adjusted EPS $2.84 vs $2.742*; adjusted EBITDA $141.5M vs $135.0M* . Values retrieved from S&P Global.
  • Implications: Consensus likely rises for FY26 and Q3 reflecting stronger A&D mix, backlog, and early pricing tailwinds; organic growth guide (7.4–9.5%) and margin maintenance supports stable upward revisions .

Key Takeaways for Investors

  • A&D mix is inflecting positively; defense and commercial aero rate ramps plus VACCO add incremental growth and pricing tailwinds; backlog trajectory to ~$2B is a major visibility catalyst .
  • Contract repricing with Boeing/Airbus should begin to benefit margins from shipments after Jan 1, compounding with overhead absorption as capacity expands .
  • Industrial remains mixed; watch distribution seasonality and OEM weakness (oil/semis/Europe) as offsets to A&D strength .
  • Cash generation remains strong; deleveraging plan on track (term loan paydowns, revolver extended to 2030), reducing interest expense and supporting equity value .
  • Q3 guide implies sustained growth with maintained margin structure; organic growth 7.4–9.5% supports near-term revenue beats if execution holds .
  • VACCO integration is a medium-term margin expansion opportunity with West Coast synergies; expect mid-20% margin drag to diminish over 18–24 months .
  • Near-term trading: Positive skew from estimates beats, backlog growth, and imminent pricing benefits; medium-term thesis: margin expansion through mix, pricing, and integration, underpinned by secular A&D demand .