RBC Bearings INC (RBC)·Q4 2025 Earnings Summary

Executive Summary

• Q4 FY2025 delivered resilient growth: revenue $0.438B (+5.8% YoY) and adjusted diluted EPS $2.83; EPS beat consensus by ~$0.13 while revenue was modestly below consensus by ~$2.6M. Backlog reached $940.7M, reflecting durable demand in Aerospace/Defense and improving Industrial trends . EPS estimate $2.703*; revenue estimate $440.3M* (S&P Global).
• Margin execution remained strong despite aerospace production choppiness: gross margin 44.2% (+110 bps YoY) and operating margin 23.0% (+20 bps YoY), supported by manufacturing performance and Dodge synergies .
• Q1 FY2026 guide implies continued momentum: net sales $424–$434M, gross margin 44.25–44.75%, SG&A 16.75–17.25% of sales. Management targets FY2026 gross margin expansion of 50–100 bps, adjusted tax rate 22–23%, FCF conversion ~100%, and CapEx 3–3.5% of sales .
• Strategic catalyst: RBC agreed to acquire VACCO Industries for $310M (TTM revenue ~$118M) to expand space and naval defense content; financing via existing credit lines and cash, expected close in summer 2025 .
• Balance sheet strength and optionality: $275M debt repaid in FY2025; trailing net leverage at 1.7x, positioning RBC for accretive M&A while funding capacity expansions to meet A&D demand .

What Went Well and What Went Wrong

What Went Well

• Aerospace/Defense growth of 10.6% YoY (commercial aero +11.6%, defense +8.2%), with strength across engines, spares, missiles/munitions, and space .
• Margin expansion: gross margin 44.2% (+110 bps YoY) and adjusted EBITDA margin 31.9% (+50 bps YoY) on strong manufacturing performance and Dodge synergies. “Adjusted EBITDA of $139.8M… an adjusted EBITDA margin of 31.9%” .
• Backlog and deleveraging: backlog climbed to $940.7M (Dec: $896.5M; Mar 2024: $821.5M), while interest expense fell to $12.8M (-31.8% YoY) from continued debt reduction and hedging; “trailing net leverage to 1.7 turns” .

What Went Wrong

• SG&A rose to 16.5% of sales (from 15.6% YoY) on personnel and back-office investments, partially offsetting margin gains .
• Free cash flow conversion in Q4 was 76% vs 113% last year, reflecting AR timing amid higher sales; management still targets ~100% conversion in FY2026 .
• Capacity constraints in A&D: ~70% of plants serving A&D are demand-constrained, requiring labor, machinery moves, and added hours; gross margin expansion likely back-half weighted due to ramp timing .

Financial Results

Quarterly Comparison (prior two quarters and current)

Year-over-Year (Q4)

Consensus vs Actual (S&P Global)

Values marked with * were retrieved from S&P Global.

Segment Breakdown (Net External Sales)

KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO on FY2025 performance: “We executed flawlessly in an aerospace production environment that included multiple disruptions... delivered a stronger than expected operating performance... Adjusted EBITDA growth of 7.8%... Adjusted EPS growth of 16.1%... another record year for free cash flow... net leverage... 1.7x” .
• CFO on Q4 drivers: “Net sales growth of 5.8% drove gross profit growth of 8.5%... adjusted EBITDA... $139.8 million... margin of 31.9%... tax rate in our adjusted EPS calculation was 21.7%... adjusted diluted EPS of $2.83” .
• CEO on A&D outlook: “Commercial aero is poised for growth of at least 15%... adding additional capacity at several plants... demand from defense OEMs led by submarines...” .
• On tariffs: “We currently expect tariff pressure to be minimal and believe we can mitigate the expected headwinds and still deliver margin expansion” .

Q&A Highlights

• Boeing production trajectory: management expects movement to 38/month soon and upper-40s by early CY2026; incremental revenue sensitivity: +10 planes/month on 737 adds ~$24M annually; A320 +10 planes adds ~$12M .
• Segment margins: Industrial gross margin 45.7%; A&D 41.5% in Q4 .
• Capacity constraints: ~70% of A&D revenues are in plants with demand > capacity; plans to add labor, hours and move machinery; multi-year throughput ramps .
• SG&A investments: continued reinvestment to support growth; aim for margin expansion to drop to EBITDA line .
• Industrial end-markets: mining/metals strongest; aggregate/cement next; warehousing/logistics turned positive; ongoing headwinds in oil & gas and semis .

Estimates Context

• EPS beat: $2.83 vs $2.703* consensus; revenue slight miss: $437.7M vs $440.3M* consensus. The EPS beat was driven by margin execution and lower interest expense; revenue softness relative to consensus reflects mix and AR timing but not demand weakness (backlog rose sequentially) . Estimates marked with * were retrieved from S&P Global.
• Potential estimate revisions: Q1 FY2026 guide and FY gross margin expansion target could drive upward revisions to FY26 gross margin and EBITDA; tariff commentary reduces risk to margin assumptions .

Key Takeaways for Investors

• Resilient execution: RBC delivered an EPS beat despite aerospace production volatility, supported by gross margin discipline and interest expense reduction .
• Demand durability: sequential backlog build to $940.7M and A&D strength across engines, spares, missiles, and space support FY2026 growth visibility .
• Capacity as a bottleneck: back-half weighted margin expansion aligns with capacity ramps; watch CapEx deployment and throughput gains for operating leverage .
• Industrial improving: Dodge-driven OEM wins and service-level improvements are yielding outgrowth vs peers; end-market mix turning in warehousing/logistics and mining/metals .
• Guidance credible and conservative: Q1 guide brackets FY2025 run-rate with margin continuity; tariff impact expected minimal under current levels .
• Strategic M&A optionality: deleveraging to 1.7x and VACCO acquisition expand content in secularly growing space/naval defense channels; integration into A&D should enhance portfolio breadth .
• Monitoring points: Boeing rate normalization (CY2026), contract renewals late in FY2026, AR collection timing (FCF conversion), and execution on capacity moves to unlock A&D margin runway .