Avondale Expects RBC Bearings' Usual Revenue 'Nudge'

Although RBC Bearings Incorporated ROLL has not provided its full-year guidance, Avondale Partners’ Lawrence R. Pfeffer expects the usual quarterly revenue ‘nudge,’ and noted consensus expectations for 1Q17 were mostly in line with historic seasonal trends.

Pfeffer maintains a Market Outperform rating on the company, with a price target of $80.

Revenue Ramp Likely

“We are not expecting a material inflection in commercial OE revenues in Q4, though the pace should improve from Q3,” the analyst mentioned.

Pfeffer expects overall A&D revenues to ramp toward MSD-HSD growth in 2H16, when the 737 MAX production levels begin to rise.

“With Boeing Co BA reiterating its production cadence for the 737 again this quarter we remain comfortable with our expectations for A&D revs to grow at ~7 percent pace over the next two fiscal years,” Pfeffer stated.

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In addition, given that Airbus has similar targets in terms of changeover and build rate ramps, the analyst expects a few choppy quarters, although RBC Bearings is well positioned to benefit from the rising narrow body build rates.

FY17–FY18 Expectations

The analyst also expects continuing LSD declines through 2QFY17, with LSD growth returning in FY18.

“With ROLL lapping the last full quarter of the Sargent quarter, we would expect gross margins to see modest YoY contraction, while improving sequentially,” Pfeffer said.

Pfeffer expects year-on-year gross margin improvement in FY17, with potential for RBC Bearings to beat the estimate.