Zacks Investment Research downgraded RBC Bearings Inc. ROLL to a Zacks Rank #3 (Hold) from a Zacks Rank #1 (Strong Buy) on May 29, 2015, primarily on account of strong U.S. dollar and weak aerospace & defense sales.
Why on Hold?
After the company reported mixed results in fourth-quarter fiscal 2015, analysts have been cautious on the stock, as evident from downward revision in the Zacks Consensus Estimate. The Estimate decreased 2 and 1 cent, respectively, to stand at 73 cents for the first quarter and at $3.35 for fiscal 2016, over the last 7 days.
Net sales for the last reported quarter came in at $113.4 million, down 0.3% year over year and below the Zacks Consensus Estimate of $115 million. Management hinted that benefits reaped from higher sales in industrial products business were offset by a fall in aerospace & defense revenues. Moreover, currency headwinds had hurt the quarterly sales by approximately $1 million.
In addition, high concentration of demand and industry rivalry are two major issues encountered by RBC Bearings.
However, this Zacks Rank #3 (Hold) stock still retains scope for improvement. Booming demand from the global oil & gas, construction and general industries is expected to translate into greater sale of industrial products, which will enhance the company’s revenue and margin growth in the upcoming quarters.
RBC Bearings also attempts to improve its business on the back of meaningful acquisitions. For instance, the company’s recent Sargent Aerospace & Defense business acquisition will likely enhance its revenues in fiscal 2016. Moreover, the company’s cost-containment efforts are commendable.
Favorably Ranked Stocks
Better-ranked stocks in the industry include Metso Corporation MXCYY, Middleby Corp. MIDD and Capstone Turbine Corp. CPST. All the three companies carry a Zacks Rank #2 (Buy).
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