Deutsche Bank initiates coverage on RBC Bearings stock with Buy rating

Investing.com - Deutsche Bank (ETR:DBKGn) initiated coverage on RBC Bearings (NYSE:RBC), a $11.77 billion precision components manufacturer with a 44.37% gross margin, with a Buy rating and a price target of $480.00 on Wednesday.

The price target represents a potential 27% upside from RBC Bearings’ current trading level, according to Deutsche Bank’s analysis. The stock has already demonstrated strong momentum, with a 25.53% year-to-date return. According to InvestingPro analysis, the stock is currently trading above its Fair Value.

Deutsche Bank compared RBC Bearings to a combination of several high-performing aerospace and defense companies, noting it shares qualities with "the entrepreneurial ethos of HEICO (NYSE:HEI), the operational track record and commercial culture of Howmet, the M&A muscle of TransDigm, and the commitment to new product innovation of HEICO and Crane."

The bank highlighted that despite RBC Bearings generating only 36% of its sales from the aerospace and defense market, "the qualities of the business and the company’s culture—and the output thereof—are more aligned with the highest quality A&D companies" in Deutsche Bank’s coverage.

RBC Bearings manufactures precision bearings and components for the industrial, defense, and aerospace markets, generating annual revenue of $1.64 billion.

In other recent news, RBC Bearings reported its fourth-quarter fiscal year 2025 results, which showed an earnings per share (EPS) of $2.83, surpassing the forecast of $2.71. However, the company experienced a slight revenue miss, posting $437.7 million compared to the anticipated $439.46 million. RBC Bearings’ aerospace and defense segments demonstrated strong growth, with sales increasing by 10.6% and 11.6%, respectively. The company also reduced its debt by $275 million over the year, improving financial stability.

KeyBanc has raised its price target for RBC Bearings to $450, maintaining an Overweight rating, based on expectations of the company outperforming consensus earnings estimates due to a lower tax rate and strong industrial segment performance. RBC Bearings’ recent acquisition of VACCO Industries is seen as a strategic move to balance its industrial and aerospace/defense segments. Truist Securities also adjusted its outlook, increasing the price target to $405, citing expected gross margin expansion driven by the aerospace and defense segment.

RBC Bearings provided a revenue outlook for the first quarter of fiscal year 2026, aligning with analyst expectations and highlighting anticipated growth in the aerospace and defense sectors. The company plans to continue expanding its capacity to meet strong demand, particularly in defense. These developments reflect RBC Bearings’ strategic focus on organic growth and market expansion.

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