RBC Bearings: record navy-missile arc, a casino of space tables — and a 22% air pocket

The $2.3B backlog keeps compounding, but three months after a blowout quarter the shares sit in a double-digit drawdown.

RBC · Earnings Call · 2026-05-15

The quarter in shape

RBC Bearings closed fiscal 2026 with its strongest print yet: net sales rose 18.3% year over year to $518 million, with aerospace & defense up 41.2% — 22.8% organically, ex-VACCO — and backlog swelling to roughly $2.3 billion. Adjusted diluted EPS of $3.62 (+27.9%) and adjusted EBITDA of $168.9 million (+21%) capped a record year, while full-year free cash flow hit $342.6 million at a 119% conversion rate. Management's tone was unfailingly confident from the open: “space infrastructure is being viewed not only as a major strategic national priority, but as a substantial and essential commercial reality.” — Michael J. Hartnett, Chairman, President, and Chief Executive Officer · 2026-05-15

Marine, missiles, space — and a casino full of tables

The story is disaggregating into three compounding arcs. The marine business, reawakened after the Seawolf-era dormancy, is the most capacity-constrained; management plans to roughly double that revenue base in 24–36 months:

we will probably attempting to double our revenues over a short period of time. Years, not months... definitely gonna double our revenues in that sector over the next 24 to 36 months.
Michael J. Hartnett, Chairman, President, and Chief Executive Officer · 2026-05-15

Missile revenue cleared $45 million for the year (VACCO-augmented), spanning Patriot, GMLRS, Tomahawk, Javelin, Meteor, a next-gen Hellfire replacement and hypersonics. And space revenue jumped past $70 million — versus just $4 million for legacy-RBC in 2021 — with exposure spanning both the primes and the new guard (SpaceX, Blue, Rocket Lab). That drew the call's most distinctive image:

50 years ago, when there was the Apollo program, the only table in the casino was NASA. And now it is a huge casino with many tables.
Michael J. Hartnett, Chairman, President, and Chief Executive Officer · 2026-05-15

The Apollo program conceit is company-unique color, but the margin discipline behind it is more sobering. A&D gross margin printed 41.6% (44.2% adjusted; 43.7% ex-VACCO), with VACCO itself above 46% in the quarter — a level the CFO was quick to wave off: “Do not do not assume that. I would not expect that to be the naturalized run rate.” — Michael J. Hartnett, Chairman, President, and Chief Executive Officer · 2026-05-15 The catch-up to industrial margins (~46%) remains the medium-term prize — on the February call management reiterated that A&D margins would “chase up towards the industrial margins,” — Michael Hartnett, Chairman, President, and Chief Executive Officer · 2026-02-05 even if they don't fully close the gap.

An industrial inflection with a microchip in it

Industrial, meanwhile, held steady — OEM +7.8%, distribution +4.5% — with strength in aggregate business, warehousing, food & beverage, grain and semiconductor end markets. The most forward-looking tell was the aggregate book itself: a rough 20%-ish barometer of North American construction, which management reads as a leading indicator for the AI buildout: “the amount of money that is going into the AI and the build out of the server farms... something extraordinary is happening someplace... in North America. And that is 1 step. Yeah. That has breath.” — Michael J. Hartnett, Chairman, President, and Chief Executive Officer · 2026-05-15 That resonates with a global tape where AI data centers is among the strongest 90-day advancer clusters, and it ties to the company's industrial automation book ($40–50M annually, overweight on semicon), which management expects to "show up in 2027." It's a notable contrast with the prior quarter's more cautious framing — back in February the message was “we are expecting sort of high single digits as worst case” — Michael Hartnett, Chairman, President, and Chief Executive Officer · 2026-02-05; now it is about breadth, "across more end markets." Two other operational signals deserve attention: commercial-aerospace LTA repricing is ~60% done, with the remaining 40% effective January 2027 — a clean pricing tailwind — and on commercial aftermarket, management framed the jet-fuel belt-tightening question as unresolved: “we have not seen it yet... it is on it is on the bubble.” — Michael J. Hartnett, Chairman, President, and Chief Executive Officer · 2026-05-15

The valuation rub

The fundamental picture is unambiguous strength, and the balance sheet is improving fast — effective net cash is a negative $439 million but trending decisively in the right direction, with interest coverage climbing to 10.6x. Yet the shares are 22% below the June 25 peak of $648.89 and still in a 17-week downtrend. The reason is the re-rating: price-to-net-income sits at ~61.8x, more than double a year ago, even as gross margins hold at 44.4%. The market paid for the defense supercycle, got the beat, and has spent the summer digesting perhaps too much of a good thing — a reminder that a fully valued winner is still subject to gravity, no matter how long the backlog.