RBC Bearings Fiscal Q2 2027 Earnings: Margin Expansion Amplifies Mid-Teen Sales Growth

RBC Bearings (NYSE: RBC) reported fiscal Q2 2027 net sales of $524.6 million, up 15.2% year over year, while diluted EPS increased 55.8% to $2.96 from $1.90. For the quarter ended September 26, 2026, margin expansion, broad-based segment growth, lower interest expense and a lower effective tax rate helped earnings grow faster than revenue.

Core Earnings Data

Organic net sales increased 14.8% after excluding $2.0 million contributed by the PSC acquisition. Gross profit and operating income grew faster than sales, reflecting a higher gross margin and lower operating expenses as a percentage of revenue.

Adjusted results also improved, although the adjusted EPS increase was smaller than the GAAP increase because the prior-year period contained more reconciling items.

Segment Performance and Backlog

Growth was balanced between RBC Bearings’ two operating segments. Aerospace & Defense grew slightly faster, while Industrial accounted for the larger share of quarterly revenue.

Industrial organic sales increased 14.0% after excluding the PSC acquisition’s $2.0 million contribution. This indicates that the quarter’s growth was primarily generated by the existing business rather than acquisition revenue.

Backlog reached $2.4 billion at September 26, up from $2.3 billion at March 28 and $1.6 billion one year earlier. The increase supports management’s favorable view of demand across both major markets.

Margin Expansion and Deleveraging Lifted Earnings

Reported gross margin increased to 45.6%, including a $1.7 million benefit from tariff refunds. On an adjusted basis, gross margin rose to 45.6% from 44.9%, a more modest improvement of about 70 basis points after excluding prior-year adjustments.

SG&A increased by $6.0 million to $83.4 million, but declined to 15.9% of sales from 17.0%. Other operating expenses also decreased to $24.0 million from $25.4 million. These changes helped RBC Bearings convert 15.2% sales growth into 34.6% growth in reported operating income.

Lower financing and tax costs further amplified the increase in net income. Net interest expense fell to $9.3 million from $13.4 million as the company continued reducing debt and fully repaid its term loan. The effective tax rate declined to 23.4% from 28.0%, with the prior-year rate affected by a deferred-tax adjustment related to the VACCO acquisition.

Cash flow data was provided on a six-month basis rather than for the quarter alone. Operating cash flow for the first half of fiscal 2027 increased to $278.2 million from $208.4 million. After $45.6 million of capital expenditures, free cash flow under the company’s definition was approximately $232.6 million, up about 32% from approximately $176.0 million a year earlier.

Cash increased to $89.3 million from $57.3 million at the end of fiscal 2026. Total debt declined by $165.0 million to $710.5 million, while inventory increased to $790.0 million from $762.8 million.

Fiscal Q3 2027 Outlook

RBC Bearings expects another quarter of double-digit year-over-year sales growth. However, the approximately $522.5 million sales midpoint would be slightly below fiscal Q2 revenue, indicating a roughly flat sequential trajectory.

The gross-margin range brackets the latest quarterly result, while the guided SG&A ratio is above fiscal Q2’s level. As a result, operating expense leverage will be an important factor in determining whether the latest margin gains continue.

Management Commentary

Chairman and CEO Michael J. Hartnett attributed the quarter’s performance to an operating environment favorable to RBC Bearings’ products, with both Aerospace & Defense and Industrial revenue growing at mid-teen rates. Management also pointed to the larger backlog and debt reduction as support for its expectation of a stronger second half of fiscal 2027.

Recent Insider Transactions

The provided six-month insider summary recorded 37,792 shares acquired across 15 transactions and 2,330 shares sold across five transactions, resulting in net acquisitions of 35,462 shares. Total insider holdings were approximately 512,350 shares; stock awards and derivative-security exercises should not be treated as equivalent to discretionary open-market purchases.

All listed transactions were reported as direct holdings. The five sales totaled 2,330 shares, consistent with the six-month sales summary, but the records alone do not establish insiders’ views of the company’s prospects.

Risks for Investors to Monitor

• Revenue growth is expected to moderate: Fiscal Q3 guidance calls for 12.7%–13.7% growth, below fiscal Q2’s 15.2%, with revenue roughly flat sequentially at the midpoint.
• Margins retain some tariff sensitivity: Fiscal Q2 gross profit included $1.7 million of tariff refunds, and changes in tariff costs or refunds could affect future comparisons.
• Inventory remains elevated: Inventory increased by $27.2 million from the end of fiscal 2026 to $790.0 million. Further growth could absorb cash if it outpaces demand and shipments.
• Debt continues to carry a financing cost: RBC Bearings made substantial repayments, but total debt remained $710.5 million and quarterly net interest expense was $9.3 million.
• GAAP and adjusted earnings remain meaningfully different: Adjusted net income of $118.7 million exceeded GAAP net income by $24.9 million, primarily reflecting items including acquisition-related amortization and stock compensation.

Summary

RBC Bearings delivered balanced mid-teen growth across both segments while expanding margins and reducing financing costs, allowing earnings to rise substantially faster than sales. The larger backlog, stronger first-half cash flow and lower debt provide support for the second half, while fiscal Q3 guidance makes expense leverage, tariff effects and the conversion of backlog into revenue the main items to monitor.