This article first appeared on GuruFocus .
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Net Sales:$524.6 million, up 15.2% year over year.
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Gross Margin:45.6% on both reported and adjusted basis, vs. 44.1% reported and 44.9% adjusted prior year.
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Adjusted EPS:$3.74, up 29.9% year over year from $2.84.
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Adjusted EBITDA:$175 million (33.4% of revenues), up 20.4% from $145.3 million.
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Free Cash Flow:$85.7 million, with 91.4% conversion of net income (vs. $71.7 million and 119.5% prior year); six-month conversion ~119% of net income.
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SG&A:$83.4 million, or 15.9% of net sales.
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Interest Expense:$9.3 million, down 30.6% year over year.
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Tax Rate:22.2% in adjusted EPS calculation vs. 22.0% prior year.
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Debt Repayment:$96 million retired during the quarter, including remaining term loan balance ahead of November 2026 target.
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Aerospace & Defense Segment:44% of sales; revenue up 15.8%; gross margin 42.2% vs. 38.7% prior year. Commercial aerospace up 17.4%, defense up 13.6%.
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Space:First-half revenues expanded 78%.
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Industrial Segment:~56% of revenue; revenue up 14.8% (~14% excluding $2 million PSC sales); gross margin 48.2%, flat vs. prior year. OEM revenues up 24.2%, distribution revenues up 10.6%.
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Q3 FY2027 Guidance:Revenue of $520 million$525 million (12.7%13.7% growth); adjusted gross margin 45.5%45.75%; SG&A 16.25%16.5% of net sales.
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Nine-Month FY2027 Guidance:Sales of $1.564 billion$1.569 billion (15.6%16% growth).
Release Date: October 30, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Net sales increased 15.2% year over year to $524.6 million, driven by strong demand in aerospace and defense and 14.8% growth in industrial.
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Adjusted EPS grew 29.9% year over year to $3.74, and adjusted EBITDA rose 20.4% to $175 million (33.4% of revenues).
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Space revenues expanded 78% in the first half, reflecting continuous demand from new and existing customers.
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Free cash flow remained strong at $85.2 million, and the company retired $96 million of debt during the quarter.
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Management expects second-half growth to accelerate, with aerospace and defense potentially growing north of 15% and industrial growing high single digits.
Negative Points
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Marine production is behind plan, with supply chain difficulties requiring insourcing of complex processes; only about 30% complete toward tripling output.
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Third-quarter revenue guidance of $520-525 million reflects seasonal holiday impacts and administrative release delays from large A&D customers.
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SG&A as a percentage of net sales is expected to rise to 16.25%-16.5% in Q3, partly due to higher stock compensation.
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Aerospace and defense growth was constrained by production capacity, though new equipment is easing the constraint.
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Industrial growth is largely GDP-dependent, limiting visibility and potentially capping upside to high single digits.
Q & A Highlights
Q: Jason Holcomb of Morgan Stanley asked for detail on RBC's expectation that the second half of fiscal 2027 will be better than the first half, including growth dynamics for Industrials, Commercial Aero and Defense. A: CEO Mike Hartnett said the easiest component is an extra week in the accounting calendar, but the more relevant driver is years of capital investment now showing up as added capacity, machinery, trained people and supply chain logistics. He noted the company is behind plan on marine production due to supply chain difficulties requiring insourcing of complex processes, with significant catch-up expected particularly in Q4. Q3 is always tricky due to holidays and customer certification releases, especially from large government and A&D customers. He expects A&D growth north of 15%, possibly closer to 20%, if marine gets on its feet, while industrial is budgeted at high single digits given its GDP dependence.
Q: Steve Barger of KeyBanc asked how much of current defense demand in missiles and munitions reflects inventory replenishment versus a structural increase in production rates, and what visibility looks like. A: CEO Mike Hartnett cited steady-state programs including Tomahawk, GMLRS, Standard Missile and the hypersonic Zumwalt program, noting build rates have stepped up substantially. Tomahawk production is moving from roughly 200 a year to about 1,000 a year, and RBC produces several critical fuel system components for it, with floor space being laid out to support those rates. GMLRS involves at least a 20% volume step-up that RBC is well-tooled to meet, while the hypersonic Zumwalt program is in testing and roughly 18 months from a manufacturing release.
Q: Michael Ciarmoli of Guggenheim asked whether RBC sees any risk of being second sourced given surging demand across marine, missiles and aerospace and defense. A: CEO Mike Hartnett said the overall answer is no. While there is talk about bringing on second sources, that talk is usually directed at RBC to be the second source. He noted a bearing is a very small part of an airframe RBC content on a 737 is about $200,000 against a discounted selling price of $60-70 million so the company's philosophy is "don't be the problem," supported by industry-leading service levels.
Q: Michael Ciarmoli of Guggenheim asked for quantification of the marine capacity constraints and whether they sit in legacy RBC or VACCO. A: CEO Mike Hartnett said the issue is more in legacy RBC, specifically in Tucson, while VACCO is also tripling production but is more able to do so because its designs differ from Sargent's. The required items are metallurgically sophisticated, and RBC is retooling other RBC plants to manufacture them at rates consistent with Sargent's needs. He characterized it as a timing issue and is reasonably sure the effects will be felt in Q4.
Q: Scott Deuschle of Deutsche Bank asked how long it would take for a new aerospace OEM second-source contract to begin shipping and showing up in results. A: CEO Mike Hartnett said it depends on the product; for a standard product RBC already produces, the company would give a lead-time delivery and phase it in, which at this point could be about 50 weeks depending on the product line.
Q: Scott Deuschle of Deutsche Bank asked about the primary machine tools used to produce aerospace bearings and their lead times. A: CEO Mike Hartnett identified turning and cutting machines (made by companies like Mori Seiki) with roughly six-month lead times, heat treating equipment at a year to 18 months depending on type, and finishing equipment such as grinding, polishing and stoning with about 15 months of planning to get operational. Material availability is also a constraint, and operators must be trained simultaneously, which temporarily dilutes plant efficiency as paid hours outpace earned hours.
Q: Scott Deuschle of Deutsche Bank followed up on whether the growth constraint will remain tooling capacity or shift toward labor next year. A: CEO Mike Hartnett said labor is not a major concern, calling it a fringe item thanks to recent approvals for plants in Mexico, where there is plenty of labor availability and machine tool capacity. The major component going forward will be cycling in advanced machine tool systems to upgrade existing floor equipment and improve throughput and efficiencies.
Q: Pete Skibitski of Alembic Global Advisors asked for an update on Boeing production rates. A: CEO Mike Hartnett said Boeing was clocking in at about 42 to 45 aircraft, though RBC's own volumes are somewhat disproportionate because it is picking up business from previous Boeing suppliers that exited the supply chain, pushing a couple of RBC plants to a higher speed limit. He agreed that organically, excluding market share gains, RBC is effectively running in the low 40s.
Q: Pete Skibitski of Alembic Global Advisors asked whether the strong SG&A quarter included any one-time lower spend and what the trend looks like. A: CFO Rob Sullivan attributed the performance to leverage from higher sales and strong cost discipline, with SG&A falling below 16% versus closer to 17% a year ago. He noted the expected uptick next quarter is largely driven by stock compensation, up about $1.5 million, reflecting normal timing as Q2 rose from Q1 and Q3 rises from Q2.
Q: Tim Thein of Raymond James asked for context on roughly 11% industrial distribution growth, which outpaces public suppliers, including whether inventory build or share gains are at play. A: CEO Mike Hartnett credited industry-leading service levels, using Dodge as a proxy: across thousands of line items, the product is in stock 95-97% of the time when a customer needs it. Because aftermarket customers need failed parts immediately, high availability drives revenue to Dodge and the rest of RBC's industrial business, which runs the same playbook.
Q: Tim Thein of Raymond James asked how cost and inflationary headwinds, including freight and logistics, have changed versus 90 days ago and what it means for gross margins. A: CFO Rob Sullivan said RBC has been running the inflation race for a few years and has stayed ahead of it effectively. Last quarter the company raised its full-year margin expansion outlook from 50 basis points to 100 basis points, and he still feels 100 basis points is very achievable, with close monitoring of cost pressures and adjustments made where possible
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
