RBC Bearings bearing the fruits of strong execution – BofA

BofA double-upgraded shares of RBC Bearings (NYSE:) to Buy from Underperform on Wednesday, raising the price target to $280 from $230 per share.

Analysts said the company is now bearing the fruits of strong execution.

“We upgrade our rating to Buy from Underperform to reflect stronger EBITDA margins and lower dilution impact from 2024 convertibles (~7% vs. prior 14%),” wrote the analysts.

Furthermore, the firm expects significant margin expansion in both A&D (Aerospace & Defense) and industrials as highly profitable volumes ramp up.

“Ahead of the October 2024 mandatory preferred stock conversion, management highlighted that the move would dilute EPS by ~5% (net of the dividend payout). This is about half of the impact we previously estimated. Thus, we increase our 2024-2026 estimates,” added the analysts.