Why This RBC Bearings Analyst Double Upgraded The Stock Wednesday

Shares of RBC Bearings Inc RBC were climbing in early trading on Wednesday.

The Oxford, Connecticut-based company is poised for significant margin expansion due to higher efficiency gains and continued execution on the defense expansion strategy, according to Bank of America Securities.

The RBC Bearings Analyst: Ronald Epstein upgraded the rating for RBC Bearings from Underperform to Buy, while raising the price target from $230 to $280.

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The RBC Bearings Thesis: There could be significant margin expansion in both A&D (Aerospace & Defense) and industrials, “as highly profitable volumes ramp up,” Epstein said in the upgrade note.

“RBC’s gross margins expanded 218bps Y/Y, while adj. operating margins grew 234bps despite top-line headwinds in the industrial segments,” the analyst wrote. “That improvement contributed toward realizing synergies from the Dodge acquisition with ~$70-$80mn based on $700mn in sales."

Epstein says RBC "continues to benefit from strong demand in commercial aerospace and its planned ramp up in OEM production."

RBC Price Action: Shares of RBC Bearings had risen by 5.98% to $256.74 at the time of publication Wednesday.

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