RBC Sales Growth Slows in 2Q, but Margin Holds Up

We don't expect much (if any) change to our fair value estimate for RBC Bearings ROLL following the release of the company's fiscal second-quarter results. Sales growth slowed in the quarter, advancing only 2.7% compared with the prior-year period; this is following several consecutive quarters of double-digit, year-over-year sales growth. Management said that mining and heavy truck demand weighed on revenue growth. We noted last quarter that RBC was likely to see some pressure from the slowing global economy, so slower growth does not come as a total surprise. That said, the company may have trouble meeting our current expectation of double-digit sales growth for fiscal 2013. However, RBC is tracking ahead of our full-year operating margin assumption of about 20%. The company's operating margin clocked in at 21.1% compared with 18.8% in the second quarter of 2012.