RBC Bearings Q3 2026 Earnings Report

RBC Bearings EPS Results

• Actual EPS: $3.04
• Consensus EPS: $2.83
• Beat/Miss: Beat by +$0.21
• One Year Ago EPS: $2.34

RBC Bearings Revenue Results

• Actual Revenue: $461.60 million
• Expected Revenue: $460.69 million
• Beat/Miss: Beat by +$906.00 thousand
• YoY Revenue Growth: +17.00%

RBC Bearings Announcement Details

• Quarter: Q3 2026
• Date: 2/5/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, February 5, 2026
• Conference Call Time: 11:00AM ET

RBC Bearings (NYSE:RBC) is a global designer, manufacturer and marketer of highly engineered precision bearings and components for extreme applications. The company’s product portfolio includes cylindrical roller bearings, spherical plain bearings, ball bearings, track rollers, and engineered components such as metal-to-metal and polymer bearings. These products are tailored to meet the demanding requirements of aerospace, defense and industrial customers where reliability under severe conditions is critical.

The company’s bearings and components find application in aircraft engines, auxiliary power units, landing gear systems, space and missile programs, industrial gas turbines, oil and gas drilling equipment, and heavy machinery. RBC Bearings supports its global customer base through a network of manufacturing facilities, service centers and distribution partners in North America, Europe and the Asia-Pacific region, ensuring localized engineering support and responsive after-sales service.

Headquartered in Oxford, Connecticut, RBC Bearings traces its origins to the founding of the Roller Bearing Company in 1919. Over the decades, the business has expanded both organically and through strategic acquisitions to broaden its product lines and international reach. The company is led by President and Chief Executive Officer Christopher J. Schemanske, who has steered its focus on innovation, operational excellence and customer collaboration.

RBC Bearings Q3 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: $461 million in Q3 sales (up 17%), adjusted EPS of $3.04 (up 30%), adjusted EBITDA of $149.6M (up 22%), and $99.1M of free cash flow, while the company paid down $81M of debt this quarter.
• Positive Sentiment: Aerospace & Defense momentum is robust — A&D sales rose 41.5% YoY (defense +86.2%, commercial aerospace +21.5%) and backlog modestly exceeds $2 billion with another $500M–$1B of potential contracted work if R&D orders are included; the company is adding capacity under a five‑year per‑site plan.
• Positive Sentiment: Industrial revenue grew 3.1% (OEM +7%), with a semiconductor rebound and new products from the Dodge acquisition plus a new Midwest service center expected to accelerate industrial growth into FY2027.
• Positive Sentiment: Management guided Q4 revenue of $495M–$505M (13.1%–15.4% YoY), adjusted gross margins ~45% and SG&A ~16% of sales, while keeping capex targeted around 3.5%–4% of sales and prioritizing continued deleveraging (term loan expected paid off by Nov 2026).
• Negative Sentiment: More than 90% of backlog is concentrated in A&D, creating revenue sensitivity to program timing and lumpiness (e.g., VACO quarter-to-quarter variability), which raises execution and timing risk despite strong demand.

Presentation

[Josh Carroll, Partner at Alpha IR Group]

Good morning, and thank you for joining us for RBC Bearings Fiscal Third Quarter 2026 Earnings Call. I'm Josh Carroll with the investor relations team. With me on today's call are Dr. Hartnett, Chairman, President, and Chief Executive Officer; Daniel Bergeron, Director, Vice President, and Chief Operating Officer; Rob Sullivan, Vice President and Chief Financial Officer. As a reminder, some of the statements made today may be forward-looking and are under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected or implied due to a variety of factors. We refer you to RBC Bearings' recent filings with the SEC for a more detailed discussion of the risks that could impact the company's future operating results and financial condition. These factors are also listed in the press release, along with the reconciliation between GAAP and non-GAAP financial information.

[Josh Carroll, Partner at Alpha IR Group]

With that, I'll now turn the call over to Dr. Hartnett.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Okay, thank you, and good morning, everyone, and thank you for joining us. As usual, I'm going to start today's call with a short review of our financial results and the outlook for the industry with our sectors. Rob Sullivan will follow me with some details on the results. Third quarter net sales were $461 million, or a 17% increase over last year. We experienced continued strong performance in our A&D segment and growth from our industrial businesses. Consolidated gross margin for the quarter was 44.3% and 45.1% on an adjusted basis. Adjusted diluted EPS was 3.04 versus 2.34 a year ago, a 30% improvement. EBITDA came in at $149.6 million versus last year, $122.6 million, up 22%.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Free cash flow for the period is a strong $99.1 million, and we paid down an additional $81 million of debt in the third quarter. 56% of our revenues were industrial, 44% from the A&D sector. Total A&D sales were up 41.5% year-on-year. Commercial aerospace expanded 21.5%. Defense expansion was 86.2%. Rob Sullivan will talk more about these details later in the call. Demand across the A&D sectors continues to be robust. As evidenced, we have modestly exceeded our $2 billion backlog mark that we spoke about last call. Remember, most of our R&D business is contracted and managed through daily or weekly orders or pulls communicated to us electronically, and as a result, represent only a modest footprint in today's backlog statement.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

If these joint contract obligations were extended based upon the statement of work content awarded and projected bill rates, they would likely exceed another $500 million-$1 billion in backlog. Today, the strength and outlook on the A&D sector can only be described as extremely robust. Clearly, we are at a national inflection point in the commercial aircraft and defense industries. Let me explain with an overview of some of our key markets. So we'll start with submarines. Submarines are facing an accelerated fleet build-out. The number one defense priority today is submarines. This drives an unprecedented demand for our proprietary, quiet running valves, both for new construction and replacement to support the current fleet. 66 Virginia-class ships are planned, 25 have been commissioned to date, and 12 Columbia-class ships are planned. Number two, missiles and guided arms.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Support for broad, multi-year refurbishment initiatives for offensive and defensive missiles and vision targeting systems, both here and overseas, create a strong environment for our precision assemblies and fuel management products. In Europe, NATO's 5% GDP initiative, this is growing demand for our products from the ground warfare system builders in Europe. This creates a strong new requirements for RBC products developed over the past decade. In the U.S.A., the refurbishment and new construction of aircraft systems, as well as the maintenance of untold number of helicopters and airframe platforms, including engines, creates strong and continuous needs for our proprietary components. We expect an expanded defense spending bill will likely accelerate the repair activities further.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

We also support the expanding need for both engineering support and staple components for the systems that the Big Three space explorers are building, as well as others. They're racing to the moon and/or creating low Earth satellite systems, requiring sophisticated precision assemblies for targeting, thrust vectoring, fuel management, structural members, et cetera. I think you can see this, the picture that we're faced with right now in the A&D sector. Of course, all of these macro extremes in space and defense are simultaneous with the unprecedented build rates for commercial aircraft, including engines.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

RBC is deeply embedded in all of these areas, which create a tremendous and continuous market for our products, both at the OEM and the replacement levels. We are working diligently to add machinery and staff to several, several of our existing sites, guided by our five-year per site plan to support these growing A&D revenues. Well, I hope this brief abstract gives you a 40,000-foot view of what our world is today in the A&D sector. We can certainly go into specific programs, outlook, products, and proprietary positioning, as well as the moats to any depth needed at another time. We've been working well over a generation to achieve industrialized catalog and fortify the portfolio that you see today. So let's turn to the industrial businesses now. Overall, our industrial business was up 3.1%.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Industrial distribution was up 1.5%, while OEM sector was up 7%. We saw strength in aggregate and cement, food and beverage, and the warehousing markets during the period. Recently, we've been seeing positive trends in some of these markets in terms of order demand, which will show as revenue as they work their way through lead time. The semiconductor industry is the biggest standout in this regard. Broad industrial demand strengthened measurably in late December and continued throughout January. In addition, we are introducing several new products to the industrial lineup through FY 2027, many of which have been in testing and development since the Dodge acquisition. Combined, they promise to bend our curve on industrial growth. Also, we are opening a service center in the Midwest to better attend the needs of our...

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

And tailor our product response to more customers in that region. So I hope I gave you a feel for our environment and the momentum that exists at RBC today, and I'll turn the call over to Rob Sullivan for more discussion on the third quarter and the fourth quarter outlook.

[Rob Sullivan, CFO at RBC Bearings]

Thank you, Mike. As Dr. Hartnett mentioned, we had another strong quarter. Net sales grew 17%, which led to a 16.9% increase in reported gross margin. Gross margins were 44.3% for the quarter, or 45.1% on an adjusted basis, compared to 44.3% in the same period last year. During the quarter, we delivered strong performance across our business segments, specifically within aerospace and defense, which has demonstrated strong growth, as Dr. Hartnett stated. Third quarter A&D sales increased 41.5% year-over-year, and importantly, the increase was 21.7%, excluding sales from VACCO, demonstrating significant expansion from both our legacy, commercial, and defense markets.

[Rob Sullivan, CFO at RBC Bearings]

A&D gross margins during the quarter were 40.1% or 42%, 42.2% on an adjusted basis, and industrial margins were 47.5%, or 47.4% on an adjusted basis. Excluding VACCO, our aerospace and defense gross margins were 43.4% during the period. We are encouraged by the margin progress we've achieved within A&D, driven by increased efficiencies achieved in our plants, coupled with improving pricing on customer contracts. Looking ahead, we expect these benefits to continue to further support margin improvement while recognizing the impact will be gradual as these benefits flow through. On the SG&A line, we had total costs of $77.9 million, or 16.9% of net sales for the quarter.

[Rob Sullivan, CFO at RBC Bearings]

This ultimately resulted in an adjusted EBITDA of $149.6 million, or 32.4% of sales for the quarter. That represents an approximate 22% increase in adjusted EBITDA dollars during the quarter compared to the same period last year. Interest expense for the quarter was $13 million. This was down 8.5% year-over-year, reflecting the improved leverage position achieved over the last 12 months, coupled with lower interest rates compared to this time last year. We paid off $81 million of debt during the quarter and another $67 million since the end of this, the third quarter. The tax rate in our adjusted EPS calculation was 22.1%, compared to last year's 22.2%.

[Rob Sullivan, CFO at RBC Bearings]

This led to adjusted diluted earnings per share of $3.04, representing growth of 29.9% year-over-year. Free cash flow in the quarter came in at $99.1 million, with conversion of 147% and compared to $73.6 million and 127% last year. The higher conversion rate was due to the increased earnings and working capital management during the quarter. As we've noted previously, our capital allocation strategy going forward will remain focused on deleveraging by using the cash that we generate to pay off our standing debt. Our expectation is to pay off the remainder of the term loan by November 2026.

[Rob Sullivan, CFO at RBC Bearings]

Looking into the fourth quarter, we are guiding revenues of $495 million-$505 million, representing year-over-year growth of 13.1%-15.4%. On the gross margin side, we are projecting adjusted gross margins of 45%-45.25% for the quarter, and SG&A, as a percentage of sales, to be between 16%-16.25% for the period. With that, operator, please open the call for Q&A.

[Operator]

Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Kristine Liwag with Morgan Stanley. Please proceed.

[Kristine Liwag, Managing Director at Morgan Stanley]

Hey, good morning, everyone, Rob and Dr. Hartnett. I just wanted to follow up regarding your commentary on the industrial business.

[Kristine Liwag, Managing Director at Morgan Stanley]

... So you mentioned that, you know, you're seeing strength in aggregate and cement, food and beverage, and warehousing. You've got, the new products, that you're introducing for fiscal 2027, and you know, it sounds like semiconductor has been doing really well. I was wondering, for these verticals, can you provide what is embedded in your 4Q revenue outlook? And also, when we go into 2027, how do you think about growth for these end markets?

[Rob Sullivan, CFO at RBC Bearings]

Yeah, Kristine, you know, the way we have our fourth quarter built out right now, it looks a lot like the third quarter in terms of what we're forecasting for year-over-year growth. Maybe slightly conservative on the industrial side. So, you know, we're just expecting more of the same. Obviously, we saw that the PMI this week was positive. So if that trend were to continue, that would be certainly a bullish sign for our business.

[Kristine Liwag, Managing Director at Morgan Stanley]

Okay, great. And then if I could, follow up, you know, with VACCO, the quiet running valve is a really differentiated technology. I was wondering, outside of submarines, are there other use cases for this product?

[Daniel Bergeron, Director, VP, and COO at RBC Bearings]

Mike, you on? So Christine, hi, it's Dan Bergeron. Yeah, for Sargent Aerospace, their products are specifically for submarine, and on the VACCO side, there are some applications for them in space on satellites.

[Kristine Liwag, Managing Director at Morgan Stanley]

Gotcha. Super helpful. And then is it, you know, I mean, just following up on my industrial question, you know, with the improving outlook, and also when we think about the order activity that you've faced, is it fair to say that fiscal year 2027 would be a higher growth year for an industrial than fiscal year 2026?

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

We're expecting that, Kristine. Yes. Yes.

[Kristine Liwag, Managing Director at Morgan Stanley]

Great. Thank you.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Yeah. Yep.

[Operator]

Our next question is from Michael Ciarmoli with Truist Securities. Please proceed.

[Alexandra Mandery, Equity Research Associate at Truist Securities]

This is Alexandra Mandery on for Michael Ciarmoli with Truist Securities, and thanks for taking my question. We've seen that backlog growth has been strong and at all-time highs with that 230% year-over-year growth. So could you add some more color in terms of order composition and submarket breakdown? And also, what is the relationship with backlog and revenue going forward?

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Okay. There was a number of questions there. The first question was the composition of the backlog, and I think Rob has that.

[Rob Sullivan, CFO at RBC Bearings]

Yeah. What I can tell you is that over 90% of our backlog is really our A&D market. Most of our industrial business tends to move in and out, and doesn't really get stuck in the backlog. And in terms of the duration, which I think was another part of your question, you know, some of these contracts, specifically with Sargent or VACCO, can be, you know, multiyear, going well beyond the next, you know, 12-24 months.

[Alexandra Mandery, Equity Research Associate at Truist Securities]

Great. And then I guess, like, can you break down the backlog further between submarkets within A&D?

[Rob Sullivan, CFO at RBC Bearings]

You know, I don't have all that detail right in front of me to share with you at this time. You know, we just kind of look at it at the segment level. But obviously, with Sargent and VACCO, there's a significant portion of our backlog with the marine products.

[Alexandra Mandery, Equity Research Associate at Truist Securities]

That makes sense. And then I guess just one other one. So on the fiscal 1Q 2026 call, you mentioned using roughly a $30 million run rate for VACCO quarterly revenue. So given that, did you divest maybe from any contracts or make any other changes that would reflect that slight performance discrepancy?

[Rob Sullivan, CFO at RBC Bearings]

I mean, they were at $29 million this quarter, so they, they were, they're pretty close to that $30 million run rate. If there's just timing, you know, we're, we're in the middle of integration, and these contracts can be, you know, a little bit lumpy quarter to quarter, but I would say we feel pretty good with where that business is operating and are optimistic for the, for the next year.

[Alexandra Mandery, Equity Research Associate at Truist Securities]

Great. Thank you.

[Operator]

Our next question is from Steve Barger with KeyBanc Capital Markets. Please proceed.

[Christian Zyla, Senior Associate in Equity Research at KeyBanc Capital Markets]

Morning, Dr. Hartnett and Rob. This is Christian Zyla.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Morning.

[Christian Zyla, Senior Associate in Equity Research at KeyBanc Capital Markets]

Thanks for taking the question. Morning. Just following up on your industrial comments, it does seem like you guys started growing before we actually saw an industrial inflection, or at least have been less impacted by recent weakness. But January PMI was strong a few days ago. U.S. industrial production has inflected positively. Sentiment in short cycle manufacturing seems to be improving. So looking back, what do you think drove your outperformance? And then based on your business and your mix, do you think you can outgrow peers or continue your strain of growth?

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Well, I think one of the, you know, the outperformance, number one, the Dodge brand is a very strong brand in the industrial marketplace, particularly the industrial MRO marketplace. And that marketplace is pretty short cycle, and as a result of being such short cycle, your product availability needs to be high in order to capture the sale. And so, Dodge does an outstanding job at managing their product availability and their hit rates and stocking of their core products. So, I think we're probably industry best in that regard. And so that helps performance when times are tough. There was a second part of your question, Stephen.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

I forget what it was.

[Christian Zyla, Senior Associate in Equity Research at KeyBanc Capital Markets]

Yeah, it was just based on, like, your current business and mix, do you think that can continue into, into calendar 2026?

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Yeah, it should. I absolutely think it should. You know, we're expecting a stronger industrial economy in 2026. Certainly, it started in January, started off well. Semicon has come back in a significant way, which was dormant for a long period of time, and that's an important sector for us. So, yeah, I think we're gonna do better on the industrial side in calendar 2026.

[Christian Zyla, Senior Associate in Equity Research at KeyBanc Capital Markets]

That's great. And then just switching gears to aero and defense. A couple of quarters ago, you mentioned some synergies on the space side with VACCO and Legacy RBC. Just any quick update there, and maybe more broadly, any updates on how you're thinking about the broader space industry and what specific markets or applications that you currently are not exposed to or, or not involved in, that could be interesting? Does that require more engineering expertise or, or capacity? Just any kind of thoughts there. Thank you.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Yeah, well, VACCO is a, you know, it's a company we learn more about, you know, every month. And one of the things that we're learning about VACCO is they have a very good product program that services the space market with staples that the space market requires in order to build out satellites. And they have a tremendous brand and following in these staples. And so it's a little bit like the bearing business. If you have a stocking position on these staples, you're liable to get the order, and you're liable to significantly improve your sales. And so we're looking at their product offering and deciding exactly which products we should be stocking.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

And, to some extent, we think, we think if we had those products in stock, people would actually, actually develop or design satellite systems around those products, because, when it's undefined, it's undefined, and, and people kinda, you know, grow their own spoke. So, we can, we, we can help guide the industry by, making these products more available, and at the same time, improve our sales to the, satellite OEMs. And there's, there's, there's quite a few of these people.

[Christian Zyla, Senior Associate in Equity Research at KeyBanc Capital Markets]

That's great. Appreciate the call. Thank you, guys.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Yep.

[Operator]

Our next question is from Scott Deuschle with Deutsche Bank. Please proceed.

[Scott Deuschle, Director of A&D Equity Research at Deutsche Bank]

Hey, good morning. Dr. Hartnett, can you clarify whether the new Airbus contract included a meaningful ship set content increase on any of your programs?

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Yeah. Yes, it did. I guess it's definitely, you know, what do you, what do you define as meaningful? I mean, we just running through some of the programs, the new programs that we captured, in my own mind here on the Airbus contract. So, yeah, I would say it's probably increased Airbus content, 20%, that sort of thing.

[Scott Deuschle, Director of A&D Equity Research at Deutsche Bank]

Okay. Can you say when that might layer into your revenue? Is there maybe a one to two-year lag as you tool up for that higher content, or could you see it sooner?

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

We expect to see it in this particular quarter.

[Scott Deuschle, Director of A&D Equity Research at Deutsche Bank]

Okay, that's great. Can you also give us a sense for how large the missile business is today relative to defense overall? Would you expect missile revenue growth to outpace commercial aerospace, given some of these big contracts Lockheed and Raytheon have gotten?

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Yeah. I mean, missiles are, they're a funny breed. I mean, there's the HIMARS, and there's the JDAMs, and those are bombs. And there's the hypersonics, and then there's the standard missiles that go into just are part of the F-16 package. And so we're pretty much, you know, across the board on all of these programs. I can't... I, you know, it's hard to see exactly how big this missile business can be, particularly when they start building out hypersonics.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

But, you know, a lot of those hypersonics are gonna go on the Columbia-class and the, and the Virginia-class. So, we're definitely gonna be part of that, that program in a meaningful way. But I don't have an answer for you with regard to how big the overall missile business can be at RBC versus commercial aircraft.... I don't think it's gonna be as large, any, anywhere near as large as our commercial aircraft business.

[Scott Deuschle, Director of A&D Equity Research at Deutsche Bank]

Okay. And then, Rob, I was wondering if you could pull apart the gross margin guidance by segment for the fourth quarter, and in particular, help us understand the, the rate of sequential gross margin improvement in A&D, given that pricing step up you have coming through.

[Rob Sullivan, CFO at RBC Bearings]

Yeah, I mean, I think the one of the best ways to look at it is, you know, we're guiding you to a gross margin that's, you know, at the high end incrementals, where we were in Q3. And, you know, we would expect aerospace and defense to be growing at a rate faster than industrial. So that should imply that there should be some, you know, increment to what we've seen in aerospace and defense. So as I said, it was about 42.2 this quarter. You know, we should see some gradual improvement in this quarter that's getting us to that guidance. So that's how I break it down. I think industrials should more or less look where they, you know, they have been.

[Rob Sullivan, CFO at RBC Bearings]

You know, I think we have some opportunities, but we have a little bit of headwind just from some absorption challenges that we always have in the third fiscal quarter with the holidays and just fewer earned hours. But generally speaking, industrial should look like what it did in the third quarter, I would expect.

[Scott Deuschle, Director of A&D Equity Research at Deutsche Bank]

Okay, thank you.

[Operator]

Our next question is from Pete Skibitski with Alembic Global. Please proceed.

[Pete Skibitski, Director of Aerospace & Defense Equity Research at Alembic Global]

Hey, good morning, guys.

[Rob Sullivan, CFO at RBC Bearings]

Good morning.

[Pete Skibitski, Director of Aerospace & Defense Equity Research at Alembic Global]

Just a couple for me. Mike, can you update us or remind us kind of where you guys are at on the production rates right now for the core Boeing and Airbus programs?

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Oh, yeah. Well, I think... Boeing, Boeing is, you know, I think they're pushing towards, they're at 38, 737s a month, looking to go to 42, looking to go to 50, with an overall objective of, of getting to 60. The exact dates that those, that occurs, I don't have in front of me, but, but I, I do have, you know, in one of my files. But the 60 is, is not that far off. And then the, 787 is, you know, six, as I remember, six going to eight per month, and that's a, that's a significant step up for us. We have, we have one plant that's, you know, very dependent upon the 787, ship, and, so that's, that's very helpful.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

And then, you know, the 777, 777X seems to be coming into its own, and... But I think that's only a few shifts a month, in the distant future. I don't have that number in front of me.

[Pete Skibitski, Director of Aerospace & Defense Equity Research at Alembic Global]

Okay. And just, are you guys producing kind of in line with where Boeing is, or are you? I think typically you're, I don't know, six to nine months ahead of their production rates. Is that where you're at right now, or do you feel like there may be reworking off some inventory?

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

I think, you know, in one of our smaller plants, Boeing is working off some inventory, and that sort of turns around in July. In all of the other plants, we're pretty much lockstep with their production rates.

[Pete Skibitski, Director of Aerospace & Defense Equity Research at Alembic Global]

Okay. Okay, got it. One last one for me, maybe for Rob. Hey, Rob, you guys were kind of hot this quarter on the CapEx spend, it inflated up a bit.

[Rob Sullivan, CFO at RBC Bearings]

Yep.

[Pete Skibitski, Director of Aerospace & Defense Equity Research at Alembic Global]

Are you still on...? Is that just timing? Are you still on tap to be about 3.5% spend for the full year and maybe continuing that level into fiscal 2027?

[Rob Sullivan, CFO at RBC Bearings]

Yeah, and we made some strategic investments and some capacity buildouts, but I think we'll still end up 3.5%, less than 4% for the full year.

[Pete Skibitski, Director of Aerospace & Defense Equity Research at Alembic Global]

Okay, got it. Thanks, guys.

[Operator]

Our next question is from Tim Thein with Raymond James. Please proceed.

[Tim Thein, Managing Director and Senior Research Analyst at Raymond James]

Great. Thank you. I've said too on the industrial business. I think, Rob, you said earlier that what's embedded in the fourth quarter guide is a growth rate for that business comparable to what you did, call it 3%, in the third, if I heard that correct. I'm just curious. Is that in terms of your, obviously, this is a business that's a lot harder to predict than A&D in the short term, but I'm curious what you've seen kind of, you know, in recent months, trends in just in terms of order activity.

[Tim Thein, Managing Director and Senior Research Analyst at Raymond James]

Does that get you to a similar kind of outcome, or is that, I don't know, just maybe just help us in terms of what you've actually seen in terms of incoming order trends relative to that number?

[Rob Sullivan, CFO at RBC Bearings]

Yeah. I know, we, you know, what's built in for the fourth quarter is probably even a little bit below that 3%. But to be honest, the orders have been pretty good in the recent months, so we feel really comfortable with what we're forecasting.

[Tim Thein, Managing Director and Senior Research Analyst at Raymond James]

Okay. And then, just as part of it, as you integrate Dodge, there is a lot of investment that the company has made over the years in terms of making that more of a global business. Where are you in terms of realizing some of those growth initiatives? You highlighted the service center piece earlier. I don't know if that's, obviously, I'm not international, but maybe just-

[Tim Thein, Managing Director and Senior Research Analyst at Raymond James]

... if there's a way to kind of help us in terms of the underlying growth prospects of Dodge. Yeah, that's all. Thank you.

[Operator]

Our-

[Rob Sullivan, CFO at RBC Bearings]

Yeah, you know, I think-

[Operator]

Sorry, go ahead.

[Rob Sullivan, CFO at RBC Bearings]

Sorry. I think we're still in the middle innings on that process, and we realize a tremendous amount of synergy on the cost side with Dodge, as we've all talked about in the past. I think we're in the middle innings, and then some of those new initiatives are being put in place. We've had a lot of great meetings and discussions around that new service center, some new product initiatives that, you know, that we're in the process of deploying. So I think there's some bright things ahead on that business.

[Tim Thein, Managing Director and Senior Research Analyst at Raymond James]

Thank you.

[Operator]

Our next question is from Jordan Lyonnais with Bank of America. Please proceed.

[Jordan Lyonnais, VP in Equity Research at Bank of America]

Hey, good morning. Thank you for taking the question. I wanted to touch on missiles again. If the frameworks that Lockheed and Raytheon now have, when we start to see those turn into real contracts in production, how are you guys thinking about CapEx, or do you need additional investments, to hit these quadruple production rates? Thank you.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Well, you know, it's the question you ask is the same question the missile builders ask us: do you guys have the capacity to take on, you know, this much demand? And we do. And so we do have to add some equipment. The equipment that we add is certainly within that 3.5% that Rob's been talking about. So it's modest, and it's usually just gonna use our capital base that we have in place today, for the most part, to a more effective level. So yeah, you shouldn't see any surprises on the capital side in order to tool up this business.

[Jordan Lyonnais, VP in Equity Research at Bank of America]

Great. Thank you so much.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Yeah.

[Operator]

Our next question is from Ross Sparenblek with William Blair. Please proceed.

[Ross Sparenblek, Equity Research Analyst at William Blair]

Hey, good morning, gentlemen. Thanks for taking the question.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Morning.

[Rob Sullivan, CFO at RBC Bearings]

Morning.

[Ross Sparenblek, Equity Research Analyst at William Blair]

Just starting with VACCO, I mean, it looks like some really strong performance on the margin side in the quarter. Can you maybe just help us parse out, you know, the success there? If this is, you know, one time, and if we should expect that to be the largest kind of margin contributor to Aerospace and Defense gross margins in the fourth quarter.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Well, Aerospace gross margins in the fourth quarter ought to be pretty good, Ross. And it's a little bit difficult for us to predict how good, but I suspect they're gonna be better than they were in the third quarter. You know, given volumes and pricing and sort of the other, you know, factors that go into the calculus to make it all work well. So yeah, those margins will definitely expand.

[Ross Sparenblek, Equity Research Analyst at William Blair]

Okay.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

When we put together the outlook for the fourth quarter, you know, it implies a 7.5% organic growth rate and a 14% total growth rate, you know, versus last year's fourth quarter. The 7.5%, you know, sort of, you know, balances aircraft and defense out at 10%, whereas industrial is somewhere less than 5% in order to get to the 7.5%. So we're looking at an aircraft, you know, a little bit north of 10% against a third quarter, which was 21.3%. So I think, you know, I think the fourth quarter outlook is very conservative.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

But we elected to make it conservative because, really for no other reason than to be conservative. So notwithstanding that, I think we expect to have a very strong fourth quarter. We have great market positioning, strong teams, good order book. It's only a matter of execution, and there's one thing about RBC, we always execute. So I think in the fourth quarter, I think our investors are gonna be very pleased with the results.

[Ross Sparenblek, Equity Research Analyst at William Blair]

Yeah, and that's pretty clear with, you know, the gross margins for backlog on the quarter. I just don't get the impression that it's a lot of operating leverage there. I mean, was it more cost out? And, you know, what is kind of maybe the, the revised outlook on where those margins can go? It feels like we should be converging with, you know, consolidated aerospace more- Aerospace and Defense gross margins sooner rather than later.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Yeah, I would think those margins are gonna, you know, the A&D margins are gonna chase up towards the industrial margins. I don't know if they'll reach them, but they're gonna close the gap.

[Ross Sparenblek, Equity Research Analyst at William Blair]

Okay, that's helpful. Then maybe just another one on the industrial business. It looks like your peers are kind of guiding for low single digits for 2026. Can you maybe just help us think through kind of the more cyclical- Sorry?

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

The peers are guiding to what for 2026?

[Ross Sparenblek, Equity Research Analyst at William Blair]

Looking like low single digits, kind of,

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Low.

[Ross Sparenblek, Equity Research Analyst at William Blair]

Consolidated. And I think a lot of that's kind of cyclicality and maybe the heavy machinery, capital goods, and that is the more cyclical piece of your industrial business. Anything to call out in the channel there? I mean, do you think inventory is balanced? And if we do start to, you know, see elevated build rates like the OEMs are expecting, how soon should we expect a catch-up there?

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Yeah, well, I think our industrial business will be sort of better than the single digits. It'll be... You know, we're expecting sort of the high single digits as worst case. So, but we're not, you know, we're not coming out with full year guidance. We never do. And, but we're looking at it. We're pretty optimistic about what's involved in the year ahead.

[Ross Sparenblek, Equity Research Analyst at William Blair]

All right. Well, thank you very much, and congrats on the quarter, guys.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Thank you. Thanks.

[Operator]

With no further questions, I would like to turn the conference back over to Dr. Hartnett for closing remarks.

[Michael Hartnett, Chairman, President, and CEO at RBC Bearings]

Okay, well, this concludes our third quarter conference call, and we thank you all for taking the time today to participate, and look forward to talking again, probably late May. Good day.

[Operator]

Thank you. This will conclude today's conference. You may disconnect at this time.

Participants

Executives

• Michael Hartnett, Chairman, President, and CEO
• Rob Sullivan, CFO

Analysts

• Alexandra Mandery, Equity Research Associate at Truist Securities
• Christian Zyla, Senior Associate in Equity Research at KeyBanc Capital Markets
• Daniel Bergeron, Director, VP, and COO at RBC Bearings
• Jordan Lyonnais, VP in Equity Research at Bank of America
• Josh Carroll, Partner at Alpha IR Group
• Kristine Liwag, Managing Director at Morgan Stanley
• Pete Skibitski, Director of Aerospace & Defense Equity Research at Alembic Global
• Ross Sparenblek, Equity Research Analyst at William Blair
• Scott Deuschle, Director of A&D Equity Research at Deutsche Bank
• Tim Thein, Managing Director and Senior Research Analyst at Raymond James