RBC Bearings (ROLL) Buys Swiss Tool, Boosts Collets Business

RBC Bearings Incorporated ROLL recently closed the buyout of Swiss Tool Systems AG for about CHF 33 million ($33.9 million) from Cross Equity Partners LLP and other private owners. Notably, the company will fund the transaction with cash on hand and debt.

Headquartered in Bürglen, Thurgau, Switzerland, Swiss Tools is a leading supplier of modular tooling systems throughout the world. Also, the company is a major supplier of high-precision boring and turning solutions for metal cutting machines.

Acquisition Rationale

Swiss Tools’ highly engineered products will augment the products offerings of RBC Bearings’ collets business. RBC Bearings already has a strong presence in collets and toolholders business in the United States and Europe, and this buyout will enable it to further strengthen customer base.

Moreover, the buyout integration process is likely to be seamless, with Swiss Tools’ manufacturing processes and design expertise complementing that of RBC Bearings.

Existing Business Scenario

RBC Bearings believes that expansion in international arenas, building of manufacturing capabilities and benefits from new contracts will boost sales from aerospace and defense markets. For second-quarter fiscal 2020 (ending September 2019), the company anticipates revenues to grow 4.1-5.3% year over year to $180-$182 million.

In the past three months, the Zacks Rank #3 (Hold) company’s share price has increased 15.6% against 4.3% decline recorded by the industry.

However, of late, the company is witnessing softness in several industrial end markets, including energy, mining, general industrial and semiconductor markets. We believe that these issues might adversely impact its revenues in the quarters ahead.

Stocks to Consider

Some better-ranked stocks from the same space are DXP Enterprises, Inc. DXPE, Graham Corporation GHM and Roper Technologies, Inc. ROP. All these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DXP Enterprises beat estimates thrice in the trailing four quarters, the average positive earnings surprise being 18.06%.

Graham’s earnings surprise in the last reported quarter was 100.00%.

Roper delivered average positive earnings surprise of 6.92% in the trailing four quarters, having surpassed estimates each time.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.