Goldman Sachs Starts RBC Bearings (ROLL) at Neutral
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Goldman Sachs analyst Joe Ritchie initiates coverage on RBC Bearings (NASDAQ: ROLL) with a Neutral rating and a price target of $217.00.
The analyst comments "We initiate coverage of RBC Bearings Incorporated (ROLL) with a Neutral rating and $217 12-month price target. Fundamentally, ROLL has delivered consistent growth (8% sales growth CAGR from FY02 to FY20) at attractive margins (high-20s EBITDA), and with the recent acquisition of Dodge, we believe the company is well poised to compound value over time. However, expectations appear to be baking in a lot of the opportunity (GS EBIT estimates for FY23/FY24 are +1%/-1% vs. FactSet consensus) and there is limited balance sheet optionality in the medium-term (~3.6x FY23 net leverage). As such, we see risk/reward as balanced at this time. From a growth perspective, we believe ROLL will benefit from a strong recovery in Industrial/Aero (70%/30%) end markets, supporting MSD-HSD growth in FY23/FY24. On margins, we expect synergy realization (~GS: $100mn synergies in 5 years) to support ~100bps/year in EBIT margin expansion through FY24. Lastly, we believe ROLL should trade at a premium to our Multis coverage given above average EBITDA margins/FCF and cyclically depressed end markets. Our $217 price target is based on 18.0x Q5-Q8 EV/EBITDA (~20% premium to our Multis median target). Our price target implies a FY24 FCF yield of ~4.5%."
Shares of RBC Bearings closed at $200.31 yesterday.
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