RBC Bearings (NYSE: RBC) diversified its lineup of products through its latest acquisition, broadening its portfolio to include the booming naval defense and space sectors.
Both the space and naval defense sectors have opportunities for growth and the potential to generate higher margins for RBC Bearings, a manufacturer of precision bearings and other components.
Last May, the company, which specializes in the aerospace, defense, and industrial industries, purchased Vacco Industries for $275 million from ESCO Technologies. The acquisition of Vacco Industries, which closed last July, adds valves, regulators, manifolds, and filters for the space and naval defense channels to RBC Bearings’ roster of products.
Growth of the space industry
The interest in the commercial space industry means more capital will be deployed in the sector, benefiting companies like RBC Bearings.
The growth in the sector is expected to continue rising as investors remain extremely enthusiastic about the industry, which includes thousands of smaller private companies in the U.S., along with larger ones like SpaceX, which could go public in the future. In addition, NASA’s budget could rise to $24.4 billion in fiscal 2026, according to a budget released by Congress.
In 2025, investors invested $55.3 billion in capital for 431 companies in the space industry, representing a massive 65% increase from 2024, according to a report from Space Capital, a venture capital firm that focuses on early-stage investments.
“What changed in 2025 wasn’t just the amount of capital flowing into space, but why it was flowing,” said Space Capital CEO Chad Anderson, according to a MarketWatch article. “Investors stopped underwriting possibilities and started underwriting systems that actually do work, such as sensing, communications, navigation, and defense resilience.”
The global space economy generated revenue of $570 billion in 2023, a 7.4% increase over the previous year, according to the Space Foundation.
Interest from investors in commercial space companies will produce a larger number of products that will require parts manufactured by RBC Bearings.
One advantage of RBC Bearings is that it is the “sole supplier of about 70% of its products” for the U.S. Defense Department and Boeing (NYSE: BA), Henry Ellenbogen, chief investment officer and managing partner of Durable Capital Partners, Chevy Chase, Md. told Barron’s.
Shares of the company soared by 53% in the past year, with a rise of 26% in the past six months.
RBC Bearings manufactures products including “quiet valves that allow nuclear submarines to remain undetected. It makes key bearings in jet airplanes. About 90% of revenue comes from the U.S.,” he added.
As both Airbus and Boeing boost their production of planes, RBC Bearings will benefit from the demand, said Ellenbogen.
The growth in the defense industry will also be favorable for RBC Bearings since its backlog has grown to $2 billion from $825 million.
“The Department of Defense is moving to in-stock from just-in-time inventory, which makes sense,” he said. “As a result, we think aerospace and defense will account for 50% of RBC’s cash flow by the end of the year. The market is going to realize that RBC can grow at a mid-teens rate. The company has added a lot of value through mergers and acquisitions, and has a clean balance sheet.”
As the manufacturing industry rebounds and grows, RBC Bearings will likely reap the rewards since it is known for being a quality supplier to the aerospace, defense, and space industries.
Comments