Source: RBC Bearings.

Modern aircraft are extremely complicated machines, and it takes a host of businesses to help manufacture all the parts and components that go into a typical airplane. RBC Bearings (NASDAQ:ROLL) makes products that few airline passengers will ever notice, but its engineered bearings and components are essential in serving not just the commercial aerospace industry but also the defense and industrial sectors as well for the aerospace, industrial, and defense industries. Coming into its fiscal first-quarter financial report last week, RBC Bearings shareholders were nervous about a slowdown in growth last quarter and hoped that the company's optimistic outlook would pan out. As it turned out, RBC largely delivered on that outlook, with solid gains in sales and adjusted earnings that investors took positively. Let's take a closer look at how RBC Bearings and whether it can sustain its momentum going forward.

RBC Bearings gets back into growth mode
RBC Bearings' fiscal first-quarter results showed renewed growth potential for the company. Sales surged 26% to $142.3 million, roughly matching the consensus figure among investors following the company. On the bottom line, net income fell on a GAAP basis, but after making allowances for extraordinary items, adjusted net income rose 15%, and adjusted earnings of $0.78 per share was $0.04 higher than investors had expected.

Looking more deeply at RBC Bearings' numbers, strength in aerospace was predominantly responsible for the company's strong showing. Sales from the aerospace business soared 45%, with the acquisition of Sargent Aerospace & Defense playing an important role in lifting revenue, especially in the engineered products segment. By comparison, industrial sales climbed just 3%. Performance in roller bearings and ball bearings was weak, but plain bearings sales climbed by about 10%, and engineered products more than quadrupled from year-ago levels.

RBC Bearings also worked to become more efficient in its internal operations. Growth in overhead remained largely in check, helping to reduce the percentage of revenue going toward those costs slightly, but acquisition-related costs weighed on overall margins and led to a drop in operating income compared to last year's first quarter.

CEO Michael Hartnett was pleased with the way the 2016 fiscal year began. "The Sargent integration is going well," Hartnett said, "and our expanded and strengthened offering is aiding our performance across the cyclical businesses we serve." Hartnett also praised RBC's operating performance during the quarter even in the face of having to fold a big acquisition into the mix.

Can RBC Holdings keep gaining altitude?
One concern that some investors might have come from RBC's conference call. When asked whether the big jump in aftermarket sales could continue at a double-digit percentage pace, Hartnett was blunt, saying, "No, I don't think it's sustainable. I think it's one of these things that those aftermarket folks deplete their inventories and then seem to all build them back up in the same quarter."

Still, the Sargent acquisition has significant implications for RBC. One thing it does is make the company more reliant on its aerospace exposure, which at this point is arguably the strongest from a macroeconomic standpoint. By contrast, oil and gas industry exposure has been minimal, and while a weak energy sector has likely cost the industrial side of the business some growth, along with poor conditions in mining as well, RBC has largely avoided the full impact by remaining focused on making the most of the high demand for aircraft parts and components.

Also, it's important to notice that when you pull out the numbers for Sargent, organic growth was still weak. In the conference call, the company said that industrial sales were down 5% excluding Sargent's influence, and even in the aerospace area, revenue fell 3%. RBC blamed the timing of defense orders for the drop in organic aerospace sales, but even so, signs of macroeconomic weakness globally continue to pose a long-term threat.

Despite those concerns, RBC Bearings has done well since the report, rising more than 5%. Even with storm clouds on the horizon that could affect the aerospace industry, RBC has made smart strategic moves that should help it take maximum advantage of favorable conditions as long as they last.