RBC Bearings (RBC) is positioned for structural margin expansion following a strong start to fiscal 2027, supported by robust aerospace and defense demand and a broadening industrial recovery, Morgan Stanley said in a Monday note.

The company reported fiscal Q1 adjusted net income and net sales above market expectations. Management noted broad-based growth across industrial end markets, except metals, that extended through July, according to the note.

Building momentum in space and marine applications, along with increasing aircraft production and defense spending, continue to drive demand in aerospace and defense. These tailwinds and improving industrial trends should support sustained earnings growth above that of peers, Morgan Stanley added.

RBC management expects consolidated gross margin to improve by about 100 to 150 basis points from fiscal 2026 to fiscal 2027. Morgan Stanley said that the improvement is expected amid aerospace and defense contract repricing and increased in-sourcing.

The firm reiterated its overweight rating on RBC Bearings and raised its price target to $655 from $640.

Shares of the company were up 3.3% in Monday trading.

Price: 569.53, Change: +18.22, Percent Change: +3.30