Boeing, Isaac, RBC discussed on The Drill Down

The Drill Down


Supply chain problems really me give you a quick sense of where the greatest impacts are being felt right now. From national manufacturing perspective categories most impacted are engineered wood windows garage doors paint in vinyl siding on a regional basis. It is breaking lumber capacity in texas concrete-block in central florida insulation in north and south west florida in phoenix minnesota. It's very labor constraints. We believe bluefield effects of this. Backup to the next few quarters and then based on the plans we have in place with all of our trade partners you would expect to see stabilization in our cycle times q. Two twenty twenty two to twenty two and that just you know from everywhere. They're doing business. They're having troubles in different kinds of troubles supply. Chain what is your next showdown isaac. Finally we can talk about ball bearings. Let's look at mary. Humor is just like mine Rbc bearings trades in her role r. l. shares fell one percent today and they've risen sixty five percent of the year. What's going on with rbis bearing slow. We talked earlier about a company's got a nine billion dollar market cap doesn't even have any product and doesn't even have any revenues. So why don't we talk about. Rbc bearings which only has a five billion dollar market cap. But it's got six hundred nine million in sales trailing basis thirty nine percent gross margin twenty five percent even margins. That's i mean. This is a fantastically profitable business. So what's the catch. They sell stuff to airlines and they sell a lot of stuff to airlines. Aerospace is fifty eight percent of the business industrial which is like caterpillar. newport news shipping applaud industrial. that's a big chunk of their and he's about forty percent but about sixty or fifty eight percent. Last year was in fact aerospace. And it was things like Department offense airbus. And yes boeing. Now you're wondering isaac i know. I know that you were hoping that we could someday do one. Hundred episodes of this show and and finally talk about ball bearings and we are but the bearings that they sell in an airplane. There are so many places were bearings are put to work like control wings on the trailing edge for the flaps and spoilers wings in the leading it for the slap center in the front of the plane cockpit controls interior seats and bins and latches and hinge points and landing gear and engine component of the doors. Don't forget the doors cargo and passenger doors. All of these things have custom-built bearings. And the problem at boeing. As we know is that they had a plan that they couldn't sell for well over a year with safety problems so they brought their numbers way down and these guys have to manufacture A year in advance by the steelers. Take some of these twenty weeks. It can take him six with six months to build these bearings and get him to the customer. So they're going to spend a lot of money in advance and they've been sitting on a lot of stuff they haven't to get it out of inventory and now they've got to start to build up inventory a year in advance of the rebuilding of the boeing fleet. That they expect to grow year after year after year. And so they've raised some money and they sold more stock and that's when the stock was down here today just for dilution. I guess. But i think it shows that they've got to spend the money now to have the product on hand to sell it for the next few years boeing ramps up production now the difference for them the other problem for them is at the aftermarket for distributing. These bearings has not been building up inventory. They've been taking it on the chin as so just when they should be building up inventory and buying from From these guys from from you know from roller bearings are bearings isn't selling to these secondary aftermarket distributors who normally at this stage in the cycle our buyers all those companies a lotta. Those companies got new owners and new owners according to rbc's ceo. Michael harnett just don't understand the business and aren't buying when they should be by the the aftermarket distribution side of the businesses events Usually at this at this stage in the In the cycle distributors The owning up there in the bill rate. We're going to be in the market would be buyers would be with with service levels And that's that would be normal at this at this stage in the cycle. It's not normal. Now is so many of the aftermarket distributors Owned by New owners and new management teams and They don't have experience. They don't have the experience cycles so what they should be doing with their capital right now. They don't appear to be doing. So i thought it was just who knew ball bearings so interesting. I knew it would be fascinating business. I have told you that it was an interesting business. Every oh all right coming up next a very special guest for one hundred episode. We're talking with amy lest who runs really interesting. Silicon valley charity called pledge one percent. You're going to want to hear about this. But how so. Many companies in silicon valley are changing the way charities are funded through this pledge. One percent from talked to amy less nick right after that. The drill down brought to you by brain trust global talent network that matches highly skilled technical freelancers with the world's most reputable brands. Braintrust is help clients like bank of america goldman sachs porsche under armor and more agile tactics fast at a fraction of cost visit brain dot com. 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