RBC Bearings Incorporated Q3 2026 Earnings Call Transcript

RBC Bearings Incorporated (NYSE: RBC) Q3 2026 Earnings Call dated Feb. 05, 2026

Presentation

Joshua Carroll — Investor Relations

Good morning and thank you for joining us for RBC Bearings fiscal third quarter 2026 earnings call. I’m Josh Carroll with the Investor Relations team. With me on Today’s call are Dr. Hartnett Jones, Chairman, President and Chief Executive Officer, Daniel Bergeron, Director, Vice President and Chief Operating Officer, Rob Sullivan, Vice President and Chief Financial Officer. As a reminder, some of the statements made today may be forward looking and are under the Private Securities Litigation Reform act of 1995. Actual results may differ materially from those projected or implied due to a variety of factors. We refer you to RBC Barings recent filings with the SEC for a more detailed discussion of the risks that could impact the company’s future operating results and financial condition.

These factors are also listed in the press release along with a reconciliation between GAAP and non GAAP financial information. With that, I’ll now turn the call over to Dr. Hartnett.

Michael J. Hartnett — Chairman, President & CEO

Okay, thank you and good morning everyone and thank you for joining us. As usual, I’m going to start today’s call with a short review of our financial results and the outlook for the industry with our sectors. Rob Sullivan will follow me with some details on the results. Third quarter net sales were 461 million, or a 17% increase over last year. We experienced continued strong performance in our A and D segment and growth from our industrial businesses. Consolidated gross margin for the quarter was 44.3% and 45.1% on an adjusted basis. Adjusted diluted EPS was 3.04 versus 2.34 a year ago, a 30% improvement.

EBITDA came in at 149.6 million versus last year 122.6, up 22 point percent. Free cash flow for the period is a strong $99.1 million and we paid down an additional $81 million of debt in the third quarter. 56% of our revenues were industrial, 44% from the a and D sector. Total A and D sales were up 41.5% year on year. Commercial aerospace expanded 21.5%. Defense expansion was 86.2%. Rob Sullivan will talk more about these details later in the call. Demand across the A and D sectors continues to be robust. As evidence, we have modestly exceeded our $2 billion backlog mark that we spoke about last call.

Remember, most of our R and D business is contracted and managed through daily or weekly orders or polls communicated to. Us electronically and as a result represent. Only a modest footprint in today’s backlog statement. If these joint contract obligations were extended based upon the statement of work content awarded and projected build rates, they would likely exceed another half to a full billion dollars of backlog. Today. The strength and outlook on the A and D sector can only be described as extreme robust. Clearly we are national inflection point in the commercial aircraft and defense industries. Let me explain with an overview of some of our key markets. So we’ll start with submarines. Submarines are facing accelerated fleet buildout. The number one defense priority today is submarines.

This drives an unprecedented demand for our proprietary quiet running valves both for new construction and replacement. To support the current fleet, 66 Virginia ships are planned, 25 have been commissioned to date and 12 Columbia class ships are planned. Number two missiles and guided arms, support for broad multi year refurbishment initiative for offensive and defensive missiles and vision targeting systems both here and overseas create a strong environment for our precision assemblies and fuel management products in Europe. NATO’s 5% GDP initiative is growing demand for our products from the ground warfare system builders in Europe. This creates a strong new requirements for RBC products developed that would have been developed over the past decade in the usa.

The refurbishment of new and refurbishment and new construction of aircraft systems as well as the maintenance of untold number of helicopters and airframe platforms including engines, creates strong and continuous needs for our proprietary components. We expect an expanded defense spending bill will likely accelerate the repair activities further. We also support the expanding need for both engineering support and staple components for the systems that the big three space Explorers are building as well as others. They’re racing to the moon and or creating low earth satellite systems requiring sophisticated precision assemblies for targeting, thrust vectoring, fuel management, structural members, et cetera.

I think you can see this the picture that we’re faced with right now in the A and D sector. Of course all of these macro extremes in space and defense are simultaneous with the unprecedented build rates for commercial aircraft including engines. RBC is deeply embedded in all of these areas which create a tremendous and continuous market for our products both at the OEM and the pre placement levels. We are working diligently to add machinery and staff to several of our existing sites, guided by our five year per site plan to support these growing A and D revenues.

Well, I hope this brief abstract gives you a 40,000 foot view of what our world today in the RD sector A and D sector. We can certainly go into specific programs, outlook products and proprietary positioning as well as the moats to any depth needed at another time. We’ve been working well over a generation to achieve, industrialize, catalog and fortify the portfolio that you see today. So let’s turn to the industrial businesses now. Overall, our industrial business was up 3.1%. Industrial distribution was up 1.5% while OEM sector was up 7%. We saw strength in aggregate and cement, food and beverage and the warehousing markets during the period.

Recently we’ve been seeing positive trends in some of these markets in terms of order demand, which will show. Which will show as revenue as they work their way through lead time. The semiconductor industry is the biggest standout in this regard. Broad industrial demand strengthened measurably in late December and continued throughout January. In addition, we are introducing several new products to the industrial lineup for FY27, many of which have been in testing and development since the Dodge acquisition combined. They promise to bend our curve on industrial growth. Also, we are opening a service center in the Midwest to better attend the needs of our and tailor our product response to more customers in that region.

I hope I gave you a feel for our environment and the momentum that exists at RBC today. And I’ll turn the call over to Rob Sullivan for more discussion on the third quarter and the fourth quarter outlook.

Robert Sullivan — VP & CFO

Thank you, Mike. As Dr. Hartman mentioned, we had another strong quarter. Net sales grew 17% which led to a 16.9% increase in reported gross margin. Gross margins were 44.3% for the quarter or 45.1% on an adjusted basis, compared to 44.3% in the same period last year. During the quarter, we delivered strong performance across our business segments, specifically within aerospace and defense, which has demonstrated strong growth. As Dr. Hartnett stated, third quarter A and D sales increased 41.5% year over year and importantly, the increase was 21.7% excluding sales from backhoe, demonstrating significant expansion from both our legacy commercial and defense markets.

AMD gross margins during the quarter were 40.1% or 42%, 42.2% on an adjusted basis and industrial margins were 47.5% or 47.4% on an adjusted basis. Excluding VATCO, our aerospace and defense gross margins were 43.4% during the period. We are encouraged by the margin progress we’ve achieved within A and D, driven by increased efficiencies achieved in our plants coupled with improving pricing on customer contracts. Looking ahead, we expect these benefits to continue to further support margin improvement, while recognizing the impact will be gradual as these benefits flow through. On the SGA line, we had total costs of 77.9 million or 16.9% of net sales for the quarter.

This ultimately resulted in an adjusted EBITDA of 1:49.6 million, or 32.4% of sales for the quarter. That represents an approximate 22% increase in adjusted EBITDA dollars during the quarter compared to the same period last year. Interest expense for the quarter was 13 million. This was down 8.5% year over year, reflecting the improved leverage position achieved over the last 12 months coupled with lower interest rates compared to this time last year. We paid off $81 million of debt during the quarter and another 67 million since the end of this third quarter. The tax rate in our adjusted EPS calculation was 22.1% compared to last year’s 22.2%.

This led to adjusted diluted earnings per share of $3.04 representing growth of 29.9% year free cash flow in the quarter came in at 99.1 million with conversion of 147% in comparison to 73.6 million and 127% last year. The higher conversion rate was due to the increased earnings and working capital management during the quarter. As we’ve noted previously, our capital allocation strategy going forward will remain focused on deleveraging by using the cash that we generate to pay off our standing debt. Our expectation is to pay off the remainder of the term loan by November of 2026.

Looking into the fourth quarter, we are guiding revenues of 495 to 505 million, representing year over year growth of 13.1 to 15.4%. On the gross margin side, we are projecting adjusted gross margins of 45 to 45.25% for the quarter and SGA as a percentage of sales to be between 16 and 16.25% for the period with that operator, please open the call for Q and A.

Question & Answers

Operator

Thank you. If you would like to ask a question, please press Star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star two if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Christine Lewag with Morgan Stanley. Please proceed.

Kristine Liwag — Analyst, Morgan Stanley

Hey, good morning everyone. Rob and Dr. Hartnett. I just wanted to follow up regarding your commentary on the industrial business. So you mentioned that you’re seeing strength in aggregate and cement, food and beverage and warehousing. You’ve got the new products that you’re introducing for fiscal year 27 and it sounds like semiconductor has been doing really well. I was wondering for these Vertical, can you provide what is embedded in your 4Q revenue outlook? And also when we go into 2027, how do you think about growth for these end markets?

Robert Sullivan — VP & CFO

Yeah, Christine, you know, the way we have our fourth quarter built out right now, it looks a lot like the third quarter in terms of what we’re forecasting for year over year growth. Maybe slightly conservative on the industrial side. So you know, we’re just expecting more of the same. Obviously we saw that the PMI this week was positive. So if that trend were to continue, that would be certainly a bullish sign for our business.

Kristine Liwag — Analyst, Morgan Stanley

Okay, great. And then if I could follow up, you know, with backhoe. The quiet running valves is a really differentiated technology. I was wondering, outside of submarines, are there other use cases for this product?

Robert Sullivan — VP & CFO

Mike Yuan.

Daniel Bergeron — VP, COO & Director

So Christine, hi, it’s Dan Bergeron. Yeah, for Sargent Aerospace, their products are specifically for submarine. And on the Vaco side there are some applications form in space on satellites.

Kristine Liwag — Analyst, Morgan Stanley

Gotcha. Super helpful. And then does it, you know, I mean, just following up on my industrial question, you know, with the improving outlook and also when we think about the order activity that you face, is it fair to say that fiscal year 27 would be a higher growth year for an industrial than fiscal year 26?

Michael J. Hartnett — Chairman, President & CEO

Now we’re expecting that, Christine. Yes.

Kristine Liwag — Analyst, Morgan Stanley

Great, thank you.

Michael J. Hartnett — Chairman, President & CEO

Yep.

Operator

Our next question is from Michael Karamali with Truist Securities. Please proceed.

Alexandra Eleni Mandery

This is Alexandra Mandry. I’m from Michael Trimoli with Truist securities and thanks for taking my question. We’ve seen that backlog growth has been strong and at all time highs with that 230% year over year growth. So could you add some more color in terms of order composition and submarket breakdown and also what is the relationship with backlog and revenue going forward?

Michael J. Hartnett — Chairman, President & CEO

Okay, there was a number of questions there. The first question was the composition of the backlog and I think Rob has that.

Robert Sullivan — VP & CFO

Yeah, I can tell you that over 90% of our backlog is really our A and D market. Most of our industrial business tends to move in and out and doesn’t really get stuck in the backlog. And in terms of the duration, which I think was another part of your question, you know, some of these contracts specifically with Sargent or Vaco can be, you know, multi year going well beyond the next, you know, 12 to 24 months.

Alexandra Eleni Mandery

Great. And then I guess like can you break down the backlog further between submarkets within A and D?

Robert Sullivan — VP & CFO

You know, I don’t have all that detail right in front of me to share with you at this time we just kind of look at it at the segment level. But obviously with Sargent mbacco, there’s a significant portion of our backlog with the marine products.

Alexandra Eleni Mandery

That makes sense. And then I guess just one other one. So on the fiscal 1Q26 call, you mentioned using roughly a $30 million run rate for Vaco quarterly revenue. So given that, did you divest maybe from any contracts or make any other changes that would reflect that slight performance discrepancy?

Robert Sullivan — VP & CFO

I mean they were at 29 this quarter, so they were, they’re pretty close to that 30 million run rate. There’s just timing. You know, we’re in the middle of integration and these contracts can be, you know, a little bit lumpy quarter to quarter. But I would say we feel pretty good with where that business is operating and are optimistic for the next year.

Alexandra Eleni Mandery

Great, thank you.

Operator

Our next question is from Steve Barger with KeyBanc Capital Markets. Please proceed.

Christian Zyla — Analyst, Morgan Stanley

Good morning Dr. Hartnett and Rob. This is Christian Zyla. Steve Barger, thanks for taking the question this morning. Just following up on your industrial comments. It does seem like you guys started growing before we actually saw an industrial inflection or at least have been less impacted by recent weakness. But January PMI was strong a few days ago. US industrial production has inflected positively sentiment. In short cycle manufacturing seems to be improving. So looking back, what do you think drove your outperformance? And then based on your business and your mix, do you think you can outgrow peers or continue your string of growth?

Michael J. Hartnett — Chairman, President & CEO

Well, I think one of the, you know, the outperformance number one, the Dodge brand is a very strong brand in the industrial marketplace, particularly the industrial MRO marketplace. And that marketplace is pretty short cycle. And as a result of having being such short cycle, your product availability needs to be high in order to capture the sale. And so Dodge does an outstanding job at managing their product availability and their hit rates and stocking of their core products. So I think we’re probably industry best in that regard and so that helps performance when times are tough.

There was a second part of your question, Steven. I forget what it was.

Christian Zyla — Analyst, Morgan Stanley

It was just based on your current business mix. Do you think that can continue into, into calendar 2026?

Michael J. Hartnett — Chairman, President & CEO

Yeah, it should. I absolutely think it should. You know we’re expecting a stronger industrial economy in 26. Certainly it started in January, started off well. Semicon has come, come back in a significant way which was, was dormant for a long period of time. And that’s a nice, that’s an important sector for us. So yeah, I think we’re going to do better on the industrial side in calendar 26.

Christian Zyla — Analyst, Morgan Stanley

That’s great. And then just switching gears to Aero and defense. A couple quarters ago you mentioned some synergies on the space side with Vaco and Legacy rbc. Just any quick update there and maybe more broadly, any updates on how you’re thinking about the broader space industry and what specific markets or applications that you currently are not exposed to or not involved in that could be interesting? Does that require more engineering expertise or capacity? Just any kind of thoughts there. Thank you.

Michael J. Hartnett — Chairman, President & CEO

Yeah, well, Vaco is a, you know, it’s a company we learn more about, you know, every month. And one of the things that we’re learning about Vaco is they have a very good product program that services the space market with staples that the space market requires in order to build out satellites. And they have a tremendous brand and following in these staples. And, and so it’s a little bit like the bearing business. If you have a stocking position on these staples, you’re liable to get the order and you’re liable to significantly improve your sales. And so we’re looking at their product offering and deciding exactly which products we should be stocking.

And to some extent we think, we think if we had those products in stock, people would actually, actually develop or design satellite systems around those products. Because when it’s undefined, it’s undefined and people kind of, you know, grow their own spoke. So we can, we could help guide the industry by making these products more available and at the same time improve our sales to the satellite OEMs. And there’s quite a few of these people.

Christian Zyla — Analyst, Morgan Stanley

That’s great. Appreciate the color. Thank you guys.

Michael J. Hartnett — Chairman, President & CEO

Yep.

Operator

Our next question is from Scott Dulesh with Deutsche Bank. Please proceed.

Scott Deuschle

Hey, good morning, Dr. Hartnett. Can you clarify whether the new Airbus contract included a meaningful ship set content increase on any of your programs?

Michael J. Hartnett — Chairman, President & CEO

Yes, it did. I guess it’s, you know, what do you define as meaningful? I mean, we, I’m just running, running through some of the programs, the new programs that we captured in my own mind here on the Airbus contract. So yeah, I would say it’s probably increased Airbus content 20%, that sort of thing.

Scott Deuschle

Okay, can you say when that might layer into your revenue? Is there maybe a one to two year lag as you tool up for that higher content or could you see it sooner?

Michael J. Hartnett — Chairman, President & CEO

We expect to see it in this particular quarter.

Scott Deuschle

Okay, that’s great. Can you also give us a sense for how large the missile business is today relative to defense overall. And would you expect missile revenue growth to outpace commercial aerospace given some of these big contracts Lockheed and Raytheon have gotten?

Michael J. Hartnett — Chairman, President & CEO

Yeah, I mean, missiles are, they’re a funny breed. I mean, there’s, they’re used for all sorts of things. You know, there’s the Himars and there’s the JDAMs, and those are bombs and there’s. The hypersonics and then there’s the standard missiles that go into, just are part of, part of the F16 package. And so we’re pretty much, you know, across the board on all of these, all of these programs. I can’t, you know, it’s hard to, it’s hard to see exactly how big this missile business can be, particularly when they start building out hypersonics. But, you know, all those type, a lot of those hypersonics are going to go on the Columbias and the Virginias.

So we’re definitely going to be part of that program in a meaningful way. But I don’t have an answer for you with regard to how big the overall missile business can be at RBC versus commercial aircraft. I don’t think it’s going to be as large, anywhere near as large as our commercial aircraft business.

Scott Deuschle

Okay. And then, Rob, I was wondering if you could pull apart the gross margin guidance by segment for the fourth quarter and in particular help us understand the rate of sequential gross margin improvement in AMD given that pricing step up you have coming through.

Robert Sullivan — VP & CFO

Yeah, I mean, I think one of the best ways to look at it is, you know, we’re guiding you to a gross margin that’s, you know, at the high end incrementals where we were in Q3 and, you know, we would expect aerospace and defense to be growing at a rate faster than industrial. So that should imply that there should be some incremental to what we’ve seen in aerospace and defense. So as I said, it was about 42.2 this quarter. We should see some gradual improvement in this quarter that’s getting us to that guidance. So that’s how I break it down.

I think industrials should more or less look where they have been. I think we have some opportunities, but we have a little bit of headwind just from some absorption challenges that we always have in the third fiscal quarter with the holidays and just fewer earned hours. But generally speaking, industrial should look like what it did in the third quarter, I would expect.

Scott Deuschle

Okay, thank you.

Operator

Our next question is from Pete Skobisky with Alembec Global. Please proceed.

Peter Skibitski — Analyst, Alembec Global

Hey, good morning. Guys, just a couple for me. Mike, can you update us or remind us kind of where you guys are at on the production rates right now for the core Boeing and Airbus programs?

Michael J. Hartnett — Chairman, President & CEO

Oh, yeah, well, I think Boeing, Boeing is, you know, I think they’re pushing towards. They’re at 38 737s a month, looking to go to 42, looking to go to 50, with an overall objective of getting to 60. The exact dates that those that occurs I don’t have in front of me, but I do have, you know, in one of my files.

But the 60 is not that far off. And then the 787 is, you know, six, as I remember, six going to eight per month. And that’s, that’s a significant step up for us. We have, we have one plant that’s, you know, very dependent upon the 787 shift. And so that’s, that’s very helpful. And then, you know, the 770, 777X seems to be coming in to its own. And. But I think that’s only a few shifts a month in the distant future. I don’t have that number in front of me.

Michael J. Hartnett — Chairman, President & CEO

Okay, just. Are you guys producing kind of in line with where Boeing is, or are you, I think typically you’re, I don’t know, six to nine months ahead of their production rates.

Is that where you’re at right now, or do you feel like you’re there maybe working off some inventory? I think, you know, in one of our smaller plants, Boeing is working off some inventory, and that sort of turns around in July. And all of the other plants, we’re pretty much lockstep with their production rates.

Peter Skibitski — Analyst, Alembec Global

Okay, okay, got it. One last one for me, maybe for Rob. Hey, Rob, you guys were kind of hot this quarter. On the Capex spend inflected up a bit. Are you still on. Is that just timing? Are you still on tap to be about 3.5% spend for the full year and maybe continuing that level into fiscal 27?

Robert Sullivan — VP & CFO

Yeah. And we made some strategic investments and some capacity buildouts, but I think we’ll still end up 3 1/2 less than 4% for the full year.

Peter Skibitski — Analyst, Alembec Global

Okay, got it. Thanks, guys.

Operator

Our next question is from Tim Thien with Raymond James. Please proceed.

Timothy Thein — Analyst, Raymond James

Great, thank you. I said two on the industrial business. On the. I think, Rob, you said earlier that what’s embedded in the fourth quarter guide is a growth rate for that business comparable to what you did call it 3% in the third, if I heard that correct. I’m just curious, is that in Terms of your. Obviously, this is a business. It’s a lot harder to predict than A and D in the short term. But I’m curious what you’ve seen kind of, you know, in recent months, trends just in terms of order activity. Does that get you to a similar kind of outcome or is that, I don’t know, maybe just help us.

In terms of what you’ve actually seen in terms of incoming order trends relative to that number?

Robert Sullivan — VP & CFO

Yeah. What’s built in for the fourth quarter is probably even a little bit below that 3%. But to be honest, the orders have been pretty good in the recent months, so we feel really comfortable. We’re forecasting.

Timothy Thein — Analyst, Raymond James

Okay. And then just as part of you integrate Dodge, there is a lot of investment that the company has made over the years in terms of making that more of a global business. Where are you in terms of realizing some of those growth initiatives? You highlighted the service center piece earlier. I don’t know if that’s obviously not international, but maybe just if there’s a way to kind of help us in terms of the underlying growth prospects of Dodge. Yeah, that’s all. Thank you.

Robert Sullivan — VP & CFO

Yeah, you know, I think.

Operator

Sorry, Go ahead.

Robert Sullivan — VP & CFO

Sorry. I think we’re still in the middle innings on that process, and we realized a tremendous amount of synergy on the cost side with Dodge, as we’ve all talked about in the past. I think we’re in the middle innings, and then some of those new initiatives are being put in place. We’ve had a lot of great meetings and discussions around that new service center, some new product initiatives that, you know, that we’re in the process of deploying. So I think there’s some bright things ahead on that business.

Timothy Thein — Analyst, Raymond James

Thank you.

Operator

Our next question is from Jordan Lyones with Bank of America. Please proceed.

Jordan Lyonnais — Analyst, Bank Of America

Hey, good morning. Thank you for taking the question. I wanted to touch on missiles again. If we. The. The frameworks that Lockheed and Raytheon now have, when we start to see those turn into real contracts in production, how are you guys thinking about Capex, or do you need additional investments to hit these quadruple production rates? Thank you.

Michael J. Hartnett — Chairman, President & CEO

Well, you know, it’s. The question you ask is the same question the missile builders ask us. Do you guys have the capacity to take on, you know, this much demand? And we do. And so we do have to add some equipment.

The equipment that we add is certainly within that 3.5% that Rob’s been talking about. So it’s modest. And usually it’s just going to use our capital base that we have in place today for the most part to a more effective level. So, yeah, you shouldn’t see any surprises on the capital side in order to tool up this business.

Jordan Lyonnais — Analyst, Bank Of America

Great. Thank you so much.

Michael J. Hartnett — Chairman, President & CEO

Yeah.

Operator

Our next question is from Ross Spelenblack with William Blair. Please proceed.

Ross Sparenblek — Analyst, William Blair

Hey, good morning, gentlemen. Thanks for taking the question. Morning. Just starting with Vaco, I mean, it looks like some really strong performance on the margin side in the quarter. Can you maybe just help us parse out the success there? This is one time and if we should expect that to be the largest kind of margin contributor to aerospace and finish gross margins in the fourth quarter.

Michael J. Hartnett — Chairman, President & CEO

Well, aerospace gross margins in the fourth quarter ought to be pretty good for us. And it’s a little bit difficult for us to predict how good, but I suspect they’re going to be better than they were in the third quarter.

You know, giving given volumes and pricing and sort of the other, you know, factors that go into the calculus to make it. To make it all work well. So, yeah, those margins will definitely expand. Okay. When we put together the outlook for the fourth quarter, you know, it implies a 7.5% organic growth rate in a 14% total growth rate, you know, versus last year’s fourth quarter. The 7.5%, you know, sort of, you know, balances aircraft and defense out at 10%, whereas industrial is somewhere less than 5% in order to get to the 7.5%. So we’re looking at an aircraft, you know, we used an aircraft, you know, a little bit north of 10% against a third quarter which was 21.3%.

So I think, you know, I think the fourth quarter outlook is very conservative, but we elected to make it conservative because really for no other reason to be conservative. So notwithstanding that, I think we expect to have a very strong fourth quarter. We have great market positioning, strong teams, good order book. It’s a matter of. It’s only a matter of execution. And there’s one thing about rbc, we always execute. So I think in the fourth quarter, I think our investors are going to be very pleased with the results.

Ross Sparenblek — Analyst, William Blair

Yeah, that’s pretty clear. With the gross margins for back on the quarter, I don’t get the impression that it’s a lot of operating leverage there. I mean, was it more cost out and what is kind of maybe the revised outlook on where those margins can go? It feels like we should be converging with consolidated aerospace and defense gross margins sooner rather than later.

Michael J. Hartnett — Chairman, President & CEO

Yeah, I would, I would. Yeah, I would think those, those margins are going to, you know, the nd margins are going to chase up towards, towards the industrial margins. I don’t know if they’ll reach them, but they’re going to close the gap.

Ross Sparenblek — Analyst, William Blair

Okay, that’s helpful. And then maybe just another one. On the industrial business, it looks like your peers are kind of guiding for low single digits for 20, 26.

Can you maybe just help us think kind of the more cyclical. Sorry,

Michael J. Hartnett — Chairman, President & CEO

the peers are guiding to what for 26?

Ross Sparenblek — Analyst, William Blair

Looking like low single digits kind of consolidated. And I think a lot of that’s kind of cyclicality and maybe the heavy machinery, capital goods and that is the more cyclical piece of your industrial business. Anything to call out the channel there. I mean, do you think inventory is balanced? And if we do start to see elevated build rates like the OEMs are expecting, how soon should we expect a catch up there?

Michael J. Hartnett — Chairman, President & CEO

Yeah, I think our industrial business will be sort of better than the single digits. It’ll be, you know, we’re expecting sort of the high single digits as, as worst case. So. But we’re not, you know, we’re not coming out with full year guidance. We never do and, but we’re looking at it. We’re pretty optimistic about what the. With what’s involved in the year ahead.

Ross Sparenblek — Analyst, William Blair

All right, well, thank you very much. Congrats on the quarter, guys.

Michael J. Hartnett — Chairman, President & CEO

Thank you.

Robert Sullivan — VP & CFO

Thanks.

Operator

With no further questions, I would like to turn the conference back over to Dr. Hartett for closing remarks.

Michael J. Hartnett — Chairman, President & CEO

Okay, well, this concludes our third quarter conference call and we thank you all for taking the time today to participate and look forward to talking again, probably late May today.

Operator

Thank you. This will conclude today’s conference. You may disconnect at this time.