Rolling elements bearings are one of the most common components used in expensive, high precision and critical machines such as gas turbines, rolling mills and gyroscopes. They can be subjected to various defects which could lead to catastrophic results. This includes inner and outer race defects and hence it is of interest to analyze the system response under such defects. A better understanding of the system performance under such defects can be beneficial when performing system diagnostics and system design. In this paper we are focused on the outer race defect and perform a comparative nonlinear time series analysis of a healthy system and a defective system. We consider various levels of outer race defects. The analysis is based on the recurrence properties of the system in its reconstructed state space. After determining the appropriate time lags through the average mutual information technique and the corresponding embedding dimensions through the false neighbor technique, we perform a sequential analysis of the system by subdividing the time series into bins and investigating the system response through recurrence quantification analysis parameters along with the entropy. This contributes to the enhancement of the science of diagnostics of outer race defects by analyzing the signature of various recurrence quantification analysis parameters as the system goes from a healthy state to a severely defective state.