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Kaman Corporation (KAMN), Kaydon Corporation (KDN): Will Profits Roll from Investing in Bearings?

Each industry typically has some bragging rights all its own. For manufacturers of bearings, theirs is the claim that every dollar worth of product that they produce generates $1.43 in additional economic activity, a feat they say is unmatched by any other sector. Bearings can be a backbone for machines ranging from jumbo jets and luxury cars to dentists’ drills.

Kaman Corporation (NYSE:KAMN)

Given this logic, the rationale seems sound for Kaman Corporation (NYSE:KAMN)’s acquisition of Florida Bearings in 2012. This acquisition provides a strategic fit to Kaman Corporation (NYSE:KAMN)’s business segments in the aerospace and industrial distribution markets. Besides bearings, the major products in Kaman Corporation (NYSE:KAMN)’s distribution channel include mechanical and electrical transmissions, automation and motion control. The company’s aerospace segment focuses on global manufacturing and subcontracting for commercial and military markets.

Consolidators in metal processing

The same acquisition track forms part of the growth strategy for RBC Bearings Incorporated (NASDAQ:ROLL) which manufactures and markets engineered precision, plain, roller and ball bearings in the international markets. This March, it acquired Western Precision Aero, a manufacturer of precision gears and components for the industrial and aerospace markets. This acquisition had net sales of about $5 million in the last calendar year. Its output is supplementary to the bearings that RBC manufactures and supplies for diversified industrial and aerospace and defense customers in the international markets.

A search for investment possibilities in the bearings sphere can also include Kaydon Corporation (NYSE:KDN). This company designs and manufactures engineered, performance-critical products for a diverse customer base worldwide. It operates in three product segments: friction control, velocity control, and industrial products.

Like Kaman Corporation (NYSE:KAMN) and RBC Bearings Incorporated (NASDAQ:ROLL), Kaydon Corporation (NYSE:KDN) is also an industry consolidator, having acquired Fabreeka Group Holdings last year. Fabreeka focuses on industrial products for vibration and shock control. In 2011, Kaydon Corporation (NYSE:KDN) also acquired the German firm HAHN-Gasfedern which is a manufacturer and marketer of gas springs, tension springs and dampers. These acquisitions have diverse industrial markets globally and were integrated into Kaydon Corporation (NYSE:KDN)’s velocity control segment.

Velocity control saves the day

Kaydon Corporation (NYSE:KDN) is banking on its velocity control segment to offset lingering weakness on its products for the wind farm industries. In the 2013 first quarter, a $14.6 million decline in sales from its wind business depressed the company revenues which totaled $110 million, down from $116.5 million a year earlier. Adjusted EBITDA in this year’s first quarter amounted to $23.1 million or $0.37 adjusted EPS, compared to the $26.8 million adjusted EBITDA, or $0.44 adjusted EPS posted a year earlier.

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