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Nidec Corporation (ADR) (NJ), REGAL-BELOIT CORPORATION (RBC): Three Equipment Manufacturers to Watch

According to MarketLine, the global electric equipment market is expected to expand 4% per year from 2010-2015 and is expected to reach $220 billion by 2015. The economic downturn affected the industrial equipment industry, but with the recovery and increase in economic activities, the demand for industrial products has boosted. Housing recovery, high orders from auto companies, and the growing manufacturing sector are the main drivers of this growth. Let’s discuss three companies, which are growing in this technologically advanced equipment industry.

Nidec Corporation (ADR) (NYSE:NJ)

Gaming consoles to drive HDD segment

Nidec Corporation (ADR) (NYSE:NJ)’s small precision motor segment, or SPM, net sales posted a decline of 1.5% year-over-year to $888.97 million in the first quarter. The hard disk drive, or HDD, segment, net sales also decreased 3.8% year-over-year to $471.29 million in the first quarter. However, this segment’s demand is set to pick up due to the launch of two new game consoles, Xbox One and Play Station 4, in the second half of the year.

The pre-orders for both these gaming consoles have already crossed all levels. HDD is an integral part of gaming consoles, and Nidec Corporation (ADR) (NYSE:NJ) commands 75% of the global market share in HDD. The total spending on gaming consoles is expected to increase by 5% annually from $24.9 billion in 2012 to $31.2 billion in 2017. Therefore, Nidec Corporation (ADR) (NYSE:NJ) expects to sell around 280 million units of HDD in the second half of 2013 up from 162 million units in first half of 2013.

Nidec Corporation (ADR) (NYSE:NJ) is continuously focusing on its Appliance, Commercial, and Industrial Motors, or ACIM, segment. It acquired ASI, Kinetek, and Avtron in 2012 to cover major global regions in preparation for changing energy efficiency standards worldwide.

Korea has already introduced IE3 efficiency standards in 2012, and South Korea, Japan, and the EU will implement efficiency standards in 2015. The new efficiency standards provide good sales opportunity for high efficiency motor manufacturers.

Right now, Nidec Corporation (ADR) (NYSE:NJ) lags behind the top four Japanese motor manufacturers, but with the acquisition of ASI, it expects to boost its market share. It occupies 10% of the total Japanese manufacturer’s induction motor volume, which is expected to grow by 10% year-over-year in domestic shipments and 15% year-over-year in exports from 2013 onward.

Water-heater market on the way of recovery in North America

A. O. Smith Corporation (NYSE:AOS) is the market leader in North America, with 40% market share in U.S. residential water heaters. The outlook for water heaters in the second half of 2013 is bright due to improvement of the housing industry. Water heater sales are dependent on new housing completion and a rise in demand for replacement of water heaters.

It is expected that with every 1% increase in residential replacement sales, the U.S. water heating market will grow by $1.2 billion annually by 2015. Therefore, water heater sales will pick up in the second half of the year, and A. O. Smith Corporation (NYSE:AOS) expects residential heater sales to increase by 200,000 units this year. Additionally, the EPS is expected to increase from $1.61 in 2012 to $1.81 in 2013.

The Asian market continues to be a priority for A. O. Smith Corporation (NYSE:AOS), which is planning to invest $40 million – $45 million in order to cater to the local demand. Chinese and Indian markets are growing at a rapid pace due to urbanization and increasing per capita income. A. O. Smith Corporation (NYSE:AOS) wants to increase its penetration and visibility in both these markets.

In order to achieve profitable revenue growth, it closed 300 under-performing stores in the first quarter, and it is planning to open the same number of stores in upcoming areas by partnering with major distributors in China.

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