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

Page 2 of 2

Though Indian business generated only about $25 million of revenue in 2012, it grew over 30% year-over-year. The Indian water filtration market is approximately $400 million, and it is expected to generate modest profit from 2014. A. O. Smith Corporation (NYSE:AOS) expects revenue from both markets to be $775 million by 2015 from $470 million in 2012.

Loss of production to hurt revenue

REGAL-BELOIT CORPORATION (NYSE:RBC) will close down its heating, venting, and air-conditioning, or HVAC, motor manufacturing operations in Springfield, which was dedicated to high efficiency motors. The company wants to shift its operation to low cost regions in the next 18 months. This will incur a restructuring cost of $13 million, split between 2013 and 2014. The cost savings should begin from 2014 onward and will exceed the total restructuring cost. The cost saving is expected to be around $15 million – $20 million annually. Every $5 million of savings equates to around $0.08 – $0.10 EPS growth.

REGAL-BELOIT CORPORATION (NYSE:RBC) faced a major setback when one of its largest motor customers decided to close its production of compressor platforms and source it through a third party. REGAL-BELOIT CORPORATION (NYSE:RBC) used to provide electric motors to the compressor platforms. This will result in the revenue loss of $15 million in the second quarter of 2013 and $40 million in revenue to REGAL-BELOIT CORPORATION (NYSE:RBC) over the next four quarters. Although management is looking for possible opportunities to offset this loss in the future, analysts are not very optimistic about it.

Conclusion

The recovery of the economic condition and housing industry is a boon for these industrial companies. Nidec Corporation (ADR) (NYSE:NJ) will increase its revenue from the rise in HDD sales and will continue to expand its share in electric motors.

Recovery in the US market gives hope for A. O. Smith Corporation (NYSE:AOS) to increase its water heater sales. While Asian markets are still under penetrated and will take time to contribute significant profits. I recommend buying both these stocks.

The closure of its HVAC plant and loss of its largest customer will hurt REGAL-BELOIT CORPORATION (NYSE:RBC)’s revenue. Unless REGAL-BELOIT CORPORATION (NYSE:RBC) takes some concrete expansionary plans, I recommend holding this stock.

Shweta Dubey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Shweta is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article 3 Equipment Manufacturers to Watch originally appeared on Fool.com is written by Shweta Dubey.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Page 2 of 2