Baldor Electric Company’s (BEZ) earnings per share for third quarter of 2010 increased 100% year over year to 54 cents, outperforming the Zacks Consensus Estimate of 47 cents.
Revenue
The company also recorded strong top-line growth, with a year-over-year increase of 19% to $453.7 million. Quarterly sales outperformed the Zacks Consensus Estimate of $446 million. Baldor Electric’s growth was aided by increased sales in all its product lines.
The company witnessed the highest sales growth in its mechanical power transmission products, up 26% year over year. This was followed by Motors sales growth of 18% and Drives and Generators improvement of 9%.
Baldor experienced double-digit growth in Europe, Latin America and Canada and flat sales in Asia-Pacific, which led to a 21% increase in international sales. International sales consisted of 17% of total sales. In the domestic market, sales to OEMs increased by 24% and that to distributors by 20%.
Throughout the quarter, the company recorded double-digit growth in the incoming order rate, with backlog at the end of the period amounting to $200 million.
Income & Expenses
Baldor’s initiatives to improve productivity were helpful during the quarter, with operating margin expanding impressively by 190 basis points year over year to 14.8%. Net income was up 104% to $25.7 million.
Baldor Electric incurred total SG&A expense of $73.5 million compared with $66.1 million in the prior-year quarter.
Balance Sheet & Cash Flow
Cash at the end of the quarter amounted to $16.8 million. The company repaid $13 million of its debt during the quarter, with year-to-date reduction reaching $55 million. The company targets a debt-reduction of $75 million during the year. Shareholders’ equity was $986.6 million.
Cash flow from operations was $82.5 million and capital expenditure was $24.5 million.
Outlook
For the fourth quarter of 2010, Baldor expects a year-over-year sales growth of 20% to 25%. The company is confident that its significant productivity expansion initiatives will expand its margins in 2011. The rising price of copper may lead the company to increase its prices in early 2011.
The increasing demand for energy-efficient motors favors the long-term prospects of the company. Baldor has established a strong position within the industry as the leading supplier of energy-efficient motors. However, it is heavily exposed to the price of raw materials, particularly steel, copper, and aluminum. Higher raw material prices may have a negative impact on the company’s profitability.
Baldor Electric Company is a manufacturer of energy-efficient, industrial electric motors. The company also manufactures adjustable-speed drives, generators and power transmission equipment. The company sells its products to both distributors and original equipment manufacturers through a network of sales representatives. Major competitors of the company are AO Smith Corp. (AOS), Bodine Electric Company and Regal Beloit Corporation (RBC).
Baldor Electric has a Zacks #2 Rank (short-term “Buy” recommendation).
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