Cooper Industries Plc (CBE) announced the acquisitions of Mount Engineering Plc, a producer of adaptors and reducers for hazardous environments, and Apex Lighting Controls Ltd., a manufacturer of Energy Management lighting controls.
Mount Engineering is a strategic fit to Cooper Safety’s existing portfolio of cable glands and Cooper Crouse-Hinds’ offerings of harsh and hazardous solutions. The acquisition of Apex Lighting Controls reaffirms Cooper’s commitment to expand the range of energy-efficient lighting products.
Cooper has several opportunities for additional growth in the current year, including stimulus spending, restructuring benefits and accretive capital allocation in the form of share repurchases or mergers and acquisitions. If Congress decides to retroactively reverse tax inversion legislation, CBE’s tax rate would be higher than expected, which will affect earnings. While earnings risk still remains, we believe that the previous year marked the bottom for the earnings cycle.
CBE will likely realize an outsized portion of its growth from developing markets in China, the Middle East and Mexico. Industrial, utility and energy markets are expected to rapidly expand, and industrializing economies will help offset some of the declines in already developed regions. This will eventually help support higher growth rates for the current year.
Pressures in commercial markets will continue to be a drag on earnings throughout the current year; however, numerous items such as lighting retrofit, government spending, energy efficiency projects and stimulus will help buffer underlying pressure.
Residential markets appear to have bottomed out and should experience modest growth. The company is well positioned to capitalize on the potential for renewed spending on transmission and distribution products as utilities begin to open up their spending again.
Cooper Industries plc is a global manufacturer, with 2009 revenues of $5.1 billion, approximately 89% of which were from electrical products. Cooper has manufacturing facilities in 23 countries and currently employs approximately 28,200 people.
We currently have a Neutral recommendation on Cooper Industries.
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