Baldor income down; report beats Wall Street estimates

Baldor Electric Co. reported declines in first quarter revenue and net income, but the report was better than what Wall Street was expecting.

The Fort Smith-based global manufacturing and distribution reported Wednesday (April 28) afternoon that its first quarter net income was $15.1 million, down 58.6% from the same quarter of 2009. However, the 32 cents per share earnings was better than the average estimate of 11 analysts compiled by Thomson Financial.

First-quarter revenue was $397.5 million, down 1% from the $402.5 million in the first quarter of 2009.

“We are pleased to report operating profit increased $7.4 million on $5 million less in sales compared to one year ago. Operating margin improved to 13.2% from 11.2%. We also reduced our debt balance by $13.7 million during the quarter,” John McFarland, Baldor chairman and CEO, noted in the earnings statement.

McFarland said January and February sales were below 2009 levels, but March recovered with an 8% boost in sales. The company pushed guidance for the second quarter, saying second quarter revenue will be in the $415 million to $430 million range. If the revenue estimate is true, it would reflect an 8%-12% gain over the second quarter of 2009. Baldor’s first quarter 2010 revenue landed in the upper end of the $380 million to $400 million range estimated in early January.

While the numbers look better compared to 2009, Baldor’s 2009 numbers were nothing to write home about. The company’s 2009 total sales and net income were down 22% and 40%, respectively, compared to 2008.

Baldor will need improved sales and income to meet its $75 million debt reduction goal in 2010. The company reduced debt by $13.7 million in the first quarter. Baldor continues to reduce debt accumulated in the $1.8 billion acquisition of Rockwell Automation subsidiaries (Dodge, Reliance). Outstanding debt at the end of the first quarter was $1.191 billion, down from the $1.205 billion at the end of 2009.

The company recently announced price increases of 4.6% on motors and drives and 3.6% on generators for all orders shipped after May 30 to cover higher raw materials costs. Baldor specifically mentioned higher costs for copper, electrical steel, petroleum products and transportation. The Baldor price increases were the first in two years for those products.

Market watchers are taking note of the reports from Baldor and other large manufacturing operations to determine the health of the sector and, possibly, the national economy. John Taylor, senior vice president of John Taylor Financial-Sterne Agee and a member of the board of directors at Fort Smith-based Benefit Bank, is one of those watching the overall market.

“There is a lot of anecdotal evidence that the manufacturing sector is stabilizing and maybe even improving. The durable goods numbers as well as volume increases within the transportation sector support the case for the early stages of a manufacturing rebound,” Taylor said. “When you analyze the numbers on the rail sector for instance you see marked upticks in chemical and other shipments used by manufacturers. Keep in mind that year-over-year comparisons are easy because the numbers were so pathetic this time last year.” (Taylor’s comments are not reflective of his thoughts on any individual security.)

Baldor, a maker, designer and marketer of industrial electric motors, motor drives, power transmissions and generators, posted sales in 2009 of $1.52 billion. The company employs between 7,000 and 7,500 in 26 plants in five countries and sales offices serving more than 80 countries. About 2,000 are employed in the Fort Smith area.

Baldor shares (NYSE: BEZ) closed Wednesday at $39.78, up 64 cents. The earnings report was released after the markets closed. During the past 52 weeks, the share price has ranged from a $40.97 high to a $19.09 low.