Should You Buy It?: Baldor

Sometimes investors look to ignore good news. Although Baldor Electric (BEZ - commentary - Cramer's Take) beat second-quarter consensus earnings estimates, shares have fallen slightly. That spells opportunity in my mind, as the company has nice growth prospects, a decent dividend, a falling debt load and -- most importantly -- should prove to be steady and stable in this tough economy.

Baldor makes electric motors and controls for industrial users and is emerging as an intriguing play on improved energy efficiency. While many are vexed by the increasing price of energy, industrial firms are already scrambling to squeeze more out of their existing level of energy spending.

Sales of Baldor's Super-E premium efficient motors are rising at a 25% clip, and the company claims that customers can cut electricity usage by 9%, saving $1,200 a year for the average 30 HP motor.

Baldor is currently experiencing strong demand from new products. International sales rose 10% in the second quarter, aided in part by the weak dollar. Baldor generates about 17% of total revenue from abroad, and that metric has been steadily rising.

With that in mind, I'm here to answer readers' questions: Should you buy it? Does Baldor Electric hold value at current levels, or should investors focus elsewhere?

As noted above, the company beat second-quarter earnings estimates by a penny, which marked the second straight quarter of roughly 10% sequential profit growth. Notably, the company has slightly topped forecasts for three straight quarters.

Sales are rising at a more moderate single-digit pace, but a series of planned 5-8% price hikes should help to spur growth in the quarters ahead. In fact, analysts seem to be assuming an even stronger headwind for the 2009 economy, as they expect sales to grow just 4% next year, despite those above-cited price hikes.

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David Peltier is a research associate at TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Peltier appreciates your feedback; click here to send him an email.

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