Can These Industrial Stocks Bounce Back?
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Frost & Sullivan, a consulting service that also provides strategic analysis for industries recently provided some predictions for the Industrial Automation & Process Control Industry for 2012. They talked about trends that will drive production like cloud computing, cyber security, wireless & mobile communication technologies. The high potential for automating services and industrial applications will lead in manufacturing. Even though these predictions were focused on industrial automation, the same is happening globally in many industries as companies that are involved in production of any sort are always looking for way to make things more efficient. That is the name of the game in this tight global market.
Emerson Electric’s (NYSE: EMR) Process Management division (which is 28.9% of total sales) offers engineering services and precision tools that help improve the quality of output, safety and reliability of processing items anywhere from oil refining, sewage treatment, to pharmaceuticals.
As an example of how this segment can work and grow, BP (NYSE: BP) gave Emerson a $23 million contract to supply control and safety systems for two new offshore oil platforms in theNorth Sea.
Emerson will serve as the project's main automation contractor providing automated services for the following systems: engineering, installation, configuration, testing, and ongoing support. DeltaV digital automation system will control and monitor platform operations. AMS Suite software will enable onshore technicians and managers to monitor the platforms' instruments, valves, and other automation equipment.
This system is looking to be more efficient in diagnosing problems and scheduling maintenance when it will be most cost-effective and at the same time help reduce engineering and cabling costs, as well as installed weight on the offshore platforms. This is just one example of how BOP is turning to Emerson’s automated expertise to help operate the rigs to improve operating efficiency, and optimize production and yield.
Emerson is not the only company involved in this market. A competitor, ABB (NYSE: ABB) provides automated technology helping clients to increase performance and efficiency. It did a study and reported that the company saved its clients about 310 million megawatt hours of electrical power by installing its ABB base drives. That was a 19% increase over the previous year. This is very important because to also saves the companies in equipment costs since energy accounts for 95% of the life cycle cost of the average motor. It extended their lives.
Automation may be a growing technology and companies like Emerson and ABB will grow and thrive in these area but presently each company must deal with the economic slow downs. It was about a year ago that Emerson warned of economic conditions and how revenue would dry up for the company inEurope. Even ABB is feeling the pinch of the slow down in Europe but also inChina. Even though automation may become more and more interesting, industrial trends have weakened and there is no industry that has not been affected.
It is no secret the economy has hit the industry hard. Emerson is coming off its yearly low and ABB has just reached it. But you can be rest assured that when the economy turns, businesses will again to look to expand and increase productivity while running more efficiently and businesses like Emerson and ABB will be there to pick up the profits!
johnmylant has no positions in the stocks mentioned above. The Motley Fool owns shares of ABB. Motley Fool newsletter services recommend ABB and Emerson Electric Co.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
