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Industrial electrical equipment maker Regal Beloit Corporation (RBC - Analyst Report) recently closed the acquisition of Cemp s.r.l., an Italy-based manufacturer of hazardous duty motors primarily for oil and gas and marine applications, for an undisclosed amount. The deal, signed last month, is part of Regal Beloit’s long-term strategy to augment its existing geographic footprint and boost profitably in Europe.

The acquisition is expected to be accretive to Regal Beloit’s earnings per share in 2014 and 2015 to the tune of 3 cents – 5 cents and 6 cents – 8 cents, respectively. However, for fourth quarter 2013, the transaction is expected to be dilutive to earnings per share by 1 cent – 2 cents due to purchase accounting adjustments and transaction costs.

During the third quarter earnings call, Regal Beloit had provided GAAP earnings guidance in the range of 77 cents to 85 cents per share and adjusted earnings within 82 cents to 90 cents per share. The guidance was based on a continued listless demand in the North American commercial and industrial markets with decent improvements in China. Regal Beloit also expected unfavorable market dynamics in the HVAC (heating, ventilation, and air conditioning) sub-segment with seasonality in results.

The current Zacks Consensus Estimate for the fourth quarter is pegged at 84 cents. Earnings estimates are moving up for Regal Beloit as 8 out of 10 estimates have moved up in the last 30 days, while only 1 has gone down. We remain bullish on the transaction and expect the acquisition to be accretive to earnings in the long run.

Headquartered in Beloit, Wis., Regal Beloit is a leading manufacturer of electrical and mechanical motion control products. Major products include electric motors, HVAC electric motors, electric generators and controls, and mechanical motion control products. The products are offered to diversified end markets such as commercial construction and building, industrial machinery, industrial equipment, process industries, industrial transportation, and consumer related segments. The company has manufacturing, sales, and service facilities throughout the U.S., Canada, Mexico, Europe, and Asia.

Regal Beloit currently has a Zacks Rank #3 (Hold). Other players in the industry worth mentioning include EnerSys (ENS - Snapshot Report) and AO Smith Corp. (AOS - Snapshot Report), both carrying a Zacks Rank #1 (Strong Buy), and Rexnord Corporation (RXN - Analyst Report) that retains a Zacks Rank #2 (Buy).

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