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Timken (TKR) to Invest $75M in Renewable Energy Business

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The Timken Company (TKR - Free Report) recently announced that it will make capital investments of more than $75 million through early 2022 in an effort to expand its renewable energy business. Notably, the latest investment will further support Timken’s remarkable growth in the wind and solar businesses in the days to come. In fact, the company’s investments in acquisitions and innovations over the last few years have positioned it as a leading supplier and technology partner in the wind and solar energy market.

The company has built a wide range of engineering and innovation centers, and manufacturing facilities across the United States, Europe and Asia to serve its renewable energy customers across the globe.

Timken intends to utilize the above-mentioned investment amount in expanding its state-of-the-art bearings manufacturing facility in Xiangtan, China, as well as scaling-up production capacities at sites in Wuxi, China and Ploiesti, Romania. Apart from this, the company will combine multiple sites into a new, larger campus in Jiangyin, China, to enhance production capacity, extend the product range and boost productivity for precision drives.

Timken is poised to benefit from expansion in the renewable energy sector, which currently generates 7% of the company’s revenues and will likely generate roughly 12% of the total sales in 2020. The global demand for renewable energy is likely to witness a CAGR of around 8% over the next 10 years. The share of electricity generation from renewable is expected to more than double by 2030. Thus, the company is focused on targeted investments in this sector to capitalize on this trend and make it a bigger part of its portfolio in the days to come.

Timken’s Cone Drive acquisition in 2018 catapulted it to the leading position in the solar energy space. It also continues to pursue strategic acquisitions with focus on bearings, adjacent power transmission products and related services. In 2019, Timken completed the buyouts of BEKA Lubrication and the Diamond Chain Company. The acquisition of BEKA Lubrication strengthened the company’s global leadership in the automatic lubrication systems market. The Diamond Chain buyout has reinforced Timken's leadership in high-performance roller chains for industrial markets. Recently, the company purchased all assets of Aurora Bearing Company (Aurora) to expand its offerings in the engineered bearings space. These acquisitions have fortified the company's global presence in growing markets, particularly China and Europe.

Moreover, the company is taking actions to enhance liquidity, reduce costs and generate robust cash flow. Timken has accelerated and expanded its structural cost-reduction initiatives, which will help boost margins.

Price Performance

The stock has gained 40.3% over the past year, outperforming the industry’s growth of 10.4%.

Zacks Rank & Other Stocks to Consider

Timken currently carries a Zacks Rank #2 (Buy).

Other top-ranked stocks in the Industrial Products sector include iRobot Corporation (IRBT - Free Report) , Crown Holdings, Inc. (CCK - Free Report) and SiteOne Landscape Supply, Inc. (SITE - Free Report) . While iRobot flaunts a Zacks Rank #1 (Strong Buy), Crown Holdings and SiteOne Landscape carry a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

iRobot has an estimated earnings growth rate of 18.8% for the ongoing year. Shares of the company have appreciated 75.7% in the past year.

Crown Holdings has a projected earnings growth rate of 11.7% for 2020. Over the past year, the company’s shares have gained 29.6%.

SiteOne Landscape has an expected earnings growth rate of 28.6% for 2020. The stock has climbed 56.1% in a year’s time.

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