June 01, 2010 08:18 ET

Machine Tools Get a Thrust From Recovering U.S. Economy

JOHANNESBURG, SOUTH AFRICA--(Marketwire - June 1, 2010) -  www.rothmanresearch.com - Emerging from the brunt of a recession, the machine tools industry is starting to see an upwards, improving trend as the U.S. economy continues its recovery course. This industry is heavily dependent on some key industrial sectors, like manufacturing, automobile and housing, which require the machine tools and accessories to manufacture their products. During the economic meltdown, the automobile and housing sectors were close to suffocation, whilst the manufacturing sector saw drastic declines in production. Companies like Kennametal Inc. (NYSE: KMT) were directly impacted as they saw demand for their products shoot down as a result of the housing slump and automobile industry's funding challenges. However, with the U.S. economy pushing forward positively, appreciation of some of the industry players is gaining ground.

*Complimentary downloadable research on Kennametal Inc. is accessible upon registration at http://www.rothmanresearch.com/article/kmt/23553/Jun-01-2010.html

Kennametal has seen its outlook raised at the beginning of last week as industry experts anticipate that the company can deliver strong financials in coming quarters with favorable global economic fundamentals. "At this point in time, economic recovery seems to be the main focus for most machine tools companies. We are already seeing positives momentum as new orders in this space have begun to mend some of the wounds the recession inflicted on the industry. However, it is also true that caution is the keyword among industry executives due to the lingering European Debt issues. Emerging markets like China and India, together with cost-cutting strategies, have played major roles in maintaining this industry afloat and now with the U.S. manufacturing sectors starting to pick up, we believe a number of the big players in the space will benefit from this," stated Mathew Collier of www.rothmanresearch.com. "Our favorite in this space is without doubt Stanley which is now Stanley Black & Decker Inc. (NYSE: SWK). The company has delivered better-than-expected results for the first quarter of fiscal 2010. Stanley has been perfecting its diversification strategy since 2008 and it is only a matter of time for the company to lead the pact." 

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With industry data for the first quarter 2010 in the green for the U.S. machine tool consumption, the industry players are working towards consolidating their markets and penetrating new ones. There is a growing demand in the defence and aerospace industry which is sending a green signal for machine tools companies. It is said that some companies in this sphere like RBC Bearings have long been exploring the defence and aerospace market and were able to create a successful niche within this market even during the recession.

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