Research & Analysis: Belden Inc. (NYSE: BDC)

BDC; Industry 4.0; telecom & network connectivity; data in motion

This week’s single-name stock report circles back to our industrial automation theme with Belden Inc. (NYSE: BDC). Belden was founded by Joseph Belden in 1902 during the first Industrial Revolution developing wire for telecommunications & power transmission. The company was taken public at the tail end of the Great Depression in 1939 and was listed on the Midwest Stock Exchange.

Belden’s cabling was instrumental in enabling radio, television, space exploration, and now high-speed broadband. Through a series of acquisitions, Belden has embedded itself in the center of Industry 4.0, bringing forth cutting-edge technologies for Smart Building Systems and Industrial Automation.

Industry 4.0 can be approached in two distinct ways:

• New facility builds

• Retrofitted facilities

From an investment standpoint, new facility builds may be a modest proportion of growth for the Industry 4.0 theme. Much of this may derive from reshoring or manufacturing migration as international trade policy takes shape. A significant proportion of manufacturing has migrated out of China and into other Asia Pacific countries in recent years following the first go-around of Trump tariffs back in 2018. Given the current tariff policy with China, migration will likely continue, driving the need for more autonomous operations in order to reduce variable costs.

Retrofitted aligns more with existing facilities being retrofitted with autonomous machinery. This is generally a slower process, particularly with large process control systems. I have reason to believe retrofitted facilities will likely leverage industrial robotics over process controls in order to augment labor as opposed to replacing it.

Regardless of how the manufacturing footprint transforms, what we do know is that more machines will be connected and more network infrastructure will be needed.

One of the key industries Belden is targeting is the automative industry. This may be a large growth area for Belden, particularly as trade tariffs across the US, Canada, and Mexico shifts where and how vehicles are produced. For example, General Motors (GM) is investing $4b across key regions in the US to localize ICE vehicle manufacturing, expanding its domestic capacity to 2mm vehicles per year. Stellantis is also investing $1.2b to reopen one of its idled facilities to produce pickup trucks locally.

Manufacturing migration will certainly be a major growth driver for Belden, particularly as automotive OEMs seek to maintain a cost structure similar to cheaper, foreign production.

Belden Operations

Belden reports under two primary segments:

• Smart Infrastructure Solutions

• Industrial Automation Solutions

Today, Belden’s solutions have evolved into wired & wireless infrastructure, fiber, and broadband infrastructure. Belden’s technology plays a major role in the convergence of Information Technology & Operational Technology as well as edge and data analytics.

Essentially, Belden manufactures network infrastructure to enable data in motion.

The Automation Solutions business segment provides customers with complete connected solutions across data handling, including acquisition, transmission, orchestration, and management, primarily utilized for discrete automation, process automation, energy, and mass transit. Given these factors, we can safely presume that Belden likely sells connectivity solutions to companies like Rockwell Automation (ROK) and Emerson Electric (EMR).

Rockwell Automation (NYSE: ROK)

Emerson Electric (NYSE: EMR)

Belden’s products support a wide array of end-markets, including:

• Data centers

• Government

• Healthcare/Hospitality

• Commercial Real Estate

• Financial Institutions

• Stadiums & Venues

• Military Installations

Overall, the market Belden participates in should be relatively durable with sustainable growth, particularly as enterprises more heavily utilize AI. In addition to this, Belden will play a major role in industrial automation on the back end, enabling the high-speed connectivity necessary for these high-powered applications.

M&A Activity

Belden has made a number of acquisitions over the years to keep its portfolio fresh and relevant. M&A will likely continue to be a key growth driver for the organization as it navigates the next generation of IT/OT communications.

2024

Voleatech

• Fills product gaps and enhances Belden’s OT network security offerings.

• Builds upon Belden’s software platform for wireless, firewall, protocol conversion, and edge.