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Here's Why Lincoln Electric Should Be in Your Portfolio Now

Zacks Equity Research

Shares of Lincoln Electric Holdings, Inc. LECO, full-line manufacturer and reseller of welding and cutting products, have been performing well of late. The stock has yielded a solid one-year return of around 51.5%. If you haven’t taken advantage of the share price appreciation yet, the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead. The Zacks Rank #1 (Strong Buy) stock has an estimated long-term earnings growth rate of 9.90%.

Estimates Northbound

Estimates for Lincoln Electric have moved up in the past 30 days, reflecting the optimistic outlook of analysts. The earnings estimate for second-quarter fiscal 2017, fiscal 2017 and fiscal 2018 have all gone up in the past 30 days.

For second-quarter fiscal 2017, the Zacks Consensus Estimate for earnings has gone up 12% in the past 30 days and is pegged at 93 cents, depicting a year-over-year growth of 12.20%. The estimate for fiscal 2017 has gone up 5% to $3.66, reflecting a year-over-year growth of 11.25%. The Zacks Consensus Estimate for earnings for fiscal 2018 has also moved north 4% to $4.03, a year-over-year growth of 9.99%.

Positive Earnings Surprise History

Lincoln Electric has an impressive earnings surprise history. The company has outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering a positive average earnings surprise of 4.66%.

Ahead of the Industry

In the last two years, Lincoln Electric has outperformed the Zacks classified Machinery Tools & Related Products sub-industry with respect to price performance. The stock gained around 33.9%, while the industry recorded growth of 31.5%.

Upbeat Q1

Lincoln Electric’s shares have been on the rise since the company reported robust first-quarter 2017 results. The company reported earnings of 88 cents per share in first-quarter 2017, up 16% year over year. Total revenue went up 5.5% year over year to $580.9 million, driven by 2.9% higher volumes, a 2.1% increase in product prices and a 0.6% benefit from acquisitions. The company’s both top-line and bottom-line beat the Zacks Consensus Estimate.

Growth Drivers

Lincoln Electric has been consistently investing in welding automation. Welding automation is on growth path due to the shortage of welding labor and new, low-cost welding robots that provide productivity savings to customers. Over the past five years, the company acquired welding automation companies for approximately $320 million. On Mar 2, Lincoln Electric entered into exclusive negotiations with Air Liquide to acquire its France-based subsidiary, Air Liquide Welding. The proposed acquisition is subject to a definitive agreement between the parties along with customary conditions and other provisions. Air Liquide Welding is an important player in the manufacturing of welding and cutting technologies, and had a turnover of around €350 million ($427 million) in 2016.

Lincoln Electric is poised to gain from focus on customers, as well as execution of the 2020 vision and strategy. Additionally, the company’s focus on investment in long-term, profitable growth, with its broad range of product launches and strategic acquisitions, will be conducive to growth in the near term.

Other Stocks to Consider

Other top ranked stocks worth considering in the same sector are AGCO Corporation AGCO, Caterpillar, Inc. CAT and Rockwell Automation Inc. ROK. AGCO Corporation and Caterpillar flaunt a Zacks Rank #1 while Rockwell Automation carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AGCO has an average positive earnings surprise of 40.39% in the trailing four quarters. Caterpillar generated an average positive earnings surprise of 40.25% in the past four quarters. Rockwell Automation has an average positive earnings surprise of 9.89%.

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Rockwell Automation, Inc. (ROK): Free Stock Analysis Report
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