Investors in Lincoln Electric Holdings, Inc. (NASDAQ:LECO) had a good week, as its shares rose 9.6% to close at US$80.99 following the release of its quarterly results. Revenues of US$702m were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$0.91, missing estimates by 8.5%. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the eleven analysts covering Lincoln Electric Holdings provided consensus estimates of US$2.48b revenue in 2020, which would reflect a definite 16% decline on its sales over the past 12 months. Statutory earnings per share are expected to plunge 39% to US$2.76 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$2.63b and earnings per share (EPS) of US$3.82 in 2020. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a pretty serious reduction to earnings per share estimates.
The analysts made no major changes to their price target of US$81.71, suggesting the downgrades are not expected to have a long-term impact on Lincoln Electric Holdings'valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Lincoln Electric Holdings analyst has a price target of US$95.00 per share, while the most pessimistic values it at US$75.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 16%, a significant reduction from annual growth of 4.6% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 1.6% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Lincoln Electric Holdings is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Lincoln Electric Holdings going out to 2023, and you can see them free on our platform here..
We don't want to rain on the parade too much, but we did also find 2 warning signs for Lincoln Electric Holdings that you need to be mindful of.
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