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Lincoln Electric (LECO) Q1 Earnings Beat Estimates, Up Y/Y

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Lincoln Electric Holdings, Inc. LECO reported record first-quarter 2021 adjusted earnings of $1.37 per share, which beat the Zacks Consensus Estimate of $1.18. The bottom line also improved 37% year over year. The upbeat performance can be attributed to the company’s execution of strategic initiatives, cost reduction actions and recovery in its end markets.

Including one-time items, the bottom line was $1.23 compared with 91 cents in the prior-year quarter.

Total revenues increased 7.8% year over year to $757 million. Moreover, the top line surpassed the Zacks Consensus Estimate of $724 million. The improvement in revenues was owing to growth of 6.4% in organic sales and a favorable impact of 1.4% from foreign exchange.

Lincoln Electric Holdings, Inc. Price, Consensus and EPS Surprise

Lincoln Electric Holdings, Inc. Price, Consensus and EPS Surprise
Lincoln Electric Holdings, Inc. Price, Consensus and EPS Surprise

Lincoln Electric Holdings, Inc. price-consensus-eps-surprise-chart | Lincoln Electric Holdings, Inc. Quote

Costs and Margins

Cost of goods sold went up 8% to $503 million from the prior-year quarter. Gross profit rose 7% to $254 million from $237 million reported in the prior-year quarter. Gross margin came in at 33.5% compared with 33.8% in the year-ago quarter.

Selling, general and administrative expenses declined 3% year over year to $146 million from the prior-year quarter. Adjusted operating profit increased 24% year over year to $109 million in the quarter. Adjusted operating margin was 14.4% in the reported quarter compared with 12.6% in the year-ago quarter.

Segment Performance

Americas Welding: Sales in the segment increased to $456 million from $443 million reported in the year-earlier period. Adjusted operating for the segment totaled $76 million in the quarter compared with $71 million witnessed in the prior-year quarter.

International Welding: This segment’s revenues increased 12% year over year to $227 million in the reported quarter. The segment reported adjusted operating profit of $19 million compared with the year-ago quarter’s $6.6 million.

The Harris Products Group: The segment’s first-quarter sales amounted to around $111 million, indicating year-over-year improvement of 27%. The segment’s adjusted operating profit was $18.7 million compared with $12.5 million in the prior-year quarter.

Financial Update

Lincoln Electric had cash and cash equivalents of around $242 million at the end of the first quarter of 2021 compared with $257 million at the end of the 2020. The company generated cash flow from operations of $45 million during the reported quarter compared with $22 million in the prior-year quarter.

The company’s debt to invested capital was at 47.2% at the end of the first quarter of 2021 compared with 47.6% as of the end of 2020.

Price Performance

Lincoln Electric’s shares have gained 60.1% over the past year compared with the industry’s growth of 30.4%.

Zacks Rank and Stocks to Consider

Lincoln Electric currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector include Dover Corporation DOV, Caterpillar Inc. CAT and Pentair plc PNR, each carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dover has a projected earnings growth rate of 21.8% for 2021. Over the past year, the company’s shares have gained 56%.

Caterpillar has an estimated earnings growth rate of 25.7% for the ongoing year. The company’s shares have rallied 99% in the past year.

Pentair has an expected earnings growth rate of 11.6% for 2021. The stock has surged 86% in a year’s time.

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