Lincoln Electric (LECO) Rallies 58% in a Year: More Room to Run?
Lincoln Electric Holdings, Inc. LECO has rallied 57.5% in a year, faring way better than the industry’s 8.9% growth. Meanwhile, the Industrial Products sector has risen 22.6%, whereas the Zacks S&P 500 composite has moved up 13.9% in the same time frame.
LECO has a market capitalization of $11.1 billion. The average volume of shares traded in the last three months was 57.6 million.
Lincoln Electric currently carries a Zacks Rank #2 (Buy).
Image Source: Zacks Investment Research
Solid Order Levels Bode Well
Lincoln Electric has delivered year-over-year improvement in its top and bottom lines in the last nine quarters. This performance is impressive considering the inflationary headwinds and supply-chain issues witnessed by the industry at large over the past year. LECO has witnessed improving order rates across all end-market sectors, regions and products. The company is witnessing strong quoting activity and record backlogs for equipment systems and automation solutions.
LECO has also been effectively managing to counter raw material inflation through pricing actions and improved productivity. Solid backlog and acquisitions have been aiding the company’s performance as well. Backed by these tailwinds, the company’s revenues reached a record $1,039 million in the last reported quarter.
Upbeat Earnings Estimate Growth Expectations
The Zacks Consensus Estimate for the company’s fiscal 2023 earnings per share is currently pegged at $9.03 and suggests year-over-year growth of 9.2%. The same for 2024 is $9.66 which indicates year-over-year growth of 7%.
The company has a long-term estimated earnings growth rate of 15%.
The consensus estimate for 2023 and 2024 have both moved north by 1% and 3%, respectively, in the past 60 days. This reflects analysts’ optimism.
Focus on Innovation
Lincoln Electric is focused on product development and using digital platforms to engage with customers. The company’s product launches in the automation solutions market are likely to aid growth.
LECO is focused on its new additive services business, which will position it as a manufacturer of large-scale 3D-printed metal spell parts, prototypes and tooling for industrial customers. This is likely to be a growth opportunity for Lincoln Electric. The company has been expanding its geographic and channel reach into attractive areas, such as automation, in sync with its strategy initiatives. The company has a robust pipeline of additional product launches and acquisitions.
Strategic Acquisitions
Lincoln Electric is benefiting from several acquisitions. In April 2021, Lincoln Electric acquired Zeman Group’s unit, ZemanBauelemente Produktionsgesellschaftm.b.H. to drive automation growth in structural steel applications and support the company’s Higher Standard 2025 Strategy. The acquisition of Fabricated Tube Products and Shoals positions the Harris Products Group to capitalize on the attractive HVAC growth opportunity as part of its Higher Standard 2025 Strategy.
The company also acquired Sao Paulo-based Kestra, expanding its specialty alloy capabilities in South America. Lincoln Electric recently closed the acquisition of Fori Automation which is expected to increase its annualized automation portfolio revenues to more than $850 million. The company is well-poised for growth on the back of a strong product development pipeline, industry-leading position in automation, investments in new technologies like additive, and a solid balance sheet that will support acquisitions.
Strong Balance Sheet to Aid Growth
Lincoln Electric has a balanced capital allocation strategy, prioritizing growth investment, while returning cash to shareholders. The company will continue to evaluate M&A options focused primarily on tuck-in assets, supporting its Higher Standard 2025 strategy.
LECO had cash and cash equivalents of around $199 million at the end of the first quarter of 2023, compared with $154 million in 2022 end. The company generated a record $124 million in cash flow from operations in the quarter under review, up 188% year over year. Its total debt-to-total capital ratio was 0.51 as of Mar 31, 2023. The times interest earned ratio was 17.1. The company returned approximately $70 million to its shareholders in the first three months of 2023 through dividends and share repurchases.
Other Stocks to Consider
Some other top-ranked stocks from the Industrial Products sector are Worthington Industries, Inc. WOR, The Manitowoc Company, Inc. MTW and W.W. Grainger, Inc. GWW. WOR and MTW sport a Zacks Rank #1 (Strong Buy) at present, and GWW has a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Worthington Industries has an average trailing four-quarter earnings surprise of 14.9%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $4.94 per share. The consensus estimate for 2023 earnings has moved 10.5% north in the past 60 days. Its shares have gained 54.3% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 38.8%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at 85 cents per share. The consensus estimate for 2023 earnings has moved 63.5% north in the past 60 days. MTW’s shares have gained 77.7% in the last year.
The Zacks Consensus Estimate for Grainger’s 2023 earnings per share is pegged at $35.83, up 7.6% in the past 60 days. It has a trailing four-quarter average earnings surprise of 9.1%. GWW gained 71.2% in the last year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The Manitowoc Company, Inc. (MTW) : Free Stock Analysis Report
Worthington Industries, Inc. (WOR) : Free Stock Analysis Report
Lincoln Electric Holdings, Inc. (LECO) : Free Stock Analysis Report
W.W. Grainger, Inc. (GWW) : Free Stock Analysis Report
