It has been about a month since the last earnings report for Lincoln Electric Holdings (LECO). Shares have lost about 7.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Lincoln Electric due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Lincoln Electric Lags Q1 Earnings & Revenue Estimates
Lincoln Electric Holdings delivered adjusted earnings of $1.17 per share in first-quarter 2019, up 6.4% year over year. The reported figure, however, missed the Zacks Consensus Estimate of $1.23. Earnings growth was driven by favorable mix and the company’s price management efforts to mitigate inflation and lower volumes.
Including one-time items, earnings in the reported quarter came in at $1.12 compared with 92 cents recorded in the prior-year quarter.
Total revenues marginally improved to $759.2 million compared to $757.7 million posted in the year-ago quarter. Organic sales growth was 0.9% in the reported quarter. Sales missed the Zacks Consensus Estimate of $767 million.
Costs and Margins
Cost of goods sold edged down to $500.7 million from $501.1 million recorded in the prior-year quarter. Gross profit inched up 0.7% year over year to $258.4 million. Gross margin came in at 34.0% compared with the prior-year quarter’s 33.9%.
Selling, general and administrative expenses slipped 0.5% to $160.4 million from the year-earlier quarter. Adjusted operating profit improved 1.6% year over year to $98.8 million in the reported quarter. Operating margin came in at 13.0% compared with 12.8% witnessed in the year-ago quarter.
Lincoln Electric had cash and cash equivalents of $267 million at the end of the first quarter compared with $369 million at the end of the prior-year quarter. The company recorded cash flow from operations of $25.9 million in the January-March quarter compared with $43.8 million witnessed in the year-earlier period.
During the first quarter, Lincoln Electric returned $106 million to shareholders through dividend and share repurchases.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
At this time, Lincoln Electric has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Lincoln Electric has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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