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Solid Demand to Aid Lincoln Electric (LECO) Amid High Costs
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Lincoln Electric Holdings, Inc. (LECO - Free Report) is benefiting from the improving demand in all its end markets, as reflected in solid order levels and record backlogs for equipment systems and automation solutions. LECO’s pricing actions helped the company offset the escalating labor, freight and raw material costs. Acquisitions, focus on developing new products, and utilization of digital platforms to engage customers will continue driving the company’s top-line performance.
Record Q3 Results
LECO reported record revenues and adjusted earnings per share in the third quarter of 2022. Total revenues surged 16% year over year to a record $935 million driven by a 21% growth in organic sales and a 1.3% benefit from acquisitions. Adjusted earnings of $2.04 per share improved 31% year over year, driven by robust demand and solid operational execution.
Solid Demand, Pricing to Offset Cost Impact in 2022
The company has been witnessing improving order rates across all end-market sectors, regions and products. Robust backlog and acquisitions are expected to benefit the company’s performance throughout this year. While the company will continue to face supply chain issues and escalating labor, freight and raw material costs, these will likely be countered by its pricing actions and improved productivity.
Lincoln Electric now expects organic growth in the mid-teens percentage for 2022. It anticipates an incremental margin in the mid-to-high 20%. The increase reflects operational improvements in the company’s automation portfolio and Americas Welding.
The Zacks Consensus Estimate for the company’s earnings for 2022 is currently pegged at $8.23, suggesting year-over-year growth of 32%. The consensus mark for 2023 earnings stands at $8.66, indicating a year-over-year improvement of 5%.
Innovation, Acquisitions to Fuel Growth
The company is committed to new product development and utilizing digital platforms to engage customers. Lincoln Electric’s product launches in the automation solutions market are likely to aid growth. Focus on its new additive services business will position the company as a manufacturer of large-scale 3D-printed metal spell parts, prototypes and tooling for industrial customers, which is a major growth prospect.
Meanwhile, the company is continuously evaluating acquisition options focused primarily on tuck-in assets, in sync with its Higher Standard 2025 strategy. In March 2022, the company acquired Sao Paulo-based Kestra, which is a manufacturer and provider of specialty welding consumables, wear plates, as well as maintenance and repair services for alloy and wear-resistant products, generally utilized in agricultural, mining, steel, and industrial mill applications.
The acquisition has expanded Lincoln Electric’s specialty alloy capabilities in South America. LECO recently closed the acquisition of Fori Automation, which is expected to increase its annualized automation portfolio revenues to more than $850 million. It will add to its earnings by 12 cents to 15 cents per share in 2023, excluding transaction costs.
Balanced Capital Allocation Strategy
Lincoln Electric has a balanced capital allocation strategy, prioritizing growth investment while returning cash to shareholders. The company anticipates capital expenditures between $70 million and $80 million for 2022 and plans to repurchase shares opportunistically.
LECO ended third-quarter 2022 with in hand cash of around $141 million. Its total debt to total capital ratio was 0.46 as of Sep 30, 2022, and times interest earned ratio was 21.1. LECO expects strong cash flow generation and cash conversion of around 90% in 2022.
Price Performance
Image Source: Zacks Investment Research
Lincoln Electric’s shares have gained 5.3% over the past year against the industry’s decline of 43%.
Zacks Rank & Stocks to Consider
Lincoln Electric currently carries a Zacks Rank #3 (Hold).
Hubbell’s earnings surprise in the last four quarters was 10.6%, on average. In the past 60 days, its earnings estimates have increased 6.1% for 2022. For the ongoing year, the bottom line is estimated to be $10.40, suggesting growth of 29.3% from the previous-year’s level. The HUBB stock has gained 17.4% in the past year.
Tenaris has an estimated year-over-year earnings growth rate of 131.5% for the current fiscal year. The earnings per estimate is currently pegged at $4.33. The estimates have been revised by 5.1% north in the past 60 days. TS has an average trailing four-quarter earnings surprise of 20.9%. Its shares have gained 56.6% over the past year.
Grainger delivered a trailing four-quarter earnings surprise of 10.1%, on average. Current-year earnings for GWW are estimated to be $29.31 per share at present, suggesting an estimated growth of 161.1% from the year-ago reported figure. The estimates have moved upward by 4.4% in the last 60 days. GWW’s shares have risen 14.3% in the past year.
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Solid Demand to Aid Lincoln Electric (LECO) Amid High Costs
Lincoln Electric Holdings, Inc. (LECO - Free Report) is benefiting from the improving demand in all its end markets, as reflected in solid order levels and record backlogs for equipment systems and automation solutions. LECO’s pricing actions helped the company offset the escalating labor, freight and raw material costs. Acquisitions, focus on developing new products, and utilization of digital platforms to engage customers will continue driving the company’s top-line performance.
Record Q3 Results
LECO reported record revenues and adjusted earnings per share in the third quarter of 2022. Total revenues surged 16% year over year to a record $935 million driven by a 21% growth in organic sales and a 1.3% benefit from acquisitions. Adjusted earnings of $2.04 per share improved 31% year over year, driven by robust demand and solid operational execution.
Solid Demand, Pricing to Offset Cost Impact in 2022
The company has been witnessing improving order rates across all end-market sectors, regions and products. Robust backlog and acquisitions are expected to benefit the company’s performance throughout this year. While the company will continue to face supply chain issues and escalating labor, freight and raw material costs, these will likely be countered by its pricing actions and improved productivity.
Lincoln Electric now expects organic growth in the mid-teens percentage for 2022. It anticipates an incremental margin in the mid-to-high 20%. The increase reflects operational improvements in the company’s automation portfolio and Americas Welding.
The Zacks Consensus Estimate for the company’s earnings for 2022 is currently pegged at $8.23, suggesting year-over-year growth of 32%. The consensus mark for 2023 earnings stands at $8.66, indicating a year-over-year improvement of 5%.
Innovation, Acquisitions to Fuel Growth
The company is committed to new product development and utilizing digital platforms to engage customers. Lincoln Electric’s product launches in the automation solutions market are likely to aid growth. Focus on its new additive services business will position the company as a manufacturer of large-scale 3D-printed metal spell parts, prototypes and tooling for industrial customers, which is a major growth prospect.
Meanwhile, the company is continuously evaluating acquisition options focused primarily on tuck-in assets, in sync with its Higher Standard 2025 strategy. In March 2022, the company acquired Sao Paulo-based Kestra, which is a manufacturer and provider of specialty welding consumables, wear plates, as well as maintenance and repair services for alloy and wear-resistant products, generally utilized in agricultural, mining, steel, and industrial mill applications.
The acquisition has expanded Lincoln Electric’s specialty alloy capabilities in South America. LECO recently closed the acquisition of Fori Automation, which is expected to increase its annualized automation portfolio revenues to more than $850 million. It will add to its earnings by 12 cents to 15 cents per share in 2023, excluding transaction costs.
Balanced Capital Allocation Strategy
Lincoln Electric has a balanced capital allocation strategy, prioritizing growth investment while returning cash to shareholders. The company anticipates capital expenditures between $70 million and $80 million for 2022 and plans to repurchase shares opportunistically.
LECO ended third-quarter 2022 with in hand cash of around $141 million. Its total debt to total capital ratio was 0.46 as of Sep 30, 2022, and times interest earned ratio was 21.1. LECO expects strong cash flow generation and cash conversion of around 90% in 2022.
Price Performance
Image Source: Zacks Investment Research
Lincoln Electric’s shares have gained 5.3% over the past year against the industry’s decline of 43%.
Zacks Rank & Stocks to Consider
Lincoln Electric currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Industrial Products sector are Hubbell (HUBB - Free Report) , Tenaris (TS - Free Report) and W.W. Grainger (GWW - Free Report) . HUBB sports a Zacks Rank #1 (Strong Buy), while TS and GWW hold Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.
Hubbell’s earnings surprise in the last four quarters was 10.6%, on average. In the past 60 days, its earnings estimates have increased 6.1% for 2022. For the ongoing year, the bottom line is estimated to be $10.40, suggesting growth of 29.3% from the previous-year’s level. The HUBB stock has gained 17.4% in the past year.
Tenaris has an estimated year-over-year earnings growth rate of 131.5% for the current fiscal year. The earnings per estimate is currently pegged at $4.33. The estimates have been revised by 5.1% north in the past 60 days. TS has an average trailing four-quarter earnings surprise of 20.9%. Its shares have gained 56.6% over the past year.
Grainger delivered a trailing four-quarter earnings surprise of 10.1%, on average. Current-year earnings for GWW are estimated to be $29.31 per share at present, suggesting an estimated growth of 161.1% from the year-ago reported figure. The estimates have moved upward by 4.4% in the last 60 days. GWW’s shares have risen 14.3% in the past year.