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Lincoln Electric (LECO) Up 3.6% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Lincoln Electric Holdings (LECO - Free Report) . Shares have added about 3.6% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to its next earnings release, or is Lincoln Electric due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Lincoln Electric Misses on Q2 Earnings & Revenues

Lincoln Electric delivered adjusted earnings of $1.22 per share in second-quarter 2018, which climbed around 26% year over year. The Air Liquide Welding acquisition contributed 5 cents to adjusted earnings per share in the quarter. Earnings, however, missed the Zacks Consensus Estimate of $1.23.

Including one-time items, earnings in the reported quarter came in at $1.04 compared with 92 cents recorded in the prior-year quarter.

Total revenues jumped 26% year over year to $790 million, including a 16% benefit from acquisitions, 4.4% higher volumes, 4.9% increase in price and 0.7% from favorable foreign exchange. The year-over-year sales growth stemmed from strong industrial production trends and order rates. Sales, however, missed the Zacks Consensus Estimate of $793 million.

Costs and Margins

Cost of goods sold escalated 26.6% year over year to $520 million. Gross profit advanced 25% year over year to $270 million. Gross margin contracted 30 basis points (bps) year over year to 34.2%.

Selling, general and administrative expenses flared up 25% to $164 million from $131 million recorded in the year-earlier quarter. Adjusted operating profit rose 18.8% year over year to $107 million in the reported quarter. Operating margin shrunk 60 bps year over year to 6.9%.

Financial Update

Lincoln Electric had cash and cash equivalents of $357 million at the end of the second quarter compared with $327 million recorded at the end of 2017. The company recorded cash flow from operations of $79.8 million in the second quarter compared with $75.4 million recorded in the year-earlier quarter.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, Lincoln Electric has a strong Growth Score of A, though it is lagging a bit on the momentum front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.

Outlook

LECO has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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